Topic 2: Presentation of financial statements
You are the assistant accounting of One Beauty Ltd, a company specializes in distributing beauty products imported from Korea to beauty salons in Riverina regions. The trial balance of the company for the year ended 30 June 2019 includes the following accounts:
|Cost of sales||524,000|
|Impairment loss – goodwill||5,000|
|Amortization expense – patent||18,000|
|Gains from sales of motor vehicles||10,000|
|Depreciation – motor vehicles||68,000|
|Doubtful debts expense||11,000|
|Proceeds from insurance claims||20,000|
|Income tax expense||39,000|
|Cash on hand||4,000|
|Allowance for doubtful debts||11,000|
|Deferred tax assets||18,000|
|Accumulated amortization – patent||20,000|
|Accumulated impairment losses – goodwill||25,000|
|Accumulated depreciation – motor vehicles||203,000|
|Current tax liabilities||37,000|
|Deferred tax liabilities||22,000|
|Paid up capital (ordinary)||400,000|
|Foreign currency translation reserve||25,000|
|Retained earnings at 16 December 2018||36,000|
- The patent relates to the fees paid to a Korean manufacturer which produces an anti-aging product called “OneSelf” so that One Beauty Ltd has the sole agency rights to market “OneSelf” in Australia for the years until end of 2025.
- An interim dividend of $16,000 was paid on 15 December 2018 and the directors have declared a final dividend of $32,000.
- The foreign currency translation reserve had an opening balance at 1 July 2018 of $10,000. During the year ended 30 June 2019, this reserve was credited with a foreign currency translation gain of $15,000 (after deducting tax on this item of $3,000), in accordance with the relevant accounting standard.
- Bank deposits are all with maturity of less than three months.
- Bank loan has maturity period of more than three years.
- The following expenses are allocated for administrative and selling and distribution expenses for the purposes of preparation of the statement of profit or loss and other comprehensive income:
|Administrative||Selling and distribution|
|Amortization expense – patent||100%||–|
|Depreciation – motor vehicles||40%||60%|
|Doubtful debts expense||–||100%|
- One Beauty Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and classifies their expenses by function in the statement.
As the assistant accountant of One Beauty Ltd, prepare the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of financial position for One Beauty Ltd for the year ended 30 June 2019. The statements should be presented in accordance to the requirements of any relevant authorities and/or best practices available.
Topic 4: Accounting for equity
You are employed as an accountant by a new company called Refresh Ltd. The company was incorporated on 1 July 2018 and is now trying to raise some new equity.
On 1 July 2018, Refresh Ltd offered 5,000,000 ordinary shares to the public at an issue price of $4.00 per share, with $2.50 payable on application, $1.00 due within one month of allotment, and $0.50 due on a call to be made at a later date. The closing date for applications was 31 July 2018. The issue is underwritten at a commission of $17,000.
By 31 July 2018, applications had been received for 6,000,000 shares. On 10 August 2018, 5,000,000 shares were allotted in proportion to the number of shares for which applications had been made. The excess application money was retained and offset against the amount payable on allotment.
The underwriter’s commission was paid on the 12 August 2018 and all allotment money was received by 10 September 2018.
The call is made on 1 February 2019, with money payable by the end of the month. By 28 February 2019, all call money was received except for holders of 20,000 shares who failed to meet the call.
On 20 March 2019, the 20,000 shares were forfeited. These forfeited shares were auctioned on 5 April 2019 as fully paid. An amount of $3.40 was received for each share sold. Share re-issue costs amounted to $5,000, and were paid on the same day of auction. The constitution provided for any surplus on resale, after satisfaction of unpaid instalments and any costs, to be returned to shareholders whose shares were forfeited. This money was returned on the 12 April 2019.
As the accountant of Refresh Ltd, prepare the journal entries necessary to account for the above transactions and events.
Topic 5: Revaluation of assets
You are the financial accountant of Nutrifresh Ltd. On 1 July 2017, the company acquired two items of plant which are to be depreciated on a straight-line basis. The following details apply to the plants acquired.
|Cost||Useful life||Residual value|
|Plant A||$800,000||10 years||$80,000|
|Plant B||$600,000||5 years||nil|
On 30 June 2018, the directors decided to use the revaluation model subsequent to acquisition. The fair value of Plant A is $760,000, and the fair value of Plant B is $400,000. The remaining useful life as at 30 June 2018 for Plant A is revised to 8 years for Plant A. No other changes occurred other than this.
On 30 June 2019, the fair value of Plant A is $600,000, and the fair value of Plant B is $320,000. No other changes have occurred in relation to their useful lives and residual values.
Ignore any tax effect.
As the financial accountant of Nutrifresh Ltd, prepare the necessary journal entries to account for the item of machinery (including entries for acquisition, depreciation and all revaluation entries) for the period 1 July 2017 to 30 June 2019.
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