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1. Question 1: Accounting for Lease
Owingtolowliquidity,LisaLtddecideson1July2015 to sell itslandand buildingstoAndersonLtd.
The carrying valuesof the landand buildingsinthe booksof LisaLtd,at 1 July2015, are:
Land at Cost $1800000
Buildingsatcost $1750000
Accumulateddepreciation $350000
The land andbuildingsare soldfor$4334 700 (theirfairvalue),withthe amountbeingallocated
equallyasfollows:
Land $2167350
Buildings$2167350
Immediatelyfollowingthe sale,LisaLtddecidestolease backthe landand buildingsfromAnderson
Ltd. The term of the lease is20 years.The implicitinterestrate inthe lease is12 per cent.It is
expectedthatthe buildingswill be demolishedatthe endof the lease term.The lease isnon-
cancellable,returnsthe landandbuildingstoAndersonLtdat the endof the lease,andrequiresthe
followinglease payments:
Paymentoninceptionof the lease on1 July2015 $600000
Paymenton30 June eachyear starting30 June 2016 $500000
There isno residual paymentrequired
REQUIRED
a) Provide the entriesforthe sale andleasebackinthe booksof LisaLtd as at 1 July2015.
b) Provide the entriesforthe purchase andlease inthe booksof Andersonltdasat 1 July2015
c) Provide the entriesinthe booksof LisaLtd as at 30 June 2025.
d) Provide the entriesinthe booksof AndersonLtdasat 30 June 2025.

2. Question 2: Accounting for Income Tax
MR Limitedcommencesoperationson1 July2014 andpresentsitsfirst statementof comprehensive
income andfirststatementof financial positionon30 June 2015. The statementsare prepared
before consideringtaxation.The followinginformationisavailable:
Statement of comprehensive income for the year ended 30 June 2015
Gross Profit 730000
Expenses:
Administration expenses 80000
Salaries 200000
Long-serviceleave 20000
Warranty expenses 30000
Depreciationexpense-plant 80000
Insurance 20000 430000
Accounting profit before tax 300000
Assets and liabilities as disclosed in the statement of financial position as at 30 June 2015.
Assets
Cash 20000
Inventory 100000
Accounts receivable 100000
Prepaid insurance 10000
Plant-cost 400000
Less Accumulated
depreciation
80000 320000
Total assets 550000
Liabilities
Accounts payable 80000
Provision for warranty expenses 20000
Loan payable 200000
Provision for long-service leave
expenses
-20000
Total liabilities 320000
Net assets 230000
Otherinformation
• All administrationandsalariesexpensesincurredhave beenpaidasat yearend.
• None of the long-service leave expense hasactuallybeenpaid.Itisnotdeductible untilitis
actuallypaid.
• Warranty expenseswere accruedand,atyearend,actual paymentsof $10000 had beenmade
(leavinganaccruedbalance of $20000). Deductionsare available onlywhenthe amountsare paid
and notas theyare accrued.
• Insurance wasinitiallyprepaidtothe amountof $30 000. At yearend,the unusedcomponentof
the prepaidinsurance amountedto$10000. Actual amountspaidare allowedasa tax deduction.
• Amountsreceivedfromsales,includingthose oncreditterms,are taxedatthe time the sale is
made.

3. • The plantis depreciatedoverfive yearsforaccountingpurposes,butoverfouryearsfortaxation
purposes.
• The tax rate is 30 percent.
REQUIRED
Provide the journalentriesto accountfortax in accordancewithAASB 112.
Question3: Consolidation
SandyLtd acquired100 per centof the issuedcapital of BeachLtd on 30 June 2014 for$900 000,
whenthe statementof financial positionof BeachLtd wasas follows:
Assets $000 $000
Accounts receivable 70 Loan 300
Inventory 100
Land 400 Share holders' equity
Property, plant and equip. 700 Share capital 500
Accumulated depreciation -270 Retained earnings 200
1000 1000
Additionalinformation
• The tax rate is 30 percent.
• Asat the date of acquisition,all assetsof BeachLtdwere at fairvalue,otherthanthe property,
plantand equipment,whichhadafairvalue of $530000. Beach Ltd adoptsthe cost model for
measuringitsproperty,plantandequipment.The property,plant andequipmentisexpectedto
have a remainingusefullifeof 10 years,and noresidual value.
• One yearfollowingacquisitionitwasconsideredthatBeachLtd's goodwill hadarecoverable
amountof
$60000.
• BeachLtd declareda dividendof $40000 on 10 July2014, withthe dividendsbeingpaidfrompre-
acquisitionretainedearnings.
• The statementsof financial positionandstatementsof comprehensiveincome of SandyLtdand
Beach Ltd one yearafteracquisitionare asfollows:
Statements of financial position of Sandy Ltd and Beach Ltd as at 30 June 2015
Sandy
Ltd
Beach
Ltd
$000 $000
Assets
Cash 80 40
Accounts receivable 50 50
Inventory 140 123
Land 600 400
Property, plant and
equipment
900 700
Accumulated
depreciation
-300 -313
Investment in Beach Ltd 900

4. Total assets 2370 1000
Liabilities
Accounts payable 100 10
Dividends payable 100 50
Loan 670 140
Shareholders' equity
Share capital 1000 500
Retained earnings 500 300
2370 1000
Reconciliation of opening and closing retained earnings
Profit after tax 400 190
Retainedearnings-
30June2014
300 200
Interim dividend -90 -40
Final dividend -110 -50
Retainedearnings-
30June2015
500 300
REQUIRED
Prepare the consolidatedstatementof financial positionforthe above entitiesasat30 June 2015.