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ACCT6003 FAP_Assessment Brief_Part 2 1 | P a g e ASSESSMENT BRIEF Subject Code and Title ACCT6003 FINANCIAL ACCOUNTING PROCESS Assessment Major Assessment – Part 2 Individual/Group Individual Length...

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ACCT6003 FAP_Assessment Brief_Part 2 1 | P a g e

ASSESSMENT BRIEF
Subject Code and Title ACCT6003 FINANCIAL ACCOUNTING PROCESS
Assessment Major Assessment – Part 2
Individual/Group Individual
Length Not applicable
Learning outcomes
1. Explain the regulatory framework that governs financial
eporting 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 range of diverse business
contexts
5. Differentiate between shares and debentures and apply
appropriate accounting procedures
Submission Sunday 22nd July of Week 8 by 11:55pm AEST/AEDT
Weighting 25% (Part 2 only, Full assessment 30%)
Total Marks 100 marks

Context:

This assignment forms Part 2 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 business in South Australia. Xiaojing decided to change the business structure from
a partnership to a private company, ChiHe
al Pty Ltd, and it has been great years for them.
After ten years of operation, the company has grown and again they have made a decision to
move onto public company structure ChiHe
al Ltd from private company structure.
In Part 2 of the assignment, students are required to prepare journal entries to account for a
ange of transactions undertaken by ChiHe
al Ltd.

Business Case
Refer to the transactions for Modules 2, 3 and 4 (Impairment of Assets will not be assessed in
this assignment).




ACCT6003 FAP_Assessment Brief_Part 2 2 | P a g e

Instructions
Students are expected to review the content of Module 2, 3 and 4 (excluding Impairment of
Assets in Module 4). Students are required to account for the formation and operation of
CHiHe
al Ltd, i.e. transactions regarding the company’s financing activities, fixed assets, and
intangible assets.

Assignment Part 2 Questions
Assume you were the accountant of ChiHe
al Ltd, address the requirements of the following
independent scenarios for the company.

Scenario 1 Financing Company Operations (30 marks)

On 1 July 2017, ChiHe
al Ltd was registered and offered 500,000 ordinary shares to the public
at an issue price of $7, payable as follows. As per the company’s constitution, all surplus money
from application would be transfe
ed to allotment and/or calls accounts.

$3 on application (due by 1 August 2017)
$2.5 on allotment (due by 30 August 2017)
$1.5 on Call 1 (due by 15 June 2018)
$1 on Call 2 (due by 30 July 2018)

Application has been closed and by 1 August 2017, 600,000 shares have been applied for of
which applicants for 100,000 shares forwarded the full $8 per share, and the reminder paid
application money only.

On 15 August, directors decided to allot shares in full to applicants who had paid the full amount
and to all remaining applications on a pro rata basis.

The cost of publishing prospectus and stamp duty ($29,000) was also paid on 15 August. Other
legal fees of $7,000 were paid on this date too.

All outstanding allotment money was received by the due date above.

The Call 1 was made on 1 May 2018 with money due by 15 June. Subsequently Call 2 was made
on 1 July 2018 with money due by 30 July 2018. All money was received on the due dates except
for the holder of 15,000 shares who failed to meet both call 1 & 2. On 1 September 2018, as
provided for in the constitution, the directors decided to forfeit these shares. They were
eissued, on 15 September 2018, as paid to $8 for $6 cash with a
okerage fee of $4,000. The
alance of the forfeited shares account (after the reissuing share costs) was returned to the
former shareholder on 30 September 2018.
Required
Prepare the journal entries to record the transactions of ChiHe
al Ltd up to and including that
which took place on 30 September XXXXXXXXXXShow all workings and na
ations are compulsory)





ACCT6003 FAP_Assessment Brief_Part 2 3 | P a g e

Scenario 2 Property, Plant and Equipment (25 marks)

The end of the reporting period for ChiHe
al Ltd is 30 June. The company depreciates all
depreciable assets using the straight-line method.

The following events / transactions occu
ed during 2017 and 2018:
01 April 2017 Paid $90,000 cash for a Truck A. ChiHe
al Ltd estimated the truck’s
useful life and residual value at 5 years and $10,000.

30 June XXXXXXXXXXPaid $140,000 cash for equipment. ChiHe
al Ltd estimated the
equipment’s useful life for 10 years with no residual value.

31 August 2017 Paid $2,500 cash for Truck A’s transmission repairs and oil change.

01 September 2017 ChiHe
al Ltd decided to change the basis of measuring equipment to
the revaluation model. ChiHe
al Ltd directors assessed the
equipment’s fair value at 1 September 2017 at $115,000 with remaining
life 8 years.

1 March 2018 Truck A has been sold for $59,000 cash

30 June 2018 ChiHe
al Ltd re-assessed fair value on 30 June 2018 by independent
valuer and the equipment’s fair value at 30 June 2018 was $120,000.


Required
Prepare the journal entries to record the above transactions of ChiHe
al Ltd for the financial
year ended 30 June 2017 and 2018.

Students are required to show depreciation entries as well as closing entry(ies) to Asset
Revaluation Surplus Account only, if any (you do not need to show closing entries to P+L
summary). Show all workings and na
ations are compulsory. Tax effect on revaluation is
ignored.




ACCT6003 FAP_Assessment Brief_Part 2 4 | P a g e

Scenario 3 Lease (35 marks)

On 31 December 2016, ChiHe
al Ltd has entered into an agreement to lease a Machine from a
manufacturer, Cessnock Ltd.

The lease agreement details are as follows.

Length of lease, non-cancellable 5 years
Commencement date 1 July 2017
Annual lease payment, commencing 1 July 2017 $8,000
Usual selling price of (fair Value) the Machine at 1 July 2017 $35,322
Lessor’s ca
ying amount of the machine at 1 July 2017 $31,000
Estimated useful life of the Machine 7 years
Estimated residual value of the plant at the end of its economic life $3,000
Residual value at the end of the lease term, 100% is guaranteed by
ChiHe
al Ltd.
$2,160
Interest rate implicit in the lease 9%


Required

a) Prepare a schedule of lease payments for the entire lease term and the journal entries
for ChiHe
al Ltd in respect of the lease for the financial year ended 30 June 2018 and
2019 only (20 marks).

) Prepare a schedule of lease receipts for the entire lease term and the journal entries for
the manufacturer, Cessnock Ltd for the financial year ended 30 June 2018 and 2019
only in respect of the lease for the lease term (15 marks).

Note: Include na
ations for all journal entries. Present value tables (both single dollar and
annuity tables) have been included at the end of the assessment





ACCT6003 FAP_Assessment Brief_Part 2 5 | P a g e

Scenario 4 Intangible Assets (10 marks)

ChiHe
al Ltd has undertaken a project to develop an online sales team. The project involves all
sales representatives being equipped with a hologram-projecting equipment which can project
an accurate, image of every stock item ordered by customers.

The costs incu
ed in the cu
ent period on this project for the financial year 30 June 2017 were:
 Computer equipment (life five years, zero residual value) $500,000
 Software development $380,000
 Consultants’ fees (for testing) $620,000

ChiHe
al Ltd expected the project to ‘go-live’ by the end of financial year 2017. However e
ors
were detected and the project was still under on-going experimental testing. Application for a
patent has been delayed. ChiHe
al Ltd was hoping to sell the technology to other companies
ut the marketing department have confirmed that cu
ently there’s yet to be existence of a
market for the new product.


Required

For the reporting period ended 30 June 2017, applying the provisions of AASB 138, identify the
amount of development and whether the development costs should be capitalised or
ecognised as an expense.

In your answer must refer to the relevant sections and paragraphs in AASB 138 Intangible Assets
to fully justify your conclusion. Journal entries are not required.








ACCT6003 FAP_Assessment Brief_Part 2 6 | P a g e
Present value tables for the Question 3 Lease
Present Value Of $1
4% 5% 6% 7% 8% 9% 10% 11% 12%
XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX1.0000
XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Answered Same Day Jul 27, 2020 ACCT6003 Torrens University Australia

Solution

Aarti J answered on Jul 29 2020
147 Votes
Answer 1
    Date    Account    Debit    Credit
    Aug-01    Cash trust    2300000
         Application        2300000
         Allotment        500000
        (Money received on application)
        Application amount = 100000*3+500000*3
        Allotment amount = 100000*5
    Aug-15    Application    1500000
        Allotment    500000
         Share Capital        2000000
        (issue of 500000 shares)
    Aug-15    Application    800000
         Cash trust        800000
        (refund of unsuccessful shares)
    Aug-15    Share issue costs    36000
         Cash        36000
        (Share issue and legal cost paid)
    Aug-30    Cash trust    1000000
         Allotment        1000000
    Aug-30    Allotment    1000000
         Share capital        1000000
    May-01    Call    600000
         Share capital        600000
    15-Jun    Cash    577500
         Call        577500
    1-Jul    Call    600000
         Share capital        600000
        Cash    577500
         Call        577500
    Sep-15    Share capital    82500
         Forefeit...
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