Accounting for Corporate Entities – Morning Star & Aileen Ltd

  A different version of this question is available here.   Question 1 Morning Star Ltd was registered on 1 July 2020, as a company with a constitution limiting the shares that could be offered to 5 000 000 Ordinary shares (including all classes) and 2 000 000 preference shares. The company issued a prospectus dated 1 July 2020 inviting the public to apply for 3 000 000 Ordinary A class shares at $3.00 per share. The terms of the shares on issue are $1.50 on application, $1.00 on allotment and $0.50 to be called within six months of allotment before 31 December 2020. If the issue is oversubscribed the directors will make a pro-rata issue of shares and the excess…

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Jaguar Ltd, P Ltd, Aqua Ltd, Jessica Ltd and Liala Ltd

Question 1 Jaguar Ltd purchased a machine on 1 July 2016 at the cost of $640,000. The machine is expected to have a useful life of 5 years (straight-line basis) and no residual value.  For taxation purposes, the ATO allows the company to depreciate the asset over 4 years. The profit before tax for the company for the year ending 30 June 2017 is $600,000. To calculate this profit the company has deducted $60,000 entertainment expense, and $80,000 salary expense that has not yet been paid.  Also the company has included $70,000 interest as income that the company has not yet received. The tax rate is 30%. Required: Calculate the company’s taxable profit and hence its tax payable for 2017. Determine…

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On 1 July 2021 Scarecrow Ltd issues convertible notes

On 1 July 2021 Scarecrow Ltd issues convertible notes with a face value of $6 million. The convertible notes have a 20-year term and mature on 30 June 2041. Interest is payable semiannually in arrears, on 31 December and 30 June each year, and the coupon rate of interest is 7.5% p.a. At around the same point in time, companies with a similar credit rating issue debt securities without a conversion option with a coupon rate of 10% p.a., payable semiannually. 1. Explain why the coupon rate to holders of the convertible notes is less than the rate of return offered to investors in the debt securities of other similar companies. 2. Determine the debt and equity components of the convertible…

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LagendaBhd has a building in Arang Batuwhich it rents out

LagendaBhd has a building in Arang Batuwhich it rents out. It accounts for investment property using the cost model. The building was bought 15years ago at a cost of RM20 million and the estimated useful life was determined on purchase to be 50 years. Due to ecological changes, the area is prone to floods. The fair value of the building at the end of the current year was RM7million. The present value of the flow of rental is RM5.6mil, taking a market interest rate of 12%.   Required: (i) Review whether or not the asset needed to be impaired. (ii) In year 2020, the market interest rate dropped to 5%. Evaluate the effect of the change in interest rate on the…

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Yume International is the New Zealand largest food

Yume International is the New Zealand largest food & beverage wholesaler to cafes and convenience stores in Australia. You are provided with the information related to its customer details, product details, and costs and revenue information sheet. Yume International has partnered with three shipping companies who ships the products to its Australian customers on time. You are a junior accountant and your Senior Accounts Manager wants you to summarise this data in a meaningful way. Required: PART- A: Complete missing information in costs and revenue information sheet (highlighted in yellow colour) PART B: Pivot Table and Recommended Charts Calculate gross profit for each customer along with product name and payment type using Pivot Table; categorising the columns by salesperson Calculate sales revenue by each…

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PROJECT EVALUATION AND SENSITIVITY ANALYSIS

PROJECT EVALUATION AND SENSITIVITY ANALYSIS Assume that your group is working for financial department of a company, which is considering a potential project with a new product that is expected to sell for an average price of $25 per unit. Launching this project will require the company to choose either one of the following equipment: – Equipment A with the cost of $1 500 000 and zero residual value after four years. The company expects it can sell 250 000 unit per year at this price for a period of 4 years with this equipment – Equipment B with the cost of $2 000 000 and zero residual value after four year. The company expects it can sell 270 000 unit…

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Risk Surfing Ltd and Molly

Question 1 You are the new CFO of Risk Surfing Ltd, which has current assets of $ 7 920, net fixed assets of $17 700, current liabilities of $4 580 and long term debts of $5 890. Required: Calculate owners’ equity and build a balance sheet for the company? How much is net working capital of the company? Calculate the return on assets of the company given that Return on Equity is 30%? What is the PE of the company if total number of ordinary shares outstanding is 2000 and market price of each share is $12?   Question 2 You are a young personal financial adviser. Molly, one of your clients approached you for consultation about her plan to save…

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ACC5200 Financial Reporting – Wastewater, Energy and Hopeful

Question 1 Wastewater Ltd acquired an item of plant on 1 July 2016 for $3 660 000. When the item of plant was acquired, it was initially assessed as having a life of 10000 hours. During the reporting period ending 30 June 2017 the plant was operated for 3000 hours. At 1 July 2017 the plant had a remaining useful life of 7000 hours. On 1 July 2017 the plant underwent a major upgrade costing $234 600. Management believes that this upgrade will add a further 2000 hours of operating time to the plant’s life. During the reporting period ended 30 June 2018 the plant was operated for 4000 hours. On 1 July 2018 the plant underwent a further major upgrade,…

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The Wholesale Ltd acquired 80 per cent of the shares of House Construction Ltd

The Wholesale Ltd acquired 80 per cent of the shares of House Construction Ltd on 30 June 2020 for a consideration of $800,000. The share capital and reserves of House Construction Ltd at the date of acquisition were:   Share capital               $550,000 Retained earnings       $100,000 Revaluation surplus $150,000   All assets of House Construction Ltd were fairly valued at the date of acquisition, except for a major plant that had a fair value $26,000 greater than its carrying amount. The cost of the plant was $100,000 and it had accumulated depreciation of $85,000. There were no transactions between Wholesale Ltd and House Construction Ltd at the date of acquisition.   In addition, the Wholesale Ltd acquired 100 per cent…

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MYOB – Your business is a toy wholesaler, located in Australia

You are required to create an MYOB company file, make changes as necessary to the chart of accounts, enter opening balances, record transactions over a one-month period and generate reports. PART A.1 – Creating the business Your business is a toy wholesaler, located in Australia.  You buy toys from manufacturers and importers and sell them to toyshops, gift shops and department stores throughout the country. Most sales are made on credit but occasionally a new customer will buy goods for cash. The business does not sell direct to the public. When creating your business, use the following information:   Company name:        Your name Toys ABN: Your student number + 0’s  (11 digits in all) Address:   Line 1    Your full…

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A compulsory winding up in insolvency order was issued by the court

ACT305 CORPORATE ACCOUNTING A compulsory winding up in insolvency order was issued by the court in respect of Rock Bottom Ltd. The company had a capital of 65 000 fully paid ordinary shares of $1 each. The liquidator took possession of the company’s assets which raised $873 145 on sale. Included in the sale proceeds was $221 000 from the disposal of the land and buildings. The creditors submitted their claims and the following debts were admitted as proven: Liquidation expenses $3 900 Liquidator’s remuneration 10 400 Mortgage loan secured on land and buildings 130 000 Additional mortgage loan on land and buildings 104 000 Employees’ wages 5 employees for 2 weeks at $520 per week 5 200 Secretary’s salary —…

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Umbilo Ice Cream and ABF Enterprises

Question 1 Umbilo Ice Cream purchased a freezer at a cost of R 285000.The estimated life of the freezer is 5 years. At which time they will have no salvage value? The company would like to compare allowable depreciation methods and decide to prepare depreciation method schedules for the fixtures using the strait-line-double declining-balance and sum-of the year digit method of depreciation schedules. Find the answers to these questions for Umbilo Ice Cream. 4.1              What is the book value at the end of the third year using the straight line depreciation method? 4.2              Using the double-declining-balance method of depreciation, what is the book value at the end of the third year? 4.3             With the…

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