On 1 January 2022, Cowboys Ltd Acquired All the Issued

question 20

Multiple Choice

On 1 January 2022, Cowboys Ltd acquired all the issued shares in Dragon Ltd. At that date, the plant of Dragon Ltd had a fair value of $10 000 more than its carrying amount and an estimated useful life of 5 years. Dragon Ltd depreciates the plant on a straight-line basis. The plant was sold during the year ended on 30 June 2023. The business combination valuation consolidation adjustment against plant in relation to the transaction as at 30 June 2023 will be:

• A) a debit of $10 000.
• B) a credit of $10 000.
• C) a debit of $2 000.
• D) there is no adjustment entry recorded against the plant account.

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Definitions:

Profits

The financial gain obtained when the revenue from business activities exceeds the expenses, taxes, and costs associated with maintaining the business.

Marginal Cost

The investment needed to manufacture an extra unit of a product or service.

Marginal Revenue

Enhanced revenue from the sale of an incremental unit of a product or service.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production.