On 1 November 20X6,a Parent Entity,Midstream Ltd,acquired 25% of the Share

question 34

Multiple Choice

On 1 November 20X6,a parent entity,Midstream Ltd,acquired 25% of the share capital of Delta Ltd and the power to significantly influence the operating and financial policies of that company for $5 000 000 cash.In the period from the date of acquisition to 30 June 20X7,Delta Ltd earned a profit for the period of $400 000 (after tax of $200 000) and declared a dividend of $200 000.At 30 June 20X7,Midstream Ltd recognised its equity in the dividend.For the year ended 30 June 20X7,in the separate income statement of Midstream Ltd and in the consolidated income statement of the group controlled by Midstream Ltd,the equity in the profit before tax of Delta Ltd would be reported as:

• A) $200 000 and $100 000 respectively.
• B) $50 000 and $150 000 respectively.
• C) $50 000 and $120 000 respectively.
• D) none of the above.

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Definitions:

Unemployment Compensation

Financial payments made to individuals who have lost their job through no fault of their own, intended to provide a temporary source of income.

Regressive Tax

A tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases, disproportionately affecting those with lower incomes.

Social Security Tax

A payroll tax collected to fund the Social Security program, charged to both employers and employees.

Sales Tax

A tax imposed by a government on sales of goods and services, collected by the retailer and passed on to the state or local government.