Alpha is a public listed company that owns two subsidiary companies. It owns 100% of the equity shares of Bravo and 55% of the equity shares of Charlie. During the year ended 30 September 2020, Charlie made several sales of goods to Bravo. The sales totalled £15m and had cost Charlie £14m to produce. Charlie made these sales on the instruction of the Board of Alpha. It is known that one of the directors of Charlie, who is not a director of Alpha, is unhappy with the parent company's instruction as he believes the goods could have been sold to other companies outside the group at the far higher price of £20m. All directors within the group benefit from a profit-sharing scheme. Required: a. Describe the main circumstances that give rise to related parties. b. Explain why the disclosure of related party relationships and transactions may be important.
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- Sapphire PLC (Sapphire) is a listed company on the London Stock Exchange and as such is required to apply the UK Corporate Governance Code (2018). The majority of shares in Sapphire are owned by Bob Diamond who is also the Chief Executive of Sapphire. However, 40% of shares are owned by other investors, including institutional investors. Bob has made no secret of his desire to sell all his shares within the next five years and retire ‘to a desert island’. Sapphire has an audit committee but no other Board level committees as Bob doesn’t consider them necessary to run ‘his company’. He determines the remuneration packages for all the executive directors and senior management including himself. The constitution and membership of a Sapphire’s audit committee is as follows: Member A – Chair of the Committee who, before retirement two years ago was the Finance Director of the company Member B – An independent member with no financial experience who joined the committee one year ago…On 1 July 2020, Lada Ltd (LL) acquired a 20 per cent interest in Hupmobile Ltd (HL) for a cash consideration of $40,000. Despite its small shareholding in HL, LL is considered to have significant influence over HL, since LL is able to appoint a director to HL’s Board of Directors, and HL is a major customer of LL. LL also provides management personnel to HL, and the two companies share technical information. On the date of the acquisition, the assets of HL were reported at fair value. The share capital and reserves of HL at the date of acquisition were: Share capital 50,000 Retained earnings 140,000 Total shareholders’ equity $190,000 Additional information For the year ending 30 June 2021, HL recorded an after-tax profit of $100,000, from which it paid a dividend of $50,000. For the year ending 30 June 2022, HL recorded an after-tax profit of $80,000, from which it paid a dividend of $60,000. On 30 June 2022, HL revalued its Land upwards by $10,000. Before this revaluation, the Land…Sharpie is a listed firm that operates in the UK and prepares its accounts using the International Financial Reporting Standards (IFRS). The company manufactures and sells spare parts for the automotive industry and has a financial year end of 31 December. On 1 July 2021, Sharpie purchases 60,000 50p shares in Lake plc at a price of £3 per share with the intention to hold the shares for a longer term to realise the gains in the future. Transaction costs were £4,000. Lake plc’s shares were trading at £2.50 on 31 December 2021. How would the shares be accounted for as at 31 December 2021?
- AGC Software Pty Ltd (AGC) is a small proprietary company limited by shares that develops, tests and markets its own “anti-malware” software products. Ben has been the sole director at AGC for two years, and prior to that appointment he had served in many other executive roles for a variety of software companies. Ben also holds 40% of the shares in AGC. The remaining shares (60%) are held by 5 other shareholders who are not directors in AGC. Ben and the employees of AGC consider themselves to be highly skilled and knowledgeable in their field. AGC has been increasing its share in the anti-virus software market over the last year which has attracted the attention of the market-leading company, Big Nanny Ltd (Nanny). Nanny makes an offer to Ben that the company will purchase as many shares in AGC as Ben can sell to them, paying him $18.95 per share. This offer is very generous as a recent independent valuation valued AGC shares at only $12.95 each. Ben swiftly makes an offer to buy the…On January 4, 2018, Watts Co. purchased 40,000 shares (40%) of the common stock of Adams Corp., paying $800,000. There was no goodwill or other cost allocation associated with the investment. Watts has significant influence over Adams. During 2018, Adams reported income of $200,000 and paid dividends of $80,000. On January 2, 2019, Watts sold 5,000 shares for $125,000. What was the balance in the investment account after the shares had been sold?You work for an accountancy firm. You have been asked to provide advice to clients about the following transactions:On 1 October 2022, Shikipisha, a listed company, purchased 90% of the ordinary shares of Allan. Allan, which ceased trading one week prior to the share purchase, owns a manufacturing facility comprising of land and buildings as well as related equipment.The fair value of the land and buildings is similar to the fair value of the equipment. The acquisition of Allan only gained legal approval on the basis that all employees who worked at the facility are retained. There are no other assets, including any inventories, or processes transferred as part of the sale.Shikipisha proposes to account for the purchase of Allan as a business combination.Required:Advise whether the proposed treatments of the above two transactions are in accordance with IFS Standards.
- Taballa Ltd owns all the share capital of Amaroo Ltd. The income tax rate is 30%. The following transactions took place during the periods ended 30 June 2023 or 30 June 2024. (a) On 1 May 2023, Amaroo Ltd sold inventories costing $600 to Taballa Ltd for $1 200 on credit. On 30 June 2023, only half of these goods had been sold by Taballa Ltd, and Taballa Ltd had paid $600 to Amaroo Ltd. All remaining inventories were sold to external entities by 30 June 2024 and Taballa Ltd paid the outstanding amount to Amaroo Ltd on 5 May 2024. (b) On 1 January 2023, Taballa Ltd sold an item of plant to Amaroo Ltd for $10 000. Immediately before the sale, Taballa Ltd had the item of plant on its accounts for $ 12 000. Taballa Ltd depreciated items at 5% p. a. on the diminishing balance and Amaroo Ltd used the straight-line method over 10 years. (c) An inventories item with a cost of $4 000 was sold by Taballa Ltd to Amaroo Ltd for $3 600 on 1 January 2024. Amaroo Ltd intended to use this item as…Multi Computers plc is a large corporation operating in the computer hardware business. The company expressed interest in acquiring the shares of Compex plc, a smaller company in the same industry. Compex plc is listed on the Alternative Investment Market (AIM) and the profits on ordinary activities after tax for the past five years are as follows: £000 2014 210 2013 190 2012 200 2011 180 2010 170 Compex plc has paid dividends of £55,000 for each of the past five years and predicted that the dividends payment will increase by 3.5% over the next five years. The nominal value of Compex plc ordinary shares is £1 each, and its share price at 31st of December, 2014 was £2.50, and its P/E ratio was 8.55 times. Multi Computers plc’s profit after tax for 2014 was £5m, and its WACC was 5%. Its P/E ratio at 31st of December, 2014 was 10 times. An examination of the proposed acquisition has determined incremental cash flows, over and above that expected from the separate companies,…Davies FashionsRose, Jean and Dorothy have been trading as a partnership for the last three years. However, their accountant advised them to convert to a limited company in order to reduce their tax liability.Following this advice they incorporated a company, Davies Fashions Ltd, with Rose, Jean and Dorothy as the sole directors and shareholders. They commenced trading as the new company some thirteen months ago. The company manufactures high quality fashiongoods for the more mature end of the female market and deliberately targets customers who used to shop at major high street retailers but no longer do so.They pride themselves on the fact that all their products are hand-finished, using local staff, a large proportion of which are family and friends of the directors. The company secretary is Edward, who has responsibility for all compliance issues. He drew up the Memorandum and Articles of Association and registered the company at Companies House, in accordance with all statutory…
- On January 1, 2024, Cullumber Company, a public company, purchased 40% of the common shares of Triple Titanium Inc. for $575,000. The remaining shares (60%) are held by the family members of the company's founder. Cullumber considers this a strategic investment and a critical step into developing consumer markets. Triple Titanium is currently a supplier to Cullumber. Cullumber placed two members on Triple Titanium's 10-person board of directors and the two members believe they have been influential on the board through the year. Cullumber and Triple Titanium both have December 31 year ends. During 2024, Triple Titanium reported profit of $240,000 and paid total dividends of $60,000. (b) Prepare the following journal entries for Cullumber, assuming significant influence does exist. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all…Hi, I’m having a hard time understanding how to arrive at the answer of $6,720 for this problem. I can see the answer on the website but I want to understand how to arrive at this number. Thank you for your help. Problem: Garrison holds a controlling interest in Robertson’s outstanding stock. For the current year, the following information has been gathered about these two companies:Garrison uses the initial value method to account for the investment in Robertson. Garrison’s separate operating income figure does not include dividend income for the current year.c. Assume that Garrison owns 70 percent of Robertson’s voting stock. What total amount of income tax expense does a consolidated income statement recognize? Garrison Robertson Separate operating income $ 300,000 $ 200,000 (includes $50,000 intra-entity gross profit in ending inventory) Dividends paid 32,000 50,000 Tax…On January 4, 2021, Snow Co. purchased 40,000 shares (40%) of the common stock of Walker Corp., paying $900,000. There was no goodwill or other cost allocation associated with the investment. Snow has significant influence over Walker. During 2021. Walker reported income of $240,000 and paid dividends of $75,000. On January 2, 2022, Snow sold 5,000 shares for $125,000. What was the balance in the investment account after the shares had been sold? Multiple Choice $871,500. $845,250. $761,250. $897,250. MacBook Air 888 DII Fア F10 F11 F2 F3 F4 23 $ & 3 4 5 8 { W E R Y U P F G J K く C V command option .. .- この * 00 B ト