On 1 July 2021 Alpha Ltd Acquired a 40% Share

question 22

Multiple Choice

On 1 July 2021 Alpha Ltd acquired a 40% share of Beta Ltd. At that date, the following assets had carrying amounts different to their fair values in Beta's books: $\begin{array}{|l|r|r|}\hline {\text { Asset }} & \text { Carrying amount } & \text { Fair value } \\\hline \text { Inventories } & \$ 18000 & \$ 20000 \\\hline \text { Plant } & \$ 30000 & \$ 35000 \\\hline\end{array}$ All inventories were sold to third parties by 30 June 2022. On 1 July 2021, the plant had a remaining useful life of 2 years. The tax rate is 30%.
The adjustment required to the Investment in Associate account at 30 June 2022 in relation to the above assets is:

• A) $1 260
• B) $1 400
• C) $1 750
• D) $3 150

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Definitions:

Marginal Costs

The amount spent on producing an extra unit of a product or service.

Fixed Costs

Costs that do not vary with the level of output or sales in the short term, such as rent or salaries.

Sunk Costs

Costs that have already been incurred and cannot be recovered or refunded, and thus should not factor into future decision-making processes.

Fixed Costs

Fixed expenditures that are unaffected by changes in production or sales volumes, like rent, wages, and insurance costs.