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Reference no: EM13380757

Problem # 1                    

The Trial Balance of ABC Ltd at 30 June 2012 as follows:

 

Debit

Credit

Share Capital (ordinary shares issued at $2 fully paid)

 

$200 000

General Reserve

 

    25 000

Retained Earnings (1/7/11)

 

 128 400

Revaluation Reserve

 

   85 000

Mortgage Loan

 

250 000

Bank Overdraft (at Call)

 

  69 200

7% Debenture

 

  80 000

Interest Payable

 

    2 800

Accounts Payable

 

  69 500

Dividend Payable

 

  10 000

Current Tax Liability

 

  52 100

Provision for Employee benefits

 

  34 200

Deferred Tax Liability

 

  18 400

Allowance for Doubtful Debts

 

  12 800

Accumulated Depreciation-Plant and Equipment

 

  42 500

Accumulated Impairment-Goodwill

 

10 000

Cash

$     500

 

Accounts Receivable

  58 000

 

Inventory

  87 700

 

Prepaid Insurance

    7 000

 

Plant & Equipment

222 500

 

Land

220 000

 

Buildings

380 000

 

Goodwill

105 000

 

Deferred Tax Asset

    9 800

 

Sales Revenue

 

825 000

Cost of Sales

450 000

 

Administrative Expenses

265 000

 

Other Expenses

  10 000

 

Interest Revenue

 

    2 500

Dividends Revenue

 

    3 500

Income Tax Expense

  50 400

 

Dividend Paid

   20 000

 

Dividends Declared

   10 000

 

Transfer to General Reserve

   25 000

 

Total

$1 920 900

$1 920 900

Additional Information:

a) Administrative expenses for the year include interest expense of $28 700.

b) All assets are carried at cost, except for land and buildings which are carried at valuation.

c) During the year, 50 000 shares were issued at issue price of $2 each, payable in full on application.

d) On 30 June 2012, the directors revalued land and buildings. The revaluation was based on an independent valuation received from FJ Holden, Registered Valuer. The valuation was based on fair values. The carrying amounts of land and buildings before the revaluation were $195 000 and $350 000 respectively.

e) The mortgage loan is repayable in annual instalments of $50 000 due on 1 March each year.

f) The 7% debentures are to be redeemed at 31 March 2013. There is no plan to refinance these debentures in future.

g) The provision for employee benefits consists of:

Annual Leave      $18 000

Long-service Leave      16 200

h) No employee is eligible for long-service leave until 2016.

i)   The company tax rate is 30%.

Required:

a. Prepare a statement of comprehensive income for ABC ltd for the year ended 30 June 2012, according to the requirements of AASB 101(classify expenses by function).

b. Prepare a statement of financial position for ABC ltd as at 30 June 2012 to comply with AASB 101.

c. Prepare a statement of changes in equity for ABC ltd for the year ended 30 June 2012, according to the requirements of AASB 101.

Problem # 2

C ltd has incurred expenditure, the treatment of which is not prescribed by any existing accounting standard. The board of directors has requested the financial accountant record the expenditure as an asset so as not to impact the current year's profit. The accountant is concerned with the request and requires your assistance in determining an accounting policy for this expenditure.Required:

a. Provide the accountant with two accounting policies or treatment that the company could adopt to account for this expenditure

b. What accountant should do?

Reference no: EM13380757

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