Determine the interest rate implicit in the lease

Reference no: EM132919022

HI6025 Accounting Theory And Current Issues - Holmes Institute

Question 1 An asset having a cost of $200 000 and accumulated depreciation of $40 000 is revalued to $240 000 at the beginning of the year. Depreciation for the year is based on the revalued amount and the remaining useful life of eight years. Shareholders' equity, before adjusting for the above revaluation and subsequent depreciation, is as follows:

Share capital	600 000
Revaluation surplus	90 000
Capital profits reserve	170 000
Retained earnings	140 000
Total	1 000 000

Required:

Prepare journal entries to reflect the revaluation of the asset and the subsequent depreciation of the revalued asset. Which of the equity accounts would be affected directly or indirectly by the revaluation?

Question 2 ABC Ltd acquires 100 per cent of RedCarpet Ltd on 1 July 2021. ABC Ltd pays the shareholders of RedCarpet Ltd the following consideration:

Cash	35 000
Plant and equipment	fair value $125 000; carrying amount in the books of ABC Ltd $85 000
Land	fair value $150 000; carrying amount in the books of ABC Ltd $100 000

There are also legal fees of $95 000 involved in acquiring RedCarpet Ltd.
On 1 July 2021 RedCarpetLtd's statement of financial position shows total assets of $300 000 and liabilities of $150 000. The fair value of the assets is $400 000.

Required:
Has any goodwill been acquired and, if so, how much? And discuss the potential for including associated legal fees into the cost of acquiring RedCarpet using appropriate accounting standard.

Question 3 ABC Ltd has entered into an agreement to lease an item of equipment that produces teddy bears. The terms of the lease are as follows:

Date of entering lease: 1 July 2023.
Duration of lease: 10 years.
Life of leased asset: 10 years.
There is no residual value.
Lease payments: $5000 at lease inception, $5500 on 30 June each year (that is, 10 payments).
Included within the lease payments are executory costs of $500.
Fair value of the machine at lease inception: $27 470.

Required:
Determine the interest rate implicit in the lease.

Question 4 Discuss and explain If an entity is considering revaluing its exploration and evaluation assets, would the revaluation increase the ‘relevance' of the information from the perspective of the readers of the financial statements? Further, provide explanation for capitalising the expenses at evaluation and exploration stage also restoration of a oil extraction project.

Question 5 ABC Ltd is an Australian listed company. Its results for the financial year ending 30 June 2023 have exceeded expectations-profit before tax is $5.597 million and income tax expense is $1.847 million. As at 30 June 2022, there were 9.75 million ordinary shares on issue. On 11 May 2023, 3.25 million further ordinary shares were issued at a price of $2.30-paid to $2.00. The partly paid shares carry rights to dividends in proportion to the amount paid relative to the total issue price.

Required:
Calculate the basic EPS for ABC Ltd for the year ending 30 June 2023.

Question 6 Explain what is a hedging arrangement and how does it reduce foreign currency risk exposure?

Attachment:- ACCOUNTING THEORY AND CURRENT ISSUES.rar

Reference no: EM132919022

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