Problem # 1
The trial balance of Black Hole Ltd at 30 June 2018 was as follows:
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Debit
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Credit
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Share capital (ordinary shares issued at $2, fully paid)
General reserve
Retained earnings (balance as at 1/7/17)
Revaluation surplus
Mortgage loan
Bank overdraft (at call)
7% debentures
Interest payable
Accounts payable
Dividend payable
Current tax liability
Provision for employee benefits
Deferred tax liability
Allowance for doubtful debts
Accumulated depreciation - plant and equipment
Accumulated impairment - goodwill
Cash
Accounts receivable
Inventory
Prepaid insurance
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$ 500
58 000
87 700
7 000
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$ 200 000
25 000
128 400
85 000
250 000
69 200
80 000
2 800
69 500
10 000
52 100
34 200
18 400
12 800
42 500
10 000
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Plant and equipment
Land
Buildings
Goodwill
Deferred tax asset
Sales revenue
Cost of sales
Administrative expenses
Other expenses
Interest revenue
Dividends revenue
Income tax expense
Dividends paid
Dividends declared
Transfer to general reserve
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222 500
220 000
380 000
105 000
9 800
450 000
265 000
10 000
50 400
20 000
10 000
25 000
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825 000
2 500
3 500
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$1 920 900
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$1 920 900
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Additional information
(a) Administrative expenses for the year include interest expense of $28 700.
(b) All assets are carried at cost, except for land and buildings which are carried at valuation.
(c) During the year, 50 000 shares were issued at an issue price of $2 each, payable in full on application.
(d) There was a transfer of $25 000 to general reserve from retained earnings
(e) On 30 June 2018, the directors revalued land and buildings. The revaluation was based on an independent valuation received from FJ Holden, Registered Valuer. The valuation was based on fair values. The carrying amounts of land and buildings before the revaluation were $195 000 and $350 000 respectively.
(f) The mortgage loan is repayable in annual instalments of $50 000 due on 1 March each year.
(g) The 7% debentures are to be redeemed on 31 March 2019. There is no plan to refinance these debentures in the future.
(h) The provision for employee benefits consists of:
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Annual leave
Long-service leave
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$18 000
16 200
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(i) No employee is eligible for long-service leave until 2022.
(j) The company tax rate is 30%.
Required
A. Prepare a statement of profit or loss and other comprehensive income for Black Hole Ltd for the year ended 30 June 2018, according to the requirements of AASB 101 (classify expenses by function).
B. Prepare a statement of financial position for Black Hole Ltd as at 30 June 2018 to comply with AASB 101.
C. Prepare a statement of changes in equity for Black Hole Ltd for the year ended 30 June 2018, according to the requirements of AASB 101.
(Show all workings where necessary and explain fully if an item is omitted/not provided in the financial statements.)
Problem #2
You have been asked by the management of My Bag Ltd to assist with the preparation of the income tax entries for the year ended 30 June 2017. The company reported a profit before tax for the year to 30 June 2017 of $900 000. The company's statements of financial position include assets and liabilities as follows:
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2017
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2016
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Accounts receivable
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$ 245 000
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$ 200 000
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Allowance for doubtful debts
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(20 000)
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(10 000)
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Plant - at cost
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600 000
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600 000
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Accumulated depreciation
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(190 000)
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(120 000)
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Interest receivable
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10 000
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20 000
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Provision for long-service leave
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48 000
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62 000
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Deferred tax asset
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?
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18 600
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Deferred tax liability
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?
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20 000
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(a) Interest revenue of $10 000 is included in the profit for the year to 30 June 2017 but interest received was $20 000.
(b) Expenses included in profit for the year to 30 June 2017 are as follows:
- parking and other fines of $10 000 but these were not deductible for tax purposes
- depreciation expense for plant of $70 000 but the tax depreciation was $100 000 for the year
- doubtful debts expense of $25 000 but bad debts written-off were $15 000
- long-service leave expense of $36 000 but long service leave paid was $50 000.
(c) Accumulated depreciation on plant for tax purposes is $280 000 on 30 June 2017 and $180 000 on 30 June 2016. There have been no acquisitions or disposals of plant during the current year.
(d) The corporate tax rate is 30%.
Required
Complete the following for My Bag Ltd for 30 June 2017:
1. Current Tax Worksheet (template provided)
2. Deferred Tax Worksheet (template provided)
3. Tax Journal Entries
(Show all workings where necessary)
Attachment:- Term - Question.rar