Question 1 -
(a) Ali (2005) argues that despite the strong motivation for harmonization of accounting there is a debate among academics, professionals and international bodies whether harmonization of is possible globally. Critically discuss the above statement and briefly explain the role of IASB to harmonize accounting standards and motivations for and barriers to achieve harmonization throughout the world.
Reference: Ali, M. J. (2005). A synthesis of empirical research on international accounting harmonization and compliance with international financial reporting standards, Journal of Accounting Literature, Vol. 24, pp. 1-52.
Question 2 -
At the end of its financial year, Star Ltd. took the following information from its accounting books of record.
Trial Balance as at 30 June, 2017
|
Debit AUD $
|
Credit AUD $
|
|
Sales Revenue
|
|
700,000
|
|
Interest Revenue
|
|
16,500
|
|
Salaries
|
80,000
|
|
|
Light, power & fuel
|
25,000
|
|
|
Audit Fees
|
10,000
|
|
|
Interest Expense
|
8,000
|
|
|
Damage due to fire
|
33,000
|
|
|
Purchases
|
360,000
|
|
|
Interim dividend
|
8,000
|
|
|
Cash at bank
|
76,000
|
|
|
Inventories
|
115,000
|
|
|
Accounts Receivable
|
85,500
|
|
|
Provision for Doubtful Debts
|
|
10,000
|
|
Term deposit - due 30th September,2017
|
166,000
|
|
|
Marketable Securities (long term)
|
40,000
|
|
|
Insurance paid in advance
|
20,000
|
|
|
Plant & Machinery
|
90,000
|
|
|
Furniture & fittings
|
100,000
|
|
|
Buildings
|
145,000
|
|
|
Accounts Payable
|
|
60,000
|
|
Accumulated Depreciation - Plant & Machinery
|
|
45,000
|
|
Accumulated Depreciation - Furniture & fittings
|
|
30,000
|
|
Accumulated Depreciation - Buildings
|
|
29,000
|
|
Bank Mortgage secured over buildings, due 1st May, 2019
|
|
150,000
|
|
Share Capital
|
|
250,000
|
|
General Reserve
|
|
40,000
|
|
Retained Earnings
|
|
31,000
|
|
1,361,500
|
1,361,500
|
Additional Information
1. Salaries not paid at 30th June amounted to $8,000.
2. Unpaid power account for June totalled $4,000.
3. Prepaid insurance attributable to current year is 10,000.
4. Star Ltd. uses the periodic inventory system. The stock-take of 30th June shows closing inventory of $110, 000 (valued at lower of cost and market value).
5. Interest on bank mortgage is 10% per annum and is payable twice yearly on 31st December and 30th June. The amount due at 30 June has not been recognised.
6. Depreciation rates on the straight line basis are as follows:
- Plant & Machinery 10%
- Furniture & Fittings 5%
- Buildings 5%.
7. The current market value of marketable securities is $42,000. Marketable securities are valued at lower of cost and market value.
8. On 21st June 2017, Star Ltd was notified of an impending legal suit for $25,000 against the company for breach of contract. The case was settled 15th July 2017.
9. Tax expense was calculated to be $40,000. A final dividend of 5% of paid-up-capital was declared and approved in 30th June 2017.
10. On 15 August 2017, Robert Ltd, a major customer of star Ltd, indicated that it had found an alternative supplier. At that date Robert Ltd owed no amount to Star Ltd.
Required:
1) Prepare the necessary adjusting journal entries required by items 1 to 10 (narrations are not required).
2) Prepare a Statement of Comprehensive Income, a Statement of Financial Position and a Statement of Changes in Equity for Star Ltd for the year ended 30th June 2017 in accordance with the requirements of ASB 101.
3) Prepare at least fifteen (15) notes to the financial statements according to comply with relevant accounting standards.