Problem # 1
The Trial Balance of ABC Ltd at 30 June 2012 as follows:
|
|
Debit
|
Credit
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|
Share Capital (ordinary shares issued at $2 fully paid)
|
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$200 000
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General Reserve
|
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25 000
|
|
Retained Earnings (1/7/11)
|
|
128 400
|
|
Revaluation Reserve
|
|
85 000
|
|
Mortgage Loan
|
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250 000
|
|
Bank Overdraft (at Call)
|
|
69 200
|
|
7% Debenture
|
|
80 000
|
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Interest Payable
|
|
2 800
|
|
Accounts Payable
|
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69 500
|
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Dividend Payable
|
|
10 000
|
|
Current Tax Liability
|
|
52 100
|
|
Provision for Employee benefits
|
|
34 200
|
|
Deferred Tax Liability
|
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18 400
|
|
Allowance for Doubtful Debts
|
|
12 800
|
|
Accumulated Depreciation-Plant and Equipment
|
|
42 500
|
|
Accumulated Impairment-Goodwill
|
|
10 000
|
|
Cash
|
$ 500
|
|
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Accounts Receivable
|
58 000
|
|
|
Inventory
|
87 700
|
|
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Prepaid Insurance
|
7 000
|
|
|
Plant & Equipment
|
222 500
|
|
|
Land
|
220 000
|
|
|
Buildings
|
380 000
|
|
|
Goodwill
|
105 000
|
|
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Deferred Tax Asset
|
9 800
|
|
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Sales Revenue
|
|
825 000
|
|
Cost of Sales
|
450 000
|
|
|
Administrative Expenses
|
265 000
|
|
|
Other Expenses
|
10 000
|
|
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Interest Revenue
|
|
2 500
|
|
Dividends Revenue
|
|
3 500
|
|
Income Tax Expense
|
50 400
|
|
|
Dividend Paid
|
20 000
|
|
|
Dividends Declared
|
10 000
|
|
|
Transfer to General Reserve
|
25 000
|
|
|
Total
|
$1 920 900
|
$1 920 900
|
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 issue price of $2 each, payable in full on application.
d) On 30 June 2012, 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.
e) The mortgage loan is repayable in annual instalments of $50 000 due on 1 March each year.
f) The 7% debentures are to be redeemed at 31 March 2013. There is no plan to refinance these debentures in future.
g) The provision for employee benefits consists of:
Annual Leave $18 000
Long-service Leave 16 200
h) No employee is eligible for long-service leave until 2016.
i) The company tax rate is 30%.
Required:
a. Prepare a statement of comprehensive income for ABC ltd for the year ended 30 June 2012, according to the requirements of AASB 101(classify expenses by function).
b. Prepare a statement of financial position for ABC ltd as at 30 June 2012 to comply with AASB 101.
c. Prepare a statement of changes in equity for ABC ltd for the year ended 30 June 2012, according to the requirements of AASB 101.
Problem # 2
C ltd has incurred expenditure, the treatment of which is not prescribed by any existing accounting standard. The board of directors has requested the financial accountant record the expenditure as an asset so as not to impact the current year's profit. The accountant is concerned with the request and requires your assistance in determining an accounting policy for this expenditure.
Required:
a. Provide the accountant with two accounting policies or treatment that the company could adopt to account for this expenditure
b. What accountant should do?