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ACCT6003 FAP_Assessment Brief_Part B Page 1 of 5 Context: This assignment forms Part B (final part) of the major assignment. Students are provided with a business case in which an entrepreneur,...

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ACCT6003 FAP_Assessment Brief_Part B Page 1 of 5
Context:
This assignment forms Part B (final part) of the major assignment. Students are provided
with a business case in which an entrepreneur, Xiaojing Wu, from China immigrated to
Australia and considered setting up a small business in South Australia. Xiaojing decided to
start her business as a partnership but decided to dissolve the partnership. Subsequently,
Xiaojing formed a public company named ChiHe
al Ltd. In Part A of the assignment,
students are required to discuss the accounting regulation and reporting requirements for
companies.
In Part B, students are required to account for a range of transactions undertaken by
ChiHe
al Ltd.
Assignment Part B Questions
Assume you were the accountant of ChiHe
al Ltd, address the requirements of the
following independent scenarios for the company.
ASSESSMENT BRIEF
Subject Code and Title ACCT6003 Financial Accounting Processes
Assessment Major Assignment – Part B
Individual/Group Individual
Length Not applicable
Learning Outcomes 1. Explain the regulatory framework that governs
financial reporting in Australia with emphasis on the
Conceptual Framework for financial reporting
3. Apply accounting principles and standards when
accounting for non-cu
ent assets, revenue and
liabilities and recognise the judgements required in a
ange of diverse business contexts
5. Differentiate between shares and debentures and
apply appropriate accounting procedures
Submission Week 8, by 11:55pm Sunday 15th April (AEST/AEDT)
Weighting Part B: 25% (Full assignment: 30%)
Total Marks 100 marks
ACCT6003 FAP_Assessment Brief_Part B Page 2 of 5

Scenario 1 Financing Company Operations XXXXXXXXXXmarks)
The equity of ChiHe
al Ltd as at 30 June 2018 comprises the following:

XXXXXXXXXXordinary Class 1 shares, issued at $4, fully paid
XXXXXXXXXXordinary Class 2 shares, issued at $4, called to $2.40
XXXXXXXXXX% redeemable preference shares, issued at $3.00, fully paid
Share issue costs
Calls in advance (at $1.60)
Share options (issued at $1.20, fully paid)
Retained earnings
$ XXXXXXXXXX
576 000
120 000
(4 272)
25 600
38 400
508 800





The options are exercisable by 28 Fe
uary 2019. Each option entitles the holder to acquire
two ordinary Class 3 shares at a price of $3.60 per share, payable by 28 Fe
uary 2019.

The following transactions occu
ed during the financial year ending 30 June 2019:

2018
Oct.


Nov.






Dec.

20

25
1



30


20

The preference shares were redeemed out of Retained earnings at a 5%
premium.
Cheques were issued to the preference shareholders.
A 1-for-5 renounceable rights offer was made to ordinary Class 1
shareholders at an issue price of $3.80 per share. The offer’s expiry date
is 30 November 2018. The rights issue is underwritten at a commission
of $4 800.
Holders of XXXXXXXXXXshares accept the rights offer, with other rights being
enounced to the underwriter. Ordinary Class 1 shares are issued and
money received.
The underwriting commission is paid.

2019
Jan.

Feb.

April
May


June




10

28

30
31


18
26


27
The directors transfer $56 000 from Retained earnings to a General
eserve account.
As a result of options being exercised, XXXXXXXXXXordinary Class 3 shares are
issued.
Unexercised options lapse.
The final call, due by 31 May 2019, is made on the partly paid shares.
All call money is received by this date, except for that due on 12 000
shares.
The shares on which the final call was unpaid are forfeited.
The forfeited shares are reissued, credited as paid to $4, for $3.60 cash
per share. The balance of the Forfeited Shares account will be refunded
to the former shareholders on 27 June.
Pay refund to former holders of forfeited shares.

ACCT6003 FAP_Assessment Brief_Part B Page 3 of 5


Required:

a) Prepare general journal entries to record the above transactions. (25 marks)

Note: Show all your workings. Journal na
ations are required.

) Prepare the equity section of ChiHe
al’s statement of financial position as at 30 June
2019 once the above transactions have been recorded. (5 marks)
Scenario 2 Property, Plant and Equipment XXXXXXXXXXmarks)
a) The extracted financial statements of ChiHe
al shows the following land and
uildings at 30 June 2018:
$
Residential land, at cost XXXXXXXXXX
Factory land, at valuation XXXXXXXXXX
Buildings, at valuation XXXXXXXXXX
Accumulated depreciation XXXXXXXXXX)
At 30 June 2018, the balance of Revaluation Surplus is $640 000, of which $ XXXXXXXXXXrelates
to Factory land and $ XXXXXXXXXXrelates to Buildings. On 30 June 2018, independent valuations
of the land and building are obtained. The assessed fair values of the above assets as at 30
June 2018 are:
$
Residential land, previously recorded at cost XXXXXXXXXX
Factory land, previously revalued in XXXXXXXXXX
Buildings, previously revalued in XXXXXXXXXX
ChiHe
al Ltd classifies Residential land and Factory land as different classes of assets.
Required:
Prepare general journal entries to account for the revaluation of the above assets on 30
June 2018.
Note: Show all your workings. Journal na
ations are required.
XXXXXXXXXXmarks)
ACCT6003 FAP_Assessment Brief_Part B Page 4 of 5
) ChiHe
al acquired a delivery truck on 1 July 2015 for $ XXXXXXXXXXThe truck is
expected to have a useful life of seven years, and is depreciated using the straight-
line method.
On 1 July 2017 the truck was revalued to $ XXXXXXXXXXOn this same date, its useful life is
eassessed, according to which the truck is expected to have a remaining useful life of six
years.
On 1 July 2018, the truck is unexpectedly sold for $220 000.
Required:
Prepare general journal entries to account for the revaluation of the truck on 1 July 2017
and the subsequent sale on 1 July 2018.
Note: Show all your workings. Journal na
ations are required XXXXXXXXXXmarks)
Scenario 3 Leases XXXXXXXXXXmarks)
ChiHe
al Ltd leases a motor vehicle from Easy Rental Ltd, a deale
manufacturer lessor.
The lease terms are as follows:
• Lease term is six years, commencing on 1 July 2018.
• The motor vehicle has a useful life of six years, after which it will have no residual
value.
• Annual lease payments are $24 000, commencing on 1 July 2018.
• The interest rate implicit in the lease is 10 per cent.
• The motor vehicle has zero unguaranteed residual value.
• The motor vehicle has a normal selling price, i.e. fair value, of $115 200.
• The cost of motor vehicle in the book of Easy Rental Ltd is $83 200.
Required:
a) Prepare general journal entries to account for the lease transaction in the book of
the lessor, Easy Rental Ltd, for two financial years ending 30 June 2019 and 30 June
XXXXXXXXXXmarks)
) Prepare general journal entries to account for the lease transaction in the book of
the lessee, ChiHe
al Ltd, for two financial years ending 30 June 2019 and 30 June
XXXXXXXXXXmarks)
Note: Show all your workings. Journal na
ations are required.
ACCT6003 FAP_Assessment Brief_Part B Page 5 of 5
Scenario 4 Intangible Assets XXXXXXXXXXmarks)
In 2016, ChiHe
al decided to develop a new type of lavender sales bags, which were made
from a new material. The material to be used was more like plastics and thus more resistant
to damage than the traditional material used to make sales bags. In 2016, ChiHe
al spent
$ XXXXXXXXXXon research to gain knowledge of different plastics. ChiHe
al believed this
knowledge could be utilised to
ing significant future economic benefits.

In 2017, ChiHe
al developed a prototype of new sales bags and asked a number of experts
on plastics materials for their opinions regarding the durability of new bags. The company
incu
ed total costs of $ XXXXXXXXXXin developing the prototype in 2017. The experts’ comments
were positive. Some other companies even put in orders to buy new bags. Anticipating a
substantial market demand, ChiHe
al spent $22 000 on legal costs to register a patent for
new bags. The patent has a life of 4 years, after which time other producers may copy the bag
design.

In 2018, ChiHe
al conducted a large-scale marketing campaign for new bags at total costs of
$ XXXXXXXXXXThe marketing campaign indicated a huge demand for new bags. Within four
months, total orders for over $2 million worth of bags were received.

ChiHe
al employed an accounting firm to estimate the present value of revenues from new
ags at $15 million. The company’s Chief Financial Officer decided that he would like to have
this present value of the bags recognised in the company’s financial statements at its fair
value. While the accounting company determined the present value at $15 million, a major
competitor of ChiHe
al made a legally binding offer to buy the patent for new bags at a price
of $12 million.

Required:

Describe how to account for the events and costs incu
ed each year. Provide appropriate
journal entries.

Note: You are expected to refer to the relevant sections and paragraphs in AASB 138
Intangible Assets in your responses to Scenario 4,
Answered Same Day Apr 08, 2020 ACCT6003 Torrens University Australia

Solution

Abr Writing answered on Apr 11 2020
140 Votes
Scenario 1
Part (a)
    
    Journal Entries-
    
    
    
    Account
    Debit
    Credit
    2018
    
    
    
    Oct.
    
    
    
    20
    Preference Share Capital
     $ 120,000.00
    
    
    Premium on redemption
     $ 6,000.00
    
    
    Prefe
ed Shareholders
    
     $ 126,000.00
    
    Amount on redemption due to preference shareholders
    
    
    
    
    
    
    
    Retained Earnings
     $ 6,000.00
    
    
    Premium on redemption
    
     $ 6,000.00
    
    Redemption premium charged from retained earnings
    
    
    
    
    
    
    25
    Prefe
ed Shareholders
     $ 126,000.00
    
    
    Cash
    
     $ 126,000.00
    
    Payments issued to prefe
ed shareholders
    
    
    
    
    
    
    Nov.
    
    
    
    1
    Shares issue expenses
     $ 4,800.00
    
    
    Accounts Payable
    
     $ 4,800.00
    
    Expenditure for underwriting commission on rights issue
    
    
    
    
    
    
    30
    Cash
     $ 243,200.00
    
    
    Retained Earnings
     $ 12,800.00
    
    
    Equity Share Capital- Class 1
    
     $ 256,000.00
    
    Rights shares issued and cash received
    
    
    
    
    
    
    Dec.
    
    
    
    20
    Accounts Payable
     $ 4,800.00
    
    
    Cash
    
     $ 4,800.00
    
    underwriting commission paid
    
    
    
    
    
    
    2019
    
    
    
    Jan.
    
    
    
    10
    Retained Earnings
     $ 56,000.00
    
    
    General Reserve
    
     $ 56,000.00
    
    General reserve created from retained earnings
    
    
    
    
    
    
    Feb.
    
    
    
    28
    Cash
     $ 201,600.00
    
    
    Share Options
     $ 33,600.00
    
    
    Equity Shares- Class 3
    
     $ 224,000.00
    
    Premium on issue of shares
    
     $ 11,200.00
    
    Shares issued against the options exercised
    
    
    
    
    
    
    April
    
    
    
    30
    Share Options
     $ 4,800.00
    
    
    Retained Earnings
    
     $ 4,800.00
    
    Options not exercised lapsed
    
    
    
    
    
    
    May...
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