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Test 1 FNSACC504 – Prepare financial reports for corporate entities – Solutions to Sample Workplace Simulation (Test) Task 1 a) On 1 January 2015 the company issued a prospectus to raise an additional...

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Test
1
FNSACC504 – Prepare financial
eports for corporate entities –
Solutions to Sample Workplace
Simulation (Test)
Task 1
a) On 1 January 2015 the company issued a prospectus to raise an additional
$1,000,000 cash by issuing 10,000 9% debentures, each with a face value of $100.
The debenture issue was fully subscribed and all the debentures were issued on 1
April 2015.
) On 30 September 2016, the company redeemed 4,000 of the $100 debentures at a
price of $102.50 each.
Required:
Prepare, General Journal entries to record (Note: na
ations are not required):
(i) the application for and issue of the debentures;
(ii) the redemption of the debentures and profit and loss transactions involved.
Solution:
General Journal
Date Particulars Debit Credit
1/4/15 Trust bank account (10,000* $100)
Debenture holders
1,000,000
1,000,000
Debenture holders
9% Debentures
1,000,000
1,000,000
General bank account
Trust bank account
1,000,000
1,000,000
30/9/16 9% Debentures (4,000*$100)
Premium on redemption
Debenture holders
400,000
10,000
410,000
Debenture holders
XXXXXXXXXXGeneral bank account
410,000
410,000
Profit & loss
Premium on redemption
10,000
10,000

Notes:
 Use a trust account for the issue;
 Don’t forget the transfer to P&L
2
Task 2
Tiger Pty Ltd and Magpie Supplies Ltd are struggling as independent suppliers and have
een losing market share to some larger businesses. They decide to join forces to be more
competitive. The new business will be called Maggers Ltd. It was agreed that Tiger Pty Ltd
would acquire the assets and liabilities of Magpie Supplies for $1,100,000 and create the
new company on 1 July XXXXXXXXXXThe acquisition would be funded through the issue of new
shares in Tigers Pty Ltd (prior to changing its name to Maggers). Prior to the acquisition and
conversion, Magpy Supplies’ trial balance was:
Debit Credit
$ $
Cash at bank 21,450
Accounts receivable 58,700
Inventory 88,100
Land 800,000
Buildings 250,000
Motor vehicles 65,000
Office equipment 350,000
Allowance for doubtful debts 2,700
Accumulated depreciation – buildings 25,000
Accumulated depreciation – office equipment 84,300
Accounts payable 51,250
Mortgage 620,000
Capital 800,000
General reserve 50,000
1,633,250 1,633,250
At the date of acquisition and conversion of the business to a company, the fair value of the
assets was determined as:
$
Cash at bank 21,450
Accounts receivable 54,000
Inventory 88,100
Land 1,000,000
Buildings 300,000
Motor vehicles 60,000
Office equipment 250,000
The business’ liabilities were accepted at the balance listed in the trial balance.
3
Required:
Prepare general journal entries to record the above in Tiger Pty Ltd’s books (prior to
changing its name to Maggers Ltd) (Note: na
ations are not required).
Solution:
Date Particulars Debit Credit
1/7/16 Cash at bank
Accounts receivable
Inventory
Land
Buildings
Motor vehicles
Office equipment
Gain on acquisition
Allowance for doubtful debts
Accounts payable
Mortgage
Vendor – Tackle
21,450
58,700
88,100
1,000,000
300,000
60,000
250,000
2,300
4,700
51,250
620,000
1,100,000
Vendor – Tackle
Share capital
1,100,000
1,100,000
Gain on acquisition
Profit & loss
2,300
2.300
Notes:
 Remember to use the full value of accounts receivable and use the difference as the
allowance for doubtful debts
 Equity is NOT acquired (share capital, reserves or retained earnings)
 Don’t forget to transfer any gain to P&L

4
Task 3
Required:
Prepare the general journal entries to reflect the following events during the year:
a) The final dividend declared at the end of the previous year of $140,000 was paid on
30 September 2015
) On 1 April 2016, land and buildings were revalued from $1,500,000 to $1,700,000
c) An interim dividend was declared on 14 Fe
uary 2016 and paid on 31 March 2016
for $60,000
d) On 30 June 2016 the company declared a fin al dividend of $100,000.
e) On 30 June 2016, the company decided to transfer $50,000 from retained earnings
to the general reserve.
(Note - Na
ations and dates are required.)
Solution:
Date Particulars Debit Credit
30 Sep 2015 Final dividends payable 140,000
Bank 140,000
Payment of final dividend from year
ended 30/6/15
1 Apr 2016 Land & buildings 200,000
Asset revaluation reserve 200,000
Revaluation of land & buildings
14 Feb 2016 Retained earnings 60,000
Interim dividends payable 60,000
Interim dividend declared
31 Mar 2016 Interim dividends payable 60,000
Bank 60,000
Interim dividend paid
30 June 2016 Retained earnings 100,000
Final dividend payable 100,000
5
Final dividend declared
30 Jun 2016 Retained earnings 50,000
General reserve 50,000
Transfer to general reserve
Task 4
Key Flick Ltd commenced operations on 1 July XXXXXXXXXXFor the year ended 30 June 2016, the
company recorded an accounting profit before tax of $299,000.
On 30 June 2016, the accounting balance sheet and the taxation balance sheets disclosed
the following:

Accounting
(Ca
ying Amount)
Taxation (Tax Base)
$ $
Assets
Motor vehicles (at cost) 240,000 240,000
Accumulated depreciation – motor vehicle -48,000 -60,000
Office furniture (at cost) 500,000 500,000
Accumulated depreciation – office furniture -75,000 -60,000
Bank 57,200 57,200
Inventories 48,500 48,500
Accounts receivable (net) 56,500 61,500
779,200 787,200
Liabilities
Bank loan 350,000 350,000
Accounts payable 55,000 55,000
Provision for annual leave 8, XXXXXXXXXXNil
413,000 405,000
Net Assets 366,200 382,200
Included in the calculation of accounting profit were the following items, which have to be
treated differently for taxation purposes:

Accounting Entries Taxation Entries
$ $
Depreciation of motor vehicles 48,000 60,000
Depreciation of office furniture 75,000 60,000
Entertainment expenses (not tax deductible) 4,500 Nil
Transfer to provision for annual leave 11,000 Nil
Transfer to allowance for doubtful debts 6,500 Nil
6
Additional information:
All depreciation is calculated using the straight line method.
Income tax rate is 30%.
Motor vehicles totalling $240,000 were purchased on 1 July XXXXXXXXXXFor accounting
purposes, these vehicles are being depreciated at 20% per year. For taxation
purposes it is being depreciated at 25% per year.
Office furniture was acquired on 1 July 2015 for $500,000. For accounting purposes,
the equipment is being depreciated at 15% per year. However, for taxation
purposes, it is depreciated at 12%.
Annual leave amounting to $3,000 was paid during the year and charged against the
provision. This amount is a taxation deduction.
During the year, a bad debt of $1,000 was written off and charged against the
allowance for doubtful debts. This amount is a taxation deduction.
Required:
(i) Prepare a statement of taxable income for the year ended 30 June 2016.
(ii) Prepare general journal entries to record income tax expense and defe
ed tax in
accordance with AASB 112, including the offset between defe
ed tax assets and
defe
ed tax liabilities. (Note: na
ations are not required)
Solution:
a) Calculation of Taxable income
Accounting profit 299,000
Add:
Accounting depreciation – motor vehicle 48,000
Accounting depreciation – off. equipment 75,000
Entertainment expenses 4,500
Transfer to provision for annual leave 11,000
Transfer to allowance for doubtful debts 6,500
145,000
Less: 444,000
Tax depreciation – machinery 60,000
Tax depreciation – off. equip. 60,000
Annual leave paid 3,000
Bad debt written off 1,000
228,100 124,000
320,000
7
Tax base calculation (not required to be completed – but useful)
Ca
ying
Amount
Tax Base DTA DTL
Motor vehicles 192,000 180,000 3,600
Office furniture 425,000 440,000 4,500
Bank 57,200 57,200
Inventories 48,500 48,500
Accounts receivable 56,500 61,500 1,500
779,200 787,200
Bank loan 350,000 350,000
Accounts payable 55,000 55,000
Provision for annual leave 8, XXXXXXXXXXNil 2,400
413,000 405,000
Net Assets 366,200 382,200
) General Journal
30/6/16 Income Tax Expense 96,000
Provision for Income Tax 96,000
(tax payable on taxable income)
Income Tax Expense 3,600
Defe
ed Tax Liability 3,600
(temporary difference created)
Defe
ed Tax Asset 8,400
Income Tax Expense 8,400
(temporary difference created)
Defe
ed Tax Liability 3,600
Defe
ed Tax Asset 3,600
(offset defe
ed tax liability against defe
ed tax asset)
Notes:
 Remember it is the tax effect of the differences – so multiply them by 30%
 Don’t forget the offset between DTA and DTL for the lower of the two amounts
8
Task 5
Answered Same Day May 26, 2020 FNSACC504

Solution

Aarti J answered on Jun 07 2020
137 Votes
Cover Sheet
    FNSACC504
    Prepare financial statements for corporate entities
    Student name:
    Student number:
    How to use this template
    Dear student,
    By using this template, you can be assured that you respond in a manner and format that is appropriate.
    This template is compulsory for this assessment.
    Assessment 1 Template (Edition 1 & 2)
    Task #    Topic    Element of competency    Marks available    Minimum required marks
    1    Share issues    FNSACC1.1, 2.3    20    10
    2    Debenture issues and redemption    FNSACC1.1, 2.3    20    10
    3    Mergers and acquisition    FNSACC1.2, 1.3    20    10
    4    Reserves and provisions    FNSACC1.1, 1.4, 2.1    16    8
    5    Tax effect accounting    FNSACC1.4    20    10
    6    Computerised accounting packages    Required knowledge    4    2
Task 1(a)
    Answers to Task 1(a)
            General Journal
        1-Aug-15    Trust bank account    3750000
             Application        3750000
        1-Sep-15    Application    3200000
             Share capital        3200000
        1-Oct-15    Application    200000
             Trust bank account        200000
        1-Oct-15    General bank account    3000000
             Trust bank account        3000000
        1-Mar-16    Truct bank account    750000
             Allotment        750000
        1-Mar-16    Call    750000
             share capital        750000
            General bank account    750000
             Trust bank account        750000
                            2650
                            4
                            0.2222222222
                            47700
Task 1 (b)
    Answers to Task 1(b)
            General Journal
        1-Jan-16    Trust bank account    1750000
             Application        1750000
        20-Apr-16    Application    1200000
             Share capital - Preference shares        1200000
            General bank account    1200000
             Trust bank account        1200000
        31-Dec-16    Trust bank account    480000
             Allotment        480000
            Call    480000
             share capital - Preference shares        480000
            General bank account    480000
             Trust bank account        480000
Task 2
    Answers to Task 2
            General Journal
                Debit    Credit
        a    Trust bank account    1200000
             debenture holders        1200000
            Debentureholders    1200000
             8%...
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