Acc222: The Trial Balance Assessment Answer

Financial Accounting Report Assignment Help

The trial balance of KLZR Ltd for the year ended 30 June 2018 is presented below:

Additional information:

• Auditor remuneration includes $16,000 in fees for management consulting services.

• The franchises currently valued at cost of $95,000, were revalued to fair value of $115,000. Assume a tax rate of 30%.

• The directors have declared a dividends of $65,000.

• The directors have proposed a transfer from retained earnings to a general reserve of $25,000.

• The depreciation expenses for the relevant assets are used for selling and distribution and administrative purposes, as detailed below:

Salaries of $104,000 are incurred for: $60,000 for selling and distribution purposes and $44,000 for administrative purposes.

• The rental expenses are for administrative purposes.

• KLZR Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and classifies expenses by function within the statement.

Prepare a statement of profit or loss and other comprehensive income and a statement of changes in equity for KLZR Ltd for the year ended 30 June 2018, according to the requirements of AASB 101. Notes to the accounts are not required but figures in your statements must be supported by explanations and/or workings. Ignore the requirement for prior period comparative figures.

Question 2 Topic 3: Accounting policies and other disclosures

UTAR Ltd is finalising its financial statements for the reporting period ending 30 June 2018. On 20 August 2018, before the financial statements have been finalised and authorised for issue, the company’s directors become aware of the following situations:    

1. The company holds shares in a public listed company, Binnie Ltd. The shares were valued at their market value at reporting date of $200,000. A major fall in the share market occurred on 12 August 2018, and the value of UTAR Ltd’s shareholding in Binnie Ltd declined to $150,000.

2. One of the company’s major debtors, Fancy Ltd, filed for bankcruptcy on 10 August 2018. UTAR Ltd’s financial statements have been prepared reflecting a 50% doubtful debts provision for this account, with the carrying amount of this debtor stated at $400,000 ($800,000 less provision for doubtful debts of $400,000). It appears, at 10 August 2018, that no amount will be recovered from Fancy Ltd’s liquidator in respect of this account.

3. On 30 June 2018, UTAR Ltd had a United States dollar loan outstanding (non-current liability) amount of US$200,000. Given the exchange rate at reporting date of A$1.00 = US$0.91, the load is stated in UTAR Ltd’s statement of financial position at a value of $219,780. A major fall in the value of the Australian dollar occurred on 13 August 2018, such that the exchange rate fell to A$1.00 = US$0.87. The Australian dollar equivalent of the United State dollar loan therefore rose to A$229,885.

4. On 18 July 2018, it is discovered that a divisional manager has been under-depreciating plant and equipment. The motivation of the manager was to maximise the division’s profit figure in order to maximise his bonuses. The carrying amount of the relevant plant and equipment in UTAR Ltd’s financial statement is $1,500,000. An investigation by the company’s internal audit division, presented to UTAR Ltd’s directors on 15 August 2018, suggests that the plant and equipment has a recoverable amount of $1,150,000.

Assuming that each of the independent events described above are material events, you are required to:

1. Classify the events as either an adjusting or non-adjusting event after the end of the reporting period. Justify your classification and make reference to relevant authority when appropriate.

2. Base on your answer to 1 above, prepare the necessary journal entries or note disclosures to comply with the requirements of AASB110. 

Tara Ltd was incorporated on 1 July 2017.  The following transactions and events occurred during the year ended 30 June 2018:

Prepare the journal entries necessary to account for the above transactions and events. Show all relevant dates and brief narrations.

Companion Ltd acquires an item of machinery on 1 July 2016 for $190,000. The useful life and residual value of this machinery is estimated to be six years and $10,000 respectively. The directors elect to depreciate machinery on a straight-line basis.

On 30 June 2017, Companion Ltd adopts the revaluation model for machinery. On this date, the directors determine that the fair value of this machinery is $150,000. As at 30 June 2017, this machinery is expected to have a remaining useful life of five years, and the estimated residual value is revised from $10,000 to $6,000.

On 30 June 2018, the directors determine that the fair value of this machinery is $140,000. As at 30 June 2018, this machinery is expected to have a remaining useful life of four years, and the estimated residual value remains unchanged at $6,000

Ignore any tax effect.

Required:

Prepare the necessary journal entries to account for the item of machinery (including entries for acquisition, depreciation and all revaluation entries) for the period 1 July 2016 to 30 June 2018.  Show all relevant workings.