Reference no: EM132618101

Problem 1: On 1 July 2021, Valpadana Limited acquired all the issued shares in Goldini Limited. At that date, the buildings of Goldini Limited had a fair value of $20 000 more than its carrying amount in Goldini Limited's financial statements. At acquisition date, the buildings in Goldini Limited's Financial statements were with a historical cost of $150,000 and accumulated depreciation of $75,000. The building is depreciated using straight line depreciation and when the building was bought 5 years ago it had an estimated useful life of 10 years with zero residual value. The tax rate is 30%. The business combination valuation entries in relation to the building for the year ended 30 June 2025 is:

Select one:

Option a.

Dr Accumulated depreciation $ 75,000

Cr Building $ 55,000

Cr Deferred tax Liability $ 6,000

Cr BCVR $ 14,000

Dr Depreciation expense $ 2,000

Dr Retained earnings (1/7/24) $ 6,000

Cr Accumulated depreciation $ 8,000

Dr Deferred tax liability $ 2,400

Cr Income tax expense $ 600

Cr Retained earnings (1/7/24) $ 1,800

Option b.

Dr Accumulated depreciation $ 75,000

Cr Building $ 55,000

Cr Deferred tax Liability $ 6,000

Cr BCVR $ 14,000

Dr Depreciation expense $ 2,000

Cr Accumulated depreciation $ 2,000

Dr Deferred tax liability $ 1,800

Cr Income tax expense $ 1,800

Option c.

Dr Accumulated depreciation $ 75,000

Cr Building $ 55,000

Cr Income tax payable $ 14,000

Cr BCVR $ 6,000

Dr Depreciation expense $ 6,000

Dr Retained earnings (1/7/24) $ 2,000

Cr Accumulated depreciation $ 8,000

Dr Deferred tax liability $ 2,400

Cr Income tax payable $ 600

Cr Retained earnings (1/7/24) $ 1,800

Option d.

Dr Accumulated depreciation $ 75,000

Cr Building $ 55,000

Cr Deferred tax Liability $ 6,000

Cr BCVR $ 14,000

Dr Depreciation expense $ 4800

Cr Income tax expense $ 1200

Cr Retained earnings (1/7/24) $ 3,600

Option e. None of the other options.