Reference no: EM132618094
Problem 1: On 1 January 2022, Wacken Limited acquired all the issued shares in Latitude Limited. At that date, the land of Latitude Limited had a fair value of $40 000 more than its carrying amount in Latitude Limited's financial statements. It was sold for $150,000 cash and Latitude Limited will record a gain on sale of $30,000. The land was sold to external parties on 31 December 2023. The tax rate is 30%. The business combination valuation entries in relation to Latitude Limited's sale of land for the year ending 30 June 2024 will include:
Select one:
Option a.
Dr Gain on Sale $ 30,000
Cr Income Tax Expense $ 9000
Cr Transfer from BCVR $ 21,000
Option b.
Dr Loss on Sale $ 30,000
Cr Income Tax Expense $ 9000
Cr Transfer from BCVR $ 21,000
Option c.
Dr Cash $ 150,000
Cr Land $ 100,000
Cr Gain on Sale $ 50,000
Option d.
Dr Gain on Sale $ 40,000
Cr Income Tax Payable $ 15,000
Cr Transfer from BCVR $ 35,000
Option e. None of the other options.