Debit balance Rock Ltd Wallaby Ltd

Cash 2,500 1,250

Receivables 27,000 13,000
Inventory 39,700 24,500
Other current assets 15,200 8,200
Deferred tax assets 7,500 3,500
Vehicles 88,000 158,000
Equipment - 42,000
Land 140,000 180,000
Machinery - -
Financial assets 68,000 14,800
Goodwill 28,000 15,000
Brand name - -
Impairment - Brand - -
Share in Wallaby Ltd 250,000 -
Debenture in Rock Ltd - 25,000
Dividend paid 10,000 5,000
Dividend declared 20,000 12,000
Transfer to general reserve 10,000 5,000
Cost of sale 210,000 192,550
Income tax expense 30,000 32,000
Depreciation and other expense 39,000 36,000
Carrying amount of machinery sold - 30,500
Carrying amount of equipment sold 21,000 -
Total 1,005,900 798,300
Credit balance
Share capital 200,000 140,000
General reserve 35,000 10,000
Retain earning (1/7/15) 51,300 67,500
Business valuation reserve
Account payable 69,500 36,000
Loan payable (due 30/6/20) 25,000 15,000
Dividend payable 20,000 12,000
Provisions 12,500 9,300
Current tax liability 43,000 34,000
Deferred tax liability 11,800 5,000
Accumulated depreciation-vehicles 16,400 60,000
Accumulated depreciation-equipment - 34,500
Accumulated depreciation- machinery
8% debentures (matures 30/6/19) 25,000 -
Sales revenue 450,000 320,000
Dividend revenue 17,000 -
Other income 11,400 17,000
Proceeds on sale equipment 18,000 -
Proceeds on sale machinery - 38,000
Total 1,005,900 798,300
- -
 Dr. Cr.
Adjustment Adjustment Total
3,750
40,000
7,600 8,850 62,950
12,000 11,400
375 11,375
6,000 252,000
3,000 45,000
30,000 30,000 320,000
-
82,800
3,620 39,380
29,000 2,000 27,000
2,000 2,000
250,000 -
25,000 -
5,000 10,000
12,000 20,000
5,000 10,000
1,250 75,800 328,000
1,140 2,265 60,875
1,550 2,000 74,550
2,750 33,250
21,000 -
84,665 454,535 1,434,330

140,000 200,000
10,000 35,000
125,220 41,240 34,820
53,620 53,620 -
105,500
40,000
12,000 20,000
21,800
77,000
12,870 22,680 26,610
3,000 79,400
300 34,800
-
25,000 -
75,000 695,000
17,000 -
 2,000 26,400
18,000 -
38,000
490,710 120,840 1,434,330
-
Dividends:
Dr. Dividends payable 12,000
Dr. Dividends revenue 5,000
Cr. Dividends declared
Cr. Dividends paid

Dr. Div. Revenue 12,000

Cr. Dividends receivable

8% Debentures
Dr. 8% debentures 25,000
Cr. Debentures in Rock Ltd

Dr. Interest income: Other income 2,000

Cr. Interest expense: Other expenses

Inter-co. sale of inventory

Sale price 75,000
Cost of sales 70,000
Profit 5,000
Unrealised profit - 25% 1,250

Dr. Sales 75,000

Cr. Cost of sales

Dr. Cost of sales 1,250

Cr. Inventory

Dr. Deferred tax asset - 1,250 30% 375

Cr. Income tax expense

Inter-co. sale of equipment

Sale price 18,000
Carrying value 21,000
Loss on sale - 3,000

Dr. Sale proceeds 18,000

Dr. Equipment 3,000
Cr. Carrying value

Dr. Income tax expense 900

Cr. Deferred tax liability
Dr. Depreciation 300
Cr. Acc. Dep - Equipment

Dr. Deferred tax liability 90

Cr. Income tax exp.

Sale of machine classified as inventory

Sale price 7,800
Carrying value 7,000
Profit on sale - 1 May 2015 (Retained earnings) 800

Dr. Retained earnings 800

Cr. Cost of sales

Dr. Income tax expense 240

Cr. Retained earnings

Fair value adjustments Land

Fair value 130,000
Carrying value 100,000
Excess / (Deficit) 30,000

Brand name:
Dr. Brand name 29,000
Cr. Deferred tax liability
Cr. Business valuation reserve

Dr. Impairment 2,000

Cr. Brand name

Dr. Deferred tax liability 600

Cr. Income tax exp.

Inventory:
Dr. Inventory 7,600
Cr. Deferred tax liability
Cr. Business valuation reserve

Since inventory is sold out to external party;

Dr. Business valuation reserve 5,320
Cr. Retained earnings

Dr. R.E 7,600

Cr. Inventory
Dr. Deferred tax liability 2,280
Cr. Retained earnings

Land:
Dr. Land 30,000
Cr. Deferred tax liability
Cr. Business valuation reserve

Dr. Bz reseve 21,000

Cr. R.E

Dr. R.E 30,000

Cr. Land

Dr. Def. Tax 9,000

Cr. R.E

Vehicles:
Dr. Vehicles 6,000
Cr. Deferred tax liability
Cr. Business valuation reserve

Incremental Depreciation - Prior years

01 Jul 13 to 30 Jun 15 - ($6,000 / 06 years) 2 years 2,000

Dr. Retained earnings 2,000

Cr. Acc. Dep - Vehicles

Dr. Deferred tax liability 600

Cr. Retained earnings

Current year - 01 July 2015 to 30 June 2016

($6,000 / 06 years) 1 year 1,000

Dr. Depreciation exp. P&L 1,000

Cr. Acc. Dep - Vehicles
Dr. Deferred tax liability 300
Cr. Income tax expense

Machinery:
Particulars Carrying value
As on 01 Jul 2013 52,000
Dep. (01 Jul 13 to 30 Jun 14) 6,500
C.V - 30 Jun 14 45,500
Dep. (01 Jul 14 to 30 Jun 15) 6,500
C.V - 30 Jun 15 39,000
Dep. (01 Jul 15 to 01 Jan 16) 3,250
C.V - 01 Jan 16 - Date of sale 35,750

C.V of machinery sold - as per TB 30,500

Adjustment of fair value 2,750
Adjusted carrying value 33,250

Adjustment:
Dr. Carrying value of machinery sold 2,750
Dr. Depreciation expense 250
Dr. Retained earnings - Balancing 700
Cr. Income tax expense - ($3000 30%)
Cr. Business valuation reserve ($4000 1 - 0.3 tax rate)

Dr. Business valuation reserve 2,800

Cr. Retained earnings

Transfer to general reserve

Dr. Gen. Reserve 5000
Cr. Trf to gen reserve

Dr. Business combination reserve 3620

Cr. Goodwill

Elimination of investment
Dr. Share capital 140,000
Dr. R.E 84,120
General reserve 5,000
Dr. Bz combination reserve 20,880
Cr. Investment in Wallaby
12,000
5,000

12,000

25,000

2,000

75,000

1,250

375

21,000

900
 300

90

800

240

Inventory Machinery Vehicles Brand

86,100 56,000 53,000 29,000
78,500 52,000 47,000 -
7,600 4,000 6,000 29,000

8,700
20,300

2,000

600

2,280
5,320
 5,320

7,600

2,280

9,000
21,000

21,000

30,000

9,000

1,800
4,200

2,000

600

1,000
 300

FV Adjustment
56,000 4,000
7,000 500
49,000 3,500
7,000 500
42,000 3,000
3,500 250
38,500 2,750

900
2,800

2,800

5000

3620

250,000