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May 01, 2023

Answer:

Workshop Questions:

A)

Retained Earnings (1/8/2019)                                                 Dr 3150

Income tax expense                                                                Dr 1350

Cost of sales                                                                            Cr 4500

B)

Retained Earnings (1/8/2019)                                                 Dr 21000

Income tax expense                                                                Dr 9000

Cost of sales                                                                            Cr 30000

Accumulated Depreciation                                                     Dr 4500

Depreciation Expense                                                             Cr 3000

Retained Earnings (1/8/2019)                                                 Cr 1500

(10% x $30,000 p.a for 1.5 years)                                          

Income tax expense                                                                Dr 900

Retained Earnings (1/8/2019)                                                 Dr 450

Deferred tax asset                                                                   Cr 1350

The accounting for pre-acquisition and post-acquisition payouts is same. All of them are treated as post-acquisition dividends (Beams, 2018). The adjustment is made to the parent`s dividend revenue and the subsidiary`s dividends paid. The characterization of all payouts as post-acquisition dividends is difficult to defend theoretically, and the standard-setters took this decision based on practical considerations. The moment of realization cannot be immediately defined by comparison to the participation of an external entity since the asset is never on with a member of the group, rather staying inside the community and also being consumed by usage inside the collective. The value of the asset is thus indirectly defined by its use within the group, that is, in ratio to the consumption of the asset`s advantages inside the group (Santis, Grossi & Bisogno, 2018). The financial gain on sale within the group is then calculated in the same proportion as the asset`s depreciation. For example, if the transferable asset is depreciated on a regular basis over a ten year period, at a rate of 10% per year, the profit on sale is realized at 10% per year (Hadi, 2015).

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