Reference no: EM133081068

Question 1.

Thompson Ltd purchased equipment on 1 July 2011 for $39,800 cash. Transport and installation costs of $4200 were paid on 5 July 2011. Useful life and residual value were estimated to be 5 years and $1 200 respectively. Mandurah depreciates equipment using the straight-line method to the nearest month and reports annually on 30 June. The company tax rate is 30%.

On 30 June 2013, the company adopted the revaluation model to account for equipment. An expert valuation was obtained showing that the equipment had a fair value of $30,000 at that date, with a remaining useful life of 3 years and a residual value of $1 200.

On 30 June 2014, depreciation for the year was charged and the equipment's carrying amount was remeasured to its fair value of $18 000, with a remaining useful life of 2 years and a residual value of $1 200.

On 30 September 2014, the equipment was sold for $10 200 cash.

Required:
(Show all workings and round amounts to the nearest dollar)
Prepare the journal entries to record the transactions and events for the period 1 July 2011 to 30 Sep 2014.

Question 2

The accounting records of Anderson Ltd show the following data for the financial year ended 30 June 2006.
i. Equipment was acquired in early July 2005 for $200 000. Straight-line depreciation was over a 5-year useful life is used with no residual value. For tax purposes, Anderson used a30% rate to calculate depreciation
ii. Exempt revenue totaled $4000.
iii. Product warranties estimated to be $60 000. Actual repairs and labour costs relating to the warranties in the financial year ended 30 June 2006 were $10 000. The remainder is estimated to be incurred evenly in 2007 and 2008.
iv. Sales on an accrual basis were $100 000. For tax purposes, $75 000 was recorded using the instalment method.
v. Entertainment expenses paid were $4200.
vi. Pre-tax accounting profit was $850,000. Tax rate is 30%

Required:
a. Prepare a schedule starting with pre-tax accounting profit and ending with taxable profit
b. Prepare the journal entry for 30 June 2006 income tax payable and expense and deferred taxes.

Question 3
On 1 July 2012, Island Ltd leased a crane from Pacific Ltd. The crane cost Pacific Ltd $120,307, considered to be its fair value on that same day. The lease agreement contained the following provisions:
The lease term is for 3 years, starting on 1-Jul-12
The lease is cancellable with permission of the lessor
Annual lease payment, payable on 30 June each year $41 000
Estimated useful life of the crane 4 years
Estimated residual value of the crane at the end of the lease term $22 000
Residual value guaranteed by Island Ltd $16 000
Interest Rate implicit in the lease 7%
The lease payment of $41 000 includes $2 000 for maintenance and insurance costs that are reimbursed to the lessor.

Required:
a. How should the lease be classified in the books of the lessor and lessee?
b. Prepare the lease schedules for both the lessee and the lessor based on the lease classification.
c. Prepare the journal entries in the records of the lessee for the year ended 30 June 2013.

Question 4
The following details are taken from the accounting records of Aster Ltd for at 30 June 2014:

	Debit	Credit
Sales Revenue		$             882,680
Cost of Sales	$    694,000
Selling Expenses	$       82,000
Administrative and General Expenses	$       51,000
Financial Expenses ( including borrowing costs of $7 000)	$       17,000
Dividend revenue		$               10,000
Interest Revenue		$                  1,320
Plant and Machinery (cost)	$    150,000
Accumulated Depreciation- plant and machinery		$               70,000
Freehold Land	$       40,000
Building (cost)	$       80,000
Accumulated Depreciation- buildings		$               30,000
6% government bonds (face value $20 000)	$       22,000
Shares in other companies	$       75,000
Bank Loan (due 2017)		$               24,000
Accounts Receivable	$       54,000
Allowance for Doubtful Debt		$                  8,000
Inventories (lower of cost or market value)	$       46,000
Mortgage Payable (secured over land and buildings)		$               16,000
Accounts Payable		$               30,000
Goodwill	$       30,000
Share Capital (120,000 ordinary shares issued for $2)		$             240,000
Contingencies Reserve (1/7/2013)		$               16,000
Retained Earnings ( 1/7/2013)		$               13,000
	$ 1,341,000	$          1,341,000

The following items, not yet recorded, must be adjusted before completion of the company's financial statements:

a. Depreciation to be recorded as follows: plant and machinery at 20% of costs; buildings at 5% of cost. Goodwill has not been impaired
b. Income tax to be provided at 30% of profit before tax
c. Dividends of 8c per share were declared
d. Transfer of $10,000 of the contingencies reserve back to retained earnings.
e. In addition, land was revalued upwards during the year to its fair value. The fair value of land was estimated at $50,000.

Required:
Prepare a statement of profit and loss and other comprehensive income, statement of financial position and statement of changes in equity for Aster Ltd for the year ended 30 June 2014.