Problem # 1
The trial balance of Simpsons Ltd at 30 June 2018 was as follows:
|
|
|
Debit
|
|
Credit
|
|
|
|
Share capital (ordinary shares issued at $2, fully paid)
General reserve
Retained earnings (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
|
|
$ 750
87 000
131 550
10 500
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|
|
$ 300 000
37 500
155 100
127 500
375 000
103 800
120 000
4 200
104 250
15 000
78 150
51 300
27 600
19 200
63 750
15 000
|
|
|
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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
|
|
333 750
330 000
570 000
157 500
14 700
675 000
397 500
15 000
75 600
30 000
15 000
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|
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1 237 500
3 750
5 250
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|
|
|
|
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$2 843 850
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$2 843 850
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|
Additional information
(a) Administrative expenses for the year include interest expense of $43 050.
(b) All assets are carried at cost, except for land and buildings which are carried at valuation.
(c) During the year, 75 000 shares were issued at an issue price of $2 each, payable in full on application.
(d) 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 $292 500 and $525 000 respectively.
(e) The mortgage loan is repayable in annual instalments of $75 000 due on 1 March each year.
(f) The 7% debentures are to be redeemed on 31 March 2019. There is no plan to refinance these debentures in the future.
(g) The provision for employee benefits consists of:
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Annual leave
Long-service leave
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$27 000
24 300
|
(h) No employee is eligible for long-service leave until 2022.
(i) The company tax rate is 30%.
Required
A. Prepare a statement of profit or loss and other comprehensive income for Simpsons 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 Simpsons Ltd as at 30 June 2018 to comply with AASB 101.
C. Prepare a statement of changes in equity for Simpsons Ltd for the year ended 30 June 2018, according to the requirements of AASB 101.
Problem # 2
Killer Ltd has determined its accounting profit before tax for the year ended 30 June 2017 to be $263 000. Included in this profit are the following items.
| Interest Receivable |
1000 |
| Annual leave expense |
(45 000) |
| Depreciation expense - buildings |
(8 000) |
| Depreciation expense - plant |
(22 500) |
| Doubtful debts expense |
(4 500) |
| Insurance expense |
(7 000) |
The company's draft balance sheet at 30 June 2017 showed the following:
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Assets
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|
|
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Cash
|
|
$ 1 500
|
|
Interest Receivable
|
|
1 000
|
|
Accounts receivable
|
$ 21 500
|
|
|
Less allowance for doubtful debts
|
(4 000)
|
17 500
|
|
Inventory
|
|
32 000
|
|
Prepaid insurance
|
|
4 500
|
|
Land
|
|
75 000
|
|
Buildings
|
170 000
|
|
|
Less Accumulated depreciation
|
(60 000)
|
110 000
|
|
Plant
|
150 000
|
|
|
Less Accumulated depreciation
|
(67 500)
|
82 500
|
|
Deferred tax assets as at 1 July 2016
|
|
10500
|
|
|
|
334 500
|
|
|
|
|
|
Liabilities
|
|
|
|
Accounts payable
|
|
25 000
|
|
Provision for annual leave
|
|
10 000
|
|
Loan
|
|
140 000
|
|
Deferred tax liabilities as at 1 July 2016
|
|
10800
|
|
|
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$185 800
|
|
|
|
|
Additional information
a) The tax depreciation rate for plant (purchased 3 years ago for $150 000) is 20%.Buildings are depreciated over the same number of years for tax and accounting purposes.
b) During the year, the following cash amounts were paid:
|
|
|
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Annual leave
|
$52 000
|
|
Insurance
|
6 500
|
Annual leave and insurance payments are only deductible for tax purposes when paid.
c) Bad debts of $2 500 were written off against the allowance for doubtful debts during the year. Bad debts are only deductible for tax purposes when written off.
d) The deferred tax balances at 30 June 2016 were:
a. Deferred tax assets $10,500
b. Deferred tax liabilities $10,800
e) The company tax rate is 30%.
Required
Complete the following for Killer Ltd for 30 June 2017:
1. Current Tax Worksheet (template provided)
2. Deferred Tax Worksheet (template provided)
3. Tax Journal Entries
Attachment:- Template.rar