Question 1 [20 marks]
Topic 2: Presentation of financial statements
The following balances are extracted from the trial balance of Tammy Ltd for the year ended 30 June 2018:
|Income tax expense||300,000|
|Depreciation of office equipment||140,000|
|Bad debt expense||220,000|
|Cost of sales||1,100,000|
|Foreign currency translation loss||100,000|
- During the period, land was revalued upwards by $160,000 (net of tax).
• At 1 July 2017, the balances of foreign currency translation reserve and revaluation reserve were $110,000 and $40,000 respectively.
• On 15 November 2017, a plant with a carrying amount of $130,000 was destroyed by an earthquake.
• Balance of retained earnings as at 1 July 2017 was $3,900,000 and dividends of $400,000 were paid during the financial year.
• Issued share capital was $1,020,000 on 1 July 2017. There was no new issue of shares during the financial year.
Tammy Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and classifies expenses by function within the statement.
Prepare a statement of profit or loss and other comprehensive income and a statement of changes in equity for Tammy Ltd for the year ended 30 June 2018, according to the requirements of AASB 101. Notes to the account are not required but figures in your statements must be supported by explanations or workings.
|Question 1||Max. marks allocated|
|Statement of Profit and Loss and Other Comprehensive Income||10|
|Statement of Changes in Equity||9|
Question 2 [15 marks]
Topic 3: Accounting policies and other disclosures
You have recently been hired by Astro Ltd as their new accountant. Astro Ltd is about to lodge their annual report for the year ended 30 June 2017. Your new boss has asked your opinion on the following events in regards to whether to include them or not, as they occurred after 30 June 2017.
1) A customer, Joe Ltd, cancelled their order and returned goods that were sent ‘cash on delivery’, due to the fact that the warehouse sent the wrong goods by accident. As this was not the first mistake, the customer has refused to order from Astro Ltd again. Joe Ltd is a regular customer.
The goods arrived back in the warehouse on 3 July 2017, and were originally sold on the 25 of June 2017. As a result the company lost a sale worth $180,000 and would have made a profit of $16,000 to the company.
2) On 7 August 2017, a fire occurred and damaged one of the key items of machinery, the cost of the machinery was $1 million dollars and was covered by insurance. However, Astro Ltd had to shut down for two weeks resulting in an expected loss in sales of $400,000 and a net loss of $26,000 during one of its busiest periods.
3) On 4 September 2017, Astro Ltd received a letter from their independent valuer stated that a mistake had been made in the valuation of their office building. The valuation was done on June 28 2017 and the building should be valued at $980,000 and not $900,000.
4) Just days before the annual report was due to be released, the external auditor discovered a cheque dated 20 April 2017 of $1,000 authorised by the company’s previous accountant, Paul. The payment was for home goods meant for a home business run by Paul’s wife. The goods were never received and it is believed this was not the first cheque signed by Paul and investigations are continuing.
The following data was provided by Astro Ltd for the years ended 30 June:
|Cost of goods sold||1,200,000||1,100,000|
|Profit from ordinary activities after income tax||118,000||115,000|
|Total current assets||132,000||116,000|
|Total current liabilities||196,000||238,000|
|Total non-current assets||1,750,000||1,600,000|
For each of the event described from (1) to (4) above:
(i) State whether they are material or immaterial event. Show all relevant workings, if any.
(ii) Classify each material event identified above as either an adjusting or non-adjusting event. Justify your answer.
Note: round all percentages to one decimal point.
|Question 2||Max. marks allocated|
Question 3 [15 marks]
Topic 4: Accounting for equity
Light Ltd, a newly registered company, issued a prospectus on 1 January 2018 inviting the public to subscribe for 2 million shares at $6.00 each. The terms of the issue are that $4.00 is to be paid on application and the remaining $2.00 within one month of allotment. The issue was underwritten at a commission of $6,000.
Applications closed on 31 January 2018. The share issue was oversubscribed by 100,000 shares. The directors allotted all shares on 15 February 2018 on a pro-rata basis. The surplus application money is used to offset against the amount payable on allotment. On the same date the underwriter was paid with their commission.
On 15 March 2018 all allotment money is received except for holders of 20,000 shares who had failed to pay the allotment money due.
On 15 June 2018 the directors forfeited the shares on which allotment money was unpaid. The shares were resold on 30 June as fully paid for a consideration of $5.20 per share. On the same date share reissue costs of $2,000 were paid. The balance in the forfeited shares account is returned to former shareholders.
Prepare the journal entries necessary to account for the above transactions and events. Show all relevant dates and brief narrations.
|Question 3||Max. marks allocated|
Question 4 [10 marks]
Topic 7: Impairment of assets
On 1 July 2017, Lollipop Ltd acquired all the assets of Star Ltd. The directors of Lollipop Ltd has determined that Star Ltd is a cash-generating unit in its own right and that Star Ltd may be impaired for the year ending 30 June 2018.
The carrying amounts of the assets of this cash-generating unit, valued pursuant to the cost model, are as follows:
|Cash and cash equivalents||10,000|
|Less: accumulated depreciation||(100,000)|
|Carrying amount of cash-generating unit||650,000|
The directors of Lollipop Ltd estimate that, at 30 June 2018, the fair value less costs to sell of the cash-generating unit amounts to $540,000, while the value in use is $590,000. The inventory is recorded at lower of cost and net realisable value. The land has a fair value less costs to sell of $190,000.
Prepare any necessary journal entries to recognise the impairment loss. Show all workings and provide explanations to support your answer where necessary.
|Question 4||Max. marks allocated|
|workings and explanation||7|
Click on Buy Solution and make payment. All prices shown above are in USD. Payment supported in all currencies. Price shown above includes the solution of all questions mentioned on this page. Please note that our prices are fixed (do not bargain).
After making payment, solution is available instantly.Solution is available either in Word or Excel format unless otherwise specified.
If your question is slightly different from the above question, please contact us at firstname.lastname@example.org with your version of question.