PART A NOT RELEVANT

PART B – PRACTICAL QUESTIONS

Question 1 (14 marks)
(A) Translate into the presentation currency – Australian Dollars
multiplied
CORRECT instead of
ANSWER divided
S$ Rate AUD
Sales 93,750 1.25 75,000 117,188
Expenses -66,000 1.25 -52,800 -82,500
Profit 27,750 22,200 34,688
Retained earnings (1/7/14) 60,000 1.30 46,154 78,000
Retained earnings (30/06/14) 87,750 68,354 112,688
Share capital 150,000 1.30 115,385 195,000
Creditors 32,000 1.20 26,667 38,400
Foreign currency translation reserve 0 14,387 -22,388
$224,792 $323,700
$269,750

Cash 45,000 1.20 37,500 54,000

Motor vehicles 65,000 1.20 54,167 78,000
(Accumulated depreciation) -16,250 1.20 -13,542 -19,500
Equipment 220,000 1.20 183,333 264,000
(Accumulated depreciation) -44,000 1.20 -36,667 -52,800
$224,792 $323,700
$269,750
(B) Verify the translation adjustment
In relation to the foreign currency translation reserve:
The income and expense items are translated at dates of the transactions and not the closing
rate. The profit represents the net movements in income and expenses:
Profit 27,750 27,750
Profit as translated 22,200 AUD 34,688
Profit x closing rate (27750/1.2) 23,125 AUD 33,300
Translation gain (loss) 925 AUD -1,388
In the case of a net investment in a foreign operation, translating the opening net assets at an
exchange rate different from the closing rate:
Net investment at 1 July 2014 210,000 210,000
Net investment x opening rate
(S$ 210,000 / 1.3) 161,538 AUD 273,000
Net investment x closing rate
(S$ 210,000 / 1.2) 175,000 AUD 252,000
Translation gain (loss) 13,462 AUD -21,000

Total translation gain is AUD 14,387 = AUD 925 + AUD 13,462

 Question 2 (13 marks)
SOLUTION
a) Acquisition Analysis
Net FV of identifiable A & L of Tail
Ltd: Share Capital 140,000
General reserve 15,000
Retained earnings 27,000
Plant & Equipment 40,000 x (1-30%) 28,000
210,000

(a) Consideration transferred

Goodwill 220000-210000 10,000

Goodwill of Tail Ltd: (10,000/75%) 7,500

FV of Tail Ltd

b) Goodwill BCVR consideration worksheet journal entry

Goodwill DR 7,500
BCVR CR 7,500
c) Goodwill impairment
Impairment Expense DR 2,000
Accum. Impairment Losses CR 2,000

d) NCI share of current profit

First need to calculate the BCVR depreciation adjustment for the change in FV of the P & E

Annual depreciation BCVR adjustment:

40,000 0.10 4,000 per annum
Income tax expense 1,200
Net adjustment 1,400

Therefore, NCI share of profit for year ending 2014: 25%

25,000
- 2,800 P&E
-2,000 GW Impairment
21,600
@ 25% 5,400

NCI Share of Profit (Loss) DR 5,400

NCI CR 5,400
(25% of [$25 000 - {2000-600} – {2000}])
Depn – ITE GW Impair
e) Intragroup transaction

Retained earnings (1/7/13) DR 28,000

Deferred tax asset DR 12,000
Plant & Equipment CR 40,000

NCI DR 7,000
Retained earnings (1/7/13) CR 7,000
(25% of $28 000 net profit from sale of plant)

Accumulated depreciation DR 6,000

Depreciation expense CR 4,000
Retained earnings (1/7/13) CR 2,000

Retained earnings (1/7/13) DR 600

Income tax expense DR 1,200
Deferred tax asset CR 1,800

NCI Share of Profit DR 700

Retained earnings (1/7/13) DR 350
NCI CR 1,050
 Question 3 (15 marks)

Journal entries for the Liquidation of Foundry Ltd

Liquidation DR 667,750
Accounts receivable CR 90,250
Inventory CR 157,500
Property, Plant and Equipment CR 420,000
(transfer asset carrying amounts to liqn)

Allowance for Doubtful Debts DR 15,250

Accumulated Depn - PPE DR 155,000
Liquidation CR 170,250
(transfer contra-assets to liqn)

Liquidation DR 8,500
Liquidator’s remuneration and exp payable CR 8,500
(Recognition of liability to liquidator)

Liquidation (loss on sale) DR 15,500

Mortgage on Land DR 211,000
Land CR 226,500
(Loss on sale of land by mortgage holder)

Liquidator’s cash DR 535,000

Liquidation CR 535,000
(Sale of assets = 135,000 + 65,000 + 335,000)

Retained Earnings DR 42,000

Liquidation CR 42,000
(transfer Retained Earnings to liquidation)

Liquidator’s remuneration and expense payable DR 8,500

Debentures DR 125,000
Mortgage on Land DR 6,750
Accounts payable DR 108,000
Other payables DR 48,000
Liquidator’s Cash CR 296,250
(payment of liabilities in order of priority)
Mortgage bal, AP and OP can be any order
 Share Capital – Preference DR 50,000
Share Capital – Ordinary DR 160,000
Shareholders’ Distribution CR 210,000
(transfer of capital accounts to shareholders’ distribution)

Liquidation DR 48,750
Shareholders’ Distribution CR 48,750
(transfer of surplus from liquidation)

Shareholders’ Distribution DR 50,000

Liquidator’s Cash CR 50,000
(payment firstly to preference shareholders)

Shareholders’ Distribution DR 208,750

Liquidator’s Cash CR 208,750
(payment of surplus on liquidation to ordinary shareholders)

Check
Liquidator's Cash A/c
Balance 20,000 pay liabilities 296,250
sale of assets 535,000 pymt to Pref S/h 50,000
pymt to Ord. S/h 208,750
555,000 555,000

Liquidation A/c
Assets 667,750 contra assets 170,250
Liq's rem&exp 8,500 sale of assets 535,000
Loss on land 22,250 trfr REarnings 42,000
trfr surplus 48,750
747,250 747,250

Share holders' Distribution A/c

pymt to Pref. S/h 50,000 trfr Sh. Cap 210,000
pymt to Ord. S/h 208,750 trfr Liqn Surplus 48,750

258,750 258,750

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 Question 4 (13 marks)
WALL LTD – BRICK LTD

Journal entries in records of Brick Ltd

1-Jul-13
Cash in JO Dr 625,000 ($1,250,000 / 2)
Plant & Machinery in JO Dr 606,250 ($1,212,500/2)
Carrying amt of P&M sold Dr 606,250
Proceeds – P&M sold Cr 625,000 ($1,250,000 / 2)
Plant & Machinery Cr $1,212,500

Cash in JO Dr 1,500,000
Cash Cr 1,500,000

30-Jun-14
Plant & Machinery in JO Dr 306,250 (1,862,500 / 2)- ($1,250,000 /2)
Supplies in JO Dr 194,500 (387,000 / 2)
Work in Progress in JV Dr 85,000 (190,000 / 2)
Inventory Dr 1,257,500 (2,515,000 / 2)
Operating expenses Dr 167,250 (334,500 / 2)
Accrued wages in JO Cr 15,000 (30,000 / 2)
A/cs Payable in JO Cr 227,500 (455,000 / 2)
Cash in JO Cr 977,250 (1,045,500 /2) – 1,500,000

P&M – Depn exp Dr 136,875 (606,250+306,250)*0.15

Accum. Depn in JO Cr 136,875

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