Question 1
Sugar Ltd was incorporated on 1 July 2014. The following transactions and events occurred during the year ended 30 June 2015:
1 Aug 2014: Sugar Ltd makes an offer to the public for investors to subscribe for 10,000,000 shares, at an issue price of $3.00 per share, with $1.50 payable on application, $1.00 being payable within one month of allotment, and $0.50 payable on a call to be made at a later date. The issue is underwritten at a commission of $2,000.
31 Aug 2014: Applications close, with applications received for 9,500,000 shares.
2 Sep 2014: Shares are allotted, and the underwriter forwarded the application and allotment money due on the 500,000 shares less their commission.
2 Oct 2014: All allotment money is received.
30 Nov 2014: The call is made, with money due by 31 December 2014.
31 Dec 2014: All call money is received except for holders of 20,000 shares who fail to meet the call.
20 Jan 2015: The shares on which call money was not received are forfeited and sold as fully paid. An amount of $2.60 is received for each share sold. Costs of the forfeiture and reissue amount to $6,000, and are paid. The constitution does allow the refund of any balance in the forfeited shares account after reissue to former shareholders.
Required:
Prepare the journal entries to record the transactions of Sugar Ltd up to and including that which took place on 20 January 2015. Show all relevant dates, narrations and workings.
|
Marking Guide - Question 2
|
Max. marks awarded
|
|
Journal entries
|
13
|
|
Dates
|
1.5
|
|
Workings
|
1.5
|
|
Total
|
16
|
Question 2
Accounting for income tax
Fresh Ltd commences operations on 1 July 2014 and presents its first statement of profit or loss and other comprehensive income and first statement of financial position on 30 June 2015. The statements are prepared before considering taxation. The following information is available:
Extract from statement of profit or loss and other comprehensive income for the year ended 30 June 2015
|
|
$
|
$
|
|
Gross profit
|
|
380,000
|
|
Other income:
|
|
|
|
Interest revenue
|
|
2,000
|
|
Government grant (exempt from income tax)
|
|
10,000
|
|
|
|
|
|
Expenses:
|
|
|
|
Administration expenses
|
145,000
|
|
|
Doubtful debts expense
|
6,000
|
|
|
Salaries
|
130,000
|
|
|
Rent
|
26,000
|
|
|
Annual leave
|
3,000
|
|
|
Entertainment expenses (not tax deductible)
|
5,000
|
|
|
Warranty expenses
|
12,000
|
|
|
Depreciation expense - plant
|
40,000
|
|
|
Insurance
|
10,000
|
(377,000)
|
|
Accounting profit before tax
|
|
15,000
|
Assets and liabilities as disclosed in the Statement of Financial Position as at 30 June 2015
|
|
$
|
$
|
|
Assets:
|
|
|
|
Cash
|
|
35,000
|
|
Inventory
|
|
120,000
|
|
Accounts receivable
|
50,000
|
|
|
Less Allowance for doubtful debts
|
(5,000)
|
45,000
|
|
Interest receivable
|
|
1,000
|
|
Prepaid insurance
|
|
5,000
|
|
Plant - cost
|
200,000
|
|
|
Less Accumulated depreciation
|
(40,000)
|
160,000
|
|
Total assets
|
|
366,000
|
|
|
|
|
|
Liabilities:
|
|
|
|
Accounts payable
|
|
40,000
|
|
Provision for warranties
|
|
8,000
|
|
Rent payable
|
|
6,000
|
|
Loan payable
|
|
200,000
|
|
Provision for annual leave
|
|
2,000
|
|
Total liabilities
|
|
256,000
|
|
Net assets
|
|
110,000
|
Additional information:
- All administration and salaries expenses incurred have been paid as at year end.
- Tax deductions for annual leave, warranties, insurance and rent are available when the amounts are paid, and not as amounts are accrued.
- Amounts received from sales, including those on credit terms, are taxed at the time the sale is made.
- Interest income is taxed when amounts are received, and not as amounts are accrued.
- The plant is depreciated over five years for accounting purposes, but over four years for taxation purposes.
- The tax rate is 30%.
Required:
i) Determine the balance of any current and deferred tax assets and liabilities as at 30 June 2015, in accordance with AASB 112. Show all necessary workings.
ii) Prepare the journal entries to record the current tax liability and deferred tax assets and liabilities.