On 1 January 20X7,a Parent Entity,Emborough Ltd,acquired 20% of the Share

question 43

Multiple Choice

On 1 January 20X7,a parent entity,Emborough Ltd,acquired 20% of the share capital of Bernborough Ltd and the power to participate in the operating and financial policies of that company for $4 500 000 cash.In the period from the date of acquisition to 30 June 20X7,Bernborough Ltd earned a profit for the period of $400 000 (after tax of $200 000) ,recognised a post-acquisition asset revaluation increment of $500 000 (deferred tax liability $100 000) and declared a dividend of $200 000.At 30 June 20X7,Emborough Ltd recognised its equity in the dividend. In respect of the increase in the investment recognised in the consolidated balance sheet at 30 June 20X7 of the group controlled by Emborough Ltd,a deferred tax liability would be recognised of:

• A) $36 000.
• B) $60 000.
• C) zero because the increase is not a temporary difference.
• D) none of the above.

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Definitions:

McLuhan

A Canadian philosopher best known for his work on media theory, including the concepts of the global village and the medium is the message.

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Baudrillard’s belief that people’s perceptions, as defined by media, lead to the sense of a simulated reality.

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