Reference no: EM132663278

HA2032 Corporate and Financial Accounting - Holmes Institute

Demonstrate an understanding of the role of the Corporations Act, sources of authority, and accounting standards in the governance of companies and requirements for financial reporting;

Learning Outcome 1: Explain the various methods available to companies in their resource expansion and the impact of each on the accounting records and financial statements;

Learning Outcome 2: Critically analyse and interpret the financial statements and other disclosures produced by Australian companies and corporate groups;

Learning Outcome 3: Achieve a high level of competence in applying prescribed accounting techniques to the preparation of the consolidated financial statements of Australian companies and corporate groups;

Question 1

ABC Ltd was registered on 30 June 2019. The next day the directors issued a prospectus inviting applicants for 400,000 ordinary shares with an issue price of $2. The shares were payable in full on application. By 31 July 2019, the company had received 500,000 applications, together with the application monies. The directors allotted 400,000 shares on 1 August 2019 and returned the money for additional applications.
Required:
(a) Prepare general journal entries to record the above data.
(b) Record the above data using ledgers.

Question 2
(Note this question is from the Week 4 Tutorial)
(a) What are the most common reasons for a corporation to reduce its share capital?
(b) What are the allowable methods of reducing share capital?
(c) Discuss the differences between a share buyback and a capital reduction.
(d) What are the different types of debt instruments discussed in this unit?

Question 3
(a) Explain the ways in which a company may expand by obtaining new assets.
(b) Jamuna River Ltd purchased a parcel of assets and liabilities comprising a business directly from Lyneham Pty Ltd. The parcel of assets, measured at net fair value, consisted of:

 Balance of Accounts:  ($)     

Plant	150,000
Land	240,000
Vehicles	120,000
Accounts receivable	30,000

Accounts payable        (48,000)

Total                               492,000

Required:

Prepare journal entries to record the acquisition by Jamuna River Ltd, assuming that:
(i) The cost of acquisition was $600,000 cash.
(ii) The cost of acquisition was $432,000 cash.

Question 4
On 1 July 2018, Sunflower Ltd acquired 90% of the share capital to gain control of Palm Ltd. The following intra-group transactions occurred during the year ending 30 June 2019.

(i) During the 2018/2019 period, Sunflower Ltd sold inventory to Palm Ltd for $1,600,000. Sunflower Ltd purchased this inventory at $1,000,000. By 30 June 2019, Palm Ltd had sold 70% of that inventory to a third party.

(ii) Palm Ltd declared a final dividend of $1,300, 000 from current year's profits.

(iii) Palm Ltd paid Sunflower Ltd a fee for administrative services they provided of $40,000.

(iv) Palm Ltd has an intra-group loan with Sunflower Ltd. Sunflower Ltd provided a loan of $10,000,000. The loan charges 4% interest annually. One half of the interest for the current year remains unpaid as at 30 June 2019.

(v) Palm Ltd sold land to Sunflower Ltd for $560,000. The land was purchased by Palm Ltd at $300,000.

Required:
(a) Prepare the journal entries required to eliminate the intra-group transactions above. (5 marks)
(b) When are profits realised in relation to inventory transfers within the group? (1 mark)
(c) What are the rules for the elimination entry for intra-group transactions relating to dividends declared by the parent company and dividends declared by the subsidiary company? (1 mark)

Question 5

On 1st July, 2018 Nile Ltd acquired 70% of the share capital of Amazon Ltd for $80,000,000. The equity of Amazon Ltd as at the acquisition date was:

Share Capital	$ 52,000,000
General Reserve	$ 20,000,000
Retained Earnings	$ 10,000,000

All assets of Amazon Ltd were recorded at fair value on acquisition, except for one property which had a fair value which was $2,000,000 lower than its' carrying amount. The cost of the property was $20,000,000 with accumulated depreciation of $12,000,000. Ignore Taxes.

Required:

(a) Complete the worksheet below using the NET method.
(b) Prepare the consolidation adjustments and eliminations entries and recognise the NCI in the pre-acquisition equity of Amazon Ltd, assuming that the NCI was measured at the proportionate share of the acquiree's identifiable net assets.

Elimination of Investment in Amazon Ltd	Amazon Ltd (S) $,000	Nile Ltd (70% of Amazon) (P) $,000	30% NCI $,000
Fair Value of consideration transferred
Less: FV of identifiable assets acquired & liabilities assumed
Share capital on acquisition date	52,000
General reserve-acquisition date	20,000
Retained earnings-acquisition date	10,000
Fair value adjustment
Goodwill on acquisition
Non-controlling interest

Question 6

(a) At the beginning of the accounting period the company has a salary payable liability of $200 and at the reporting date a salary payable of $360. During the year the salary expense shown in the income statement was $400.

(b) At the beginning of the accounting period the company has property, plant and equipment (PPE) with a carrying amount of $400. At the end of the accounting period, the carrying amount of the PPE is $1,200. During the year depreciation charged was $80, a revaluation surplus of $240 was recorded and PPE with a carrying amount of $60 was sold for $80.

(c) At the beginning of the accounting period the company has retained earnings of $2,000 and at the end of the accounting period the balance of the retained earnings is $2,800. The reported profit for the year was $1,800.

(d) Moon Light Ltd also provides you with the following information on its sales and collection of accounts receivable:

Sales for the year                                                                         $16,000

Discounts provided to customers for early payment                  $400

Doubtful debts expense for the year                                             $200

Opening balance of accounts receivable                                 $3,600

Closing balance of accounts receivable                                   $3,200

Opening balance of the allowance for doubtful debts                               $360

Closing balance of the allowance for doubtful debts                               $320

Required:

(a) Calculate the cash paid for salary.
(b) Calculate the cash paid to purchase new PPE.
(c) Calculate the dividend paid.
(d) Calculate the cash collected from customers.