Financial Report Presentation & Disclosure: Accounting for Equity- Report Writing Assignment
You are to complete all 4 problem-solving questions below. A total of 100 marks are allocated to thequestions, which will then be converted to a mark out of 20%.
Topic 3: Financial report presentation and disclosure
You are the chief accountant of Wesley Ltd, a big accounting firm in town. Jennifer, the trainee accountant has presented you with the balance sheet of one of your clients, Dom Ltd. The balance sheet prepared by Jennifer is shown below.
Additional information related to Dom Ltd:
(1)Cash and cash equivalents consists of $4,000 cash on hand and a bank overdraft of $28,000.
(2)All receivables are expected to be received within 1 year.
(3)The intangible assets included as part of the property, plant and equipment amounted to $94,000.
(4)The investment property relates to a piece of land held for long-term capital appreciation purpose and all of the loans taken for the purpose of the investment property are repayable within 1 year.
(5)Other assets includes $10,000 current and $36,000 non-current.
(6)Included in the trade and other payables are $40,000 repayable within 1 year.
(7)$100,000 included in the financial liabilities is repayable within 1 year.
(8)Provisions consist of current tax liabilities of $8,000 and the balance is related to provision for a 6- month warranty on certain goods sold.
Write a memo to Jennifer:
(a) Explain the key problems with thestatement of financial position prepared by Jennifer. You should make references to requirements of AASB101, where appropriate.
(b) Prepare the corrected version of thestatement of financial position of Dom Ltd for the year ended 30 June 2017 and attach it to the end of the memo, for Jennifer’s review. Your corrected statement of financial position should be prepared in accordance with AASB101, showing only minimum line items on the face of the statement, when relevant. Notes to the accounts are not required.
Question 2 [20 marks]
Topic 4: Accounting for equity
On 1 July 2016, Ansett Ltd was incorporated and offered 5,000,000 ordinary shares to the public at an issue price of $2.00 per share, with $1.50 payable on application, and $0.30 due within one month of allotment and $0.20 payable on a call to be made at a later date.
By 31 July 2016, applications had been received for 5,500,000 shares. On 12 August 2016, 5,000,000 shares were allotted, and excess application money refunded to unsuccessful applicants. All allotment money was received by 12 September 2016.
On 20 March 2017, the call was made with money due by 30 April 2017. By 30 April 2017, all call money was received except for holders of 50,000 shares who failed to meet the call. On 31 May 2017, the shares on which call money was not received are forfeited, and on 5 June 2017, they were auctioned as fully paid.An amount of $1.70 was received for each share sold.Share re-issue costs amounted to $5,000 were paid.The constitution provided for any surplus on resale, after satisfaction of unpaid instalments and any costs, to be returned to shareholders whose shares were forfeited.
Provide the journal entries necessary to account for the above transactions and events for the year ended 30 June 2017 for Ansett Ltd. Show all narrations, dates and relevant workings.
Topic 6A: Accounting for revaluation of assets
On 1 July 2015, Genesis Ltd acquired two items of machinery: Machine G at a cost of $400,000 and Machine Q at $300,000. At the date of acquisition, Genesis’s directors determine to depreciate the machinery on a straight-line basis. Machine G has an estimated useful life of 10 years and an estimated residual value of $40,000. Machine Q has an estimated useful life of 5 years with no estimated residual value.
On 30 June 2016, Genesis Ltd decided to adopt the revaluation model subsequent to acquisition. The fair values of Machine G and Q is $380,000 and $200,000 respectively. The useful life for Machine G at 30 June 2016 is estimated to be 8 years. Other than this, there is no change in the estimated useful life and residual value for the machinery.
On 30 June 2017, the fair values of Machine G & Q are $300,000 and $160,000 respectively. Assume a tax rate of 30%
Prepare the journal entries for Genesis Ltd from 1 July 2015 to 30 June 2017 to record the transactions above. Show narrations and all relevant workings.