ACCT3007 - Corporate Accounting Systems

Assignment Task

Part A

Swan River Ltd (Swan River) acquired 100% of the shares of Dresden Ltd (Dresden) on 1 July 2021. The cost of investment was $750,000. At that date the capital and reserves of Dresden were: Share capital $295,000 Retained earnings $165,000 At the date of acquisition all assets of Dresden were considered to be fairly valued, except for a plant that had a fair value $30,000 greater than its carrying amount. The cost of the plant was $100,000, and it had accumulated depreciation of $60,000.

The plant had original estimated useful life of 10 years. During the financial year, Dresden sold $29,000 in inventory to Swan River for on-sale to external parties. The inventory had originally cost Dresden $22,000. At the year end, Swan River still had half of the inventory on hand. On-hand inventory was expected to be sold in the subsequent period. There was no dividend claimed and paid from both entities for year ended 30 June 2022. There were no other intro-group transactions between Swan River and Dresden for year ending 30 June 2022.

Part B

You are the accountant of a listed company with a newly acquired subsidiary and one of the directors mention the article titled ‘Almost a third of Australia's large companies pay no income tax, published on 03 November 2022 in the Guardian.

The article mentions that “When we look at a corporate entity, we look at the entire economic group structure and which entities are paying tax” “When we analyse this population at the group level, the percentage with nil tax payable drops from 32% to 20?cause at least one entity in the group did pay tax.”. The director has asked you to present to the board at the next meeting explaining how a group structure paying the corporate tax? Provide justifications for your answer.

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