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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
Answered Same Day Jul 18, 2020 FNSACC504

Solution

Anju P answered on Jul 20 2020
133 Votes
Cover Sheet
    FNSACC504
    Prepare financial statements for corporate entities
    Student name:    Daniella Noy
    Student number:    801874894
    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 2 Template (Edition 1 & 2)
    Task #    Topic    Element of competency    Marks available    Minimum required marks
    1    Shares and debentures    FNSACC504/1    10    5
            FNSACC504/2
    2    Mergers and acquisitions    FNSACC504/1    10    5
    3    Reserves and provisions    FNSACC504/1    8    4
    4    Tax effect accounting    FNSACC504/2    12    6
    5    Income statement    FNSACC504/2     8    4
            FNSACC504/2
    6    Changes in equity    FNSACC504/2    8    4
    7    Balance sheet    FNSACC504/2    12    6
    8    Cash Flow    FNSACC504/2    12    6
    9    Consolidation     FNSACC504/1    20    10
            FNSACC504/2
Question 1
    Task 1 Marks 10
    Your company has just decided to issue a prospectus to raise additional capital.
    The relevant information is:
    Prospectus issued on 1 June 2015 to raise additional capital
    The prospectus invited applications for 5,000,000 ordinary shares at an issue price of $2.10 each.
    On application for these shares, the applicant was to pay $1.40 per share.
    A second instalment of $0.70 was payable on 1 January 2016.
    According to the prospectus, any excess application money was to be refunded in full.
    By the prospectus close date of 31 July 2015, 5,200,000 applications for ordinary shares had been received. Only application money was sent in with all applications.
    On 1 August 2015, the company’s directors allotted 5,000,000 shares in proportion to the applications received. No additional shares were issued.
    By 1 January 2016, all the second instalment payments had been made, with the exception of one holder of 6,000 ordinary shares.
    Required:
    Prepare, in General Journal format, entries to record:
    (i) the application for and issue of the shares, including any refund; (ii) the payment of the second instalment
    (Note: na
ations are not required).
    Answer:
    General Journal
    Date     Particulars     Debit     Credit
    01.06.15    Equity Share Application    7,000,000
         Equity Share Capital        7,000,000
    30.06.15    General Bank Account    7,280,000
         Equity Share Application        7,280,000
    01.08.15    Equity Share Application    280,000
         General Bank Account        280,000
    01.01.16    Equity Share Second Instalment    3,500,000
         Equity Share Capital        3,500,000
    01.01.16    General Bank Account    3,500,000
         Equity Share Second Instalment        3,500,000
Question 2
        Task 2 Marks 10
        Butch Ltd and Sundance Supplies have agreed to join forces and created a bigger company called Cassidy Supplies Ltd. It was agreed that Butch Ltd would acquire the assets and liabilities of Sundance for $2,500,000 and create a new company on 1 December 2015. The acquisition would be funded through the issue of new shares in Butch Ltd to the vendors. Prior to the acquisition and conversion, Sundance Supplies’ trial balance was:
            Debit     Credit
            $     $
        Cash at bank     35,800
        Accounts receivable     137,800
        Inventory     127,300
        Land & buildings     2,389,000
        Motor vehicles     376,900
        Plant & machinery     551,450
        Allowance for doubtful debts         4,050
        Accumulated depreciation – buildings         64,500
        Accumulated depreciation – plant & machinery         141,500
        Accounts payable         113,200
        Mortgage         998,000
        Capital         2,115,000
        General reserve         182,000
            3,618,250    3,618,250
        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     35,800
        Accounts receivable     132,000
        Inventory     120,000
        Land & buildings     2,500,000
        Motor vehicles     350,000
        Plant & machinery     500,000
        The business’ liabilities were accepted at the balance listed in the trial balance.
        Required:
        Prepare general journal entries to record the above in Cassidy Supplies Ltd’s books
        (Note: na
ations are not required).
    Answer:
    Date     Particulars     Debit     Credit
    01.12.15    Cash at Bank    35,800
        Accounts receivable    132,000
        Inventory    120,000
        Land & Buildings    2,500,000
        Motor Vehicles    350,000
        Plant & Machinery    500,000
         Gain on Acquisition        20,800
         Allowance for doubtful debts         5,800
         Accounts payable        113,200
         Mortgage        998,000
         Vendor - Tackle        2,500,000
    01.12.15    Vendor - Tackle    2,500,000
         Share Capital        2,500,000
    01.12.15     Gain on Acquisition    20,800
         Profit & Loss        20,800
Question 3
    Task 3 Marks 8
    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 $85,000 was paid on 15 August 2015
    b)  On 1 January 2016, land and buildings were revalued from $1,900,000 to $2,025,000
    c)  An interim dividend was declared on 15 March 2016 and paid on 10 April 2016 for $55,000
    d)  On 30 June 2016, the company decided to set aside an additional $35,000 form retained earnings and transfe
ed this to the general reserve
    (Note - Na
ations and dates are required.)
    Answer:
    Date     Particulars     Debit     Credit
    15.08.15    Final Dividend Payable    85,000
         General Bank Account        85,000
    01.01.16    Land & Building Account    125,000
         Revaluation Account        125,000
    15.03.16    Interim Dividend Account    55,000
         Dividend Payable Account        55,000
    10.04.16    Dividend Payable Account    55,000
         General Bank Account        55,000
    30.06.16    Retained Earnings    35,000
         General Reserve        35,000
Question 4
    Task 4 Marks 12
    Task 4 Marks 12
Delphi Deliveries Ltd commenced operations on 1 July 2016. For the year ended
30 June 2017, the company recorded an accounting profit before tax of $299,000.
On 30 June 2017, the accounting balance sheet and the taxation balance sheets disclosed the following:
        Accounting (Ca
ying Amount)     Taxation (Tax Base)
        $     $
    Assets
    Motor vehicles (at cost)     180,000    180,000
    Accumulated depreciation – motor vehicle     -49,500    -36,000
    Office furniture (at cost)     350,000    350,000
    Accumulated depreciation – office furniture     -52,500    -70,000
    Bank     61,500    61,500
    Inventories     55,200    55,200
    Accounts receivable (net)     48,500    51,500
        593,200    592,200
    Liabilities
    Bank loan     250,000    250,000
    Accounts payable     41,800    41,800
    Provision for annual leave     7,750    Nil
        299,550    291,800
    Net Assets     293,650    300,400
    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     49,500    36,000
    Depreciation of office furniture     52,500    70,000
    Entertainment expenses (not tax deductible)     3,850    Nil
    Transfer to provision for annual leave     10,000    Nil
    Transfer to allowance for doubtful debts     3,500    Nil
    Additional information:
    All depreciation is calculated using the straight line method.
    Income tax...
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