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C. Discuss the difference between non-value adding activities and business process reengineering with examples relating to the above scenario in the question. (5 Marks)
On 1st December 2020, Grapefruit Ltd acquired the following assets and liabilities of Lime Ltd. Carrying Amount Fair Value Cash 20,000 20,000 Receivables 40,000 38,000 Inventory 27,000 42,000 Property, Plant and Equipment 135,000 157,000 Accounts Payable (37,000) (39,000) Loan (41,000) (46,000) In exchange for these assets and liabilities, Grapefruit Ltd issued 100,000 shares that have been issued for $1.20 per shares but at 1st December 2020, had a fair value of $6.50 per share. Required: I. Prepare the acquisition analysis using IFRS 3 II. Prepare the journal entries in the records of the Grapefruit Ltd account to acquire the assets and liabilities of Lime Ltd. III. Prepare the acquisition analysis assuming that the fair value of the shares was $8.30 per share
The accountant for HHH Ltd, Ms Stephanie, has sought your advice on an accounting issue that has been puzzling her. When preparing the acquisition analysis relating to HHH Ltd’s acquisition of Orton Ltd, she calculated that there was an excess on acquisition of $10,000. Being unsure of how to account for this, she was informed by accounting acquaintances that this should be recognized as income. However, she reasoned that this would have an effect on the consolidated profit in the first year after acquisition date. For example, if Orton Ltd reported a profit of $50,000, then consolidated profits would be $60,000. She is unsure of whether this profit is all post-acquisition profit or a mixture of pre-acquisition profit and post-acquisition profit.
Required:
How should the excess be accounted for? What is the effect of its recognition on subsequent consolidated financial statements?
What Scenarios can lead to a deviation from the proper use of the accounting standard IAS 16 Property, Plant and Equipment in an organisation.
On July 1, 2021, Ria Co. purchased a ₱400,000 tract of land that is interested to be the site of a new office complex. Ria incurred additional cost and realized salvage proceeds during 2021 as follows:
Demolition of the existing building on site 75,000
Legal and other fees to close escrow 12,000
Proceeds from sale of demolition scrap 10,000
Based on the above data, answer the following:
1. Assume that the new office building is to be constructed right away, how much is the cost of the land?
2. Assume that the new office building is to be constructed next year, how much is the cost of the land?
On January 1,2021, Mhelson Co. acquired an equipment with a fair value of ₱5,080,000 by assuing 500 bonds. Each bond has a face value of ₱10,000 and fair value of ₱10,200.
Based on the above data, answer the following:
1. How much is the initial cost of the equipment?
2. How much is the gain (or loss) on exchange to be recognized in the profit or loss of Mhelson Co.?
On January 1,2021, Raicel Co. traded an old equipment for a newer model. Data before the trade in are follows:
Old equipment:
Cost ₱350,000
Accumulated depreciation 120,000
Average published retail value 60,000
New equipment:
List price ₱400,000
Cash price without trade in 340,000
Cash price with trade in 270,000
Questions:
Based on the above data, answer the following:
1. How much is the cost of the equipment to be recognized by Raciel Co.?
2. How much is the gain (or loss) on trade in to be recognized by Raciel Co.?
On January 1,2021, Jimar Co. acquired an equipment by issuing two-year, noninterest bearing note amounting to ₱1,000,000. The prevailing interest rate of the note is 12%.
Questions:
1. Assuming the equipment has cash price equivalent of ₱800,000, how much is the cost of the equivalent?
2. Assuming the equivalent has no cash price equivalent, how much is the cost of the equivalent?
On January 1,2021, Judycel Co. acquired on equipment for ₱500,000 on account with term of 3/10, n/30. Additional costs incurred are as follows:
Freight and insurance ₱15,000
Cost of testing and trial runs 12,000
Proceeds from selling the samples produced during
Testing and trial runs 2,000
Training cost of staff who will operate the equipment 13,000
The account was paid on January 10,2021.
How much is the cost of the equipment?
on January 1,2021 Kalimutan Mo acquired 30% of the ordinary shares that carry voting rights at a general meeting of shareholders of Sige Sige Lang for ₱300,000. Kalimutan Mo has significant influence over Sige Sige Lang. For the year ended December 31,2021 Sige Sige Lang recognized a profit of ₱400,000.
On December 30,2021 Sige Sige Lang declared and paid a dividend of ₱150,000 for the year 2021. At December 31,2021 the fair value of the investment in Sige Sige Lang is ₱425,000.
Case No. 2: Assume there is no published price quotation for Sige Sige Lang and Kalimutan Mo uses the equity method.
1. What amount should be reported by Kalimutan Mo in its statement of comprehensive income?
2. How much is the carrying amount of the investment in associate to be reported by Kalimutan Mo in its statement of financial position as of December 31,2021?
