ACT305 Corporate Accounting Assignment
ACT305 Corporate Accounting
Q1 A) Journal Entries when small ltd does not prepare the consolidated financial statement
|
Year |
Particulars |
Debit (Amount $) |
Credit (Amount $) |
|
2017 |
Bank A/c Dr To Joint venture A/c (Being the interest purchase in the Fry Ltd) |
45000 |
45000 |
|
2018 |
Joint venture A/c Dr To Profit and Loss A/c (Being the Profit is earned on Joint Venture) |
80000 |
80000 |
|
2018 |
Joint venture A/c Dr To bank A/c (Being the Income Tax is paid) |
30000 |
30000 |
|
2018 |
Joint venture A/c Dr To bank A/c (Being the dividend is paid) |
80000 |
80000 |
|
2019 |
Joint venture A/c Dr To Profit and Loss A/c (Being the Profit is earned on Joint Venture) |
70000 |
70000 |
|
2019 |
Joint venture A/c Dr To bank A/c (Being the Income Tax is paid) |
25000 |
25000 |
|
2019 |
Joint venture A/c Dr To bank A/c (Being the dividend is paid) |
15000 |
15000 |
|
2020 |
Joint venture A/c Dr To Profit and Loss A/c (Being the Profit is earned on Joint Venture) |
60000 |
60000 |
|
2020 |
Joint venture A/c Dr To bank A/c (Being the Income Tax is paid) |
20000 |
20000 |
|
2020 |
Joint venture A/c Dr To bank A/c (Being the dividend is paid) |
10000 |
10000 |
Q1 B) Journal Entries when small ltd does prepare the consolidated financial statement
|
Year |
Particulars |
Debit (Amount $) |
Credit (Amount $) |
|
2017 |
Joint Bank A/c Dr To Fry Ltd A/c (Being the amount is invested in the joint Venture) |
45000 |
45000 |
|
2018 |
Joint venture A/c Dr To Fry Ltd A/c (Being the Profit is earned on Joint Venture) |
80000 |
80000 |
|
2018 |
Joint venture A/c Dr To Joint Bank A/c (Being the Income Tax is paid) |
30000 |
30000 |
|
2018 |
Joint venture A/c Dr To Joint Bank A/c (Being the Dividend is paid) |
80000 |
30000 |
|
2018 |
Joint venture A/c Dr To Fry Ltd A/c (Being the Profit is earned on Joint Venture) |
70000 |
70000 |
|
2018 |
Joint venture A/c Dr To Joint Bank A/c (Being the Income Tax is paid) |
25000 |
25000 |
|
2018 |
Joint venture A/c Dr To Joint Bank A/c (Being the Dividend is paid) |
15000 |
15000 |
|
2018 |
Joint venture A/c Dr To Fry Ltd A/c (Being the Profit is earned on Joint Venture) |
60000 |
60000 |
|
2018 |
Joint venture A/c Dr To Joint Bank A/c (Being the Income Tax is paid) |
20000 |
20000 |
|
2018 |
Joint venture A/c Dr To Joint Bank A/c (Being the Dividend is paid) |
10000 |
10000 |
Q2.
|
Ranking of the creditors for the Insolvency process of the Rock Bottom Pty Ltd | |
|
Particulars |
Amount ($) |
|
Amount realised from the sale Secured land and building |
7500000 |
|
Amount realised from the sale of the other assets |
6750000 |
|
Total amount realised from the sale of the assets |
14250000 |
|
Expenses while realising the secured asset |
150000 |
|
Payment to secured creditors |
7350000 |
|
Liquidation Expenses |
600000 |
|
Executive Directors Wages Payable |
450000 |
|
Tax Payable |
1050000 |
|
Local Government rates |
300000 |
|
Staff wages payable |
900000 |
|
Executive Directors leave entitlement |
150000 |
|
Staff Leave entitlement |
150000 |
|
Unsecured Bank Overdraft |
750000 |
|
Unsecured trade payable |
2400000 |
|
Dividend Payment |
450000 |
|
Payment to secured creditors (Balance) |
150000 |
Q3
|
Reconciliation of opening and closing retained earnings Sales revenue 593,400 498,800 Cost of goods sold (399,040) (204,680) Gross profit 194,360 294,120 Dividends revenue from Seven Ltd 63,984 --- Management fee revenue 22,790 --- Profit on sale of plant 30,100 --- Expenses Administrative expenses (26,488) (33,282) Depreciation (21,070) (48,848) Management fee expense --- (22,790) Other expenses (86,946) (66,220) Profit before tax 176,730 122,980 Tax expense (52,890) (36,292) Profit for the year 123,840 86,688 Retained earnings-30 June 2018 274,684 205,712 398,524 292,400 Dividends paid (118,164) (79,980) Retained earnings-30 June 2019 280,360 212,420 Statements of financial position Shareholders' equity Retained earnings 280,360 212,420 Share capital 301,000 172,000 Current liabilities Accounts payable 47,042 39,818 Tax payable 35,518 21,500 Non-current liabilities Loans 149,210 99,760 813,130 545,498 Current assets Accounts receivable 51,084 53,578 Inventory 79,120 24,940 Non-current assets Land and buildings 192,640 280,360 Plant -at cost 257,871 305,988 Accumulated depreciation (73,745) (119,368) |
Q4. Kindly read the below report submitted to the Bill regarding the Investments NAGIL has and whether NAGIL is required to consolidate the financial statements or not as per AASB10
- Although NAGIL has 70% holding in SL but NAGIL has no control over the decisions made by the SL. As per para 6 of AASB10 NAGIL may not required to consolidate the financial statements with the SL as para 6 states that NAGIL has no control on the decisions which may affect the financial performance.
- As VBCL has given the power to NAGIL regarding all the finance decisions so as per para 7c of AASB10, NAGIL is required to prepare the consolidated financial statements along with the results of VBCL. Para 7c of AASB10 states that firm is required to prepare the consolidated accounts if its investor has ability to use the power over the investee to affect the amount of the investor’s return and it has been clearly mentioned in the case that NAGIL deputy chief finance officer would control all payments made by VBCL and no payment would be made without his prior approval.
- In this situation NAGIL has 50% of the voting rights in the MSCL. Although SPL is providing the managerial and entrepreneurial expertise to the MSCL and in consideration of that they are charging the Management Fees and for the loan interest is paid to the NAGIL. It has been further provided that in case of no profit interest payments would be made but management fees will not be paid out i.e. SPL will not be paid the management fees if the MSCL earns the losses so this shows that power is shared by both the companies but there are activities which significantly affect the SPL management fees. As per para 10 of AASB10 the results are required to consolidate if investor has existing rights that gives it the current ability to direct the relevant activities, the activities that significantly affect the investor’s return. But in this case NAGIL will be paid his interest in spit of the losses also so they may not be required to consolidate the financial statements.
- In the company CrocsRUs, NAGIL has 40% investment and keep a close eye on all the major decisions so as per para 7 a, b, c of AASB10 NAGIL is required to consolidate the financial statements.
