MAC006: Advanced Financial Accounting and Reporting - Accounting and Finance Assignment Help

Assignment Task:

Task:

Question 1 (10%)
1) What are key differences between a subsidiary and an associate?
[Answer here]

2) Explain equity method or one line consolidation method according to AASB 128.
[Answer here]

Question 2 (25%)
Morrison Ltd owns all the shares of Scarlett Ltd. The shares were acquired on 1 July 2018 by Morrison Ltd at a cost of $620,000. At the acquisition date, the capital of Scarlett Ltd consisted of 100,000 ordinary shares each fully paid at $2. There were retained earnings of $20,000. All the identifiable assets and liabilities of Scarlett Ltd were recorded at amounts equal to fair value except for the following:

Carrying Amount Fair Value
Patent $20,000 $35,000
Land $110,000 $150,000
Machinery (cost $200,000) $160,000 $170,000 

Patent and land had both been sold in 2019. Machinery has been depreciated at a rate of 10% a year.
 

Additional information:
1. Intragroup sales of inventory for the year ended 30 June 2020 was $40,000. On 30 June 2020, inventory held by Morrison was purchased from Scarlett at a profit of $1000. 100% of the stock is on hand

2. On 1 July 2019, inventory held by Scarlett Ltd, was purchased from Morrison in the previous year at a profit of $8000. 100% of the stock is on hand at 30 June 2020.

3. Intragroup machinery on hand on 30 June 2020:
a. Morrison Ltd: purchased from Scarlett Ltd on 1 July 2019 for $20,000 at a profit of $2,000. Depreciation rate is 10% per year.

4. Scarlett Ltd had purchased from Morrison Ltd an item of inventory. The carrying amount in Morrison’s records at time of sale (1 Jan 2019) was $10,000 and it was sold at a profit of $3,000. The inventory is still on hand as at 30 June 2020.

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