Describe about the Advanced Financial Accounting for Revaluation of Money.
1a.
|
Date |
Particulars |
Amount |
Amount |
|
Revaluation of Machinery |
|||
|
07-01-15 |
Impairment Loss A/c Dr. |
100,000 |
|
|
Accumulated Depreciation A/c. Dr. |
100,000 |
||
|
To, Machinery A/c |
200,000 |
||
|
30/06/2016 |
Depreciation A/c Dr. |
50,000 |
|
|
To, Accumulated Depreciation A/c |
50,000 |
||
|
Income Statement A/c Dr. |
150,000 |
||
|
To, Depreciation A/c |
50,000 |
||
|
To, Impairment Loss A/c |
100,000 |
||
|
Impairment Loss A/c Dr. |
100,000 |
||
|
To, Accumulated surplus A/c |
100,000 |
In accordance with the paragraph 15 of AASB 116, the actual asset value could be evaluated with the help of machinery evaluation. In addition, paragraph 29 of AASB 116 states that the organisation needs to present the cost model used to value the asset. Furthermore, the paragraphs 73-79 of AASB 116 deal with the change in depreciation, which needs to be presented in the annual report (Aasb.gov.au, 2016).
1b.
|
Adjustment for Unrecorded Expenses: |
|||
|
Date |
Particulars |
Amount |
Amount |
|
07-05-16 |
Outstanding Repairs A/c Dr. |
17500 |
|
|
Deferred Tax Asset A/c Dr. |
7500 |
||
|
To, Bank A/c |
25000 |
||
|
30/06/2016 |
Retained Earnings A/c Dr. |
17500 |
|
|
To, Outstanding Repairs A/c |
17500 |
||
|
30/06/2016 |
Income Tax Payable A/c Dr. |
7500 |
|
|
To, Deferred Tax Assets A/c |
7500 |
The above journal entries are passed to comply with the paragraph 7 of AASB 116 to provide accurate figures in the annual report of the organisation. Additionally, the paragraphs 67-72 of AASB 116 represent the treatment related to outstanding repairs to be included while preparing the financial statements (Aasb.gov.au, 2016).
1c.
In this scenario, Rainyday could not pass journal entries for share devaluation, since the investment on Bobsmith iss yet to be sold. Henceforth, the organisation has not suffered from any loss, which could be recorded in the form of journal entries or adjustments (AASB, 2016). As per the AASB standard, share sale is primarily taken into account under capital gain or loss, in which adjustments could be made after conduction of the share sale.
1d.
|
Bad Debt |
|||
|
Date |
Particulars |
Amount |
Amount |
|
Provision for Doubtful Debts A/c Dr. |
900000 |
||
|
To, Bad Debt A/c. |
900000 |
||
|
Bad Debt A/c Dr. |
900000 |
||
|
To, Income Statement A/c. |
900000 |
The above journal entries and adjustments are developed to comply with the paragraph 3 of AASB 137 (Aasb.gov.au, 2016). Thus, with the help of these entries and adjustments, the financial statements could be prepared accordingly.
2.
|
In the Books of Sunny Ltd. |
|||
|
Journal Entries |
|||
|
Date |
Particulars |
Amount |
Amount |
|
31/01/2016 |
Bank A/c Dr. |
18930000 |
|
|
To, Share Application A/c |
18900000 |
||
|
To, Share Option A/c |
30000 |
||
|
(Applications for shares) |
|||
|
Share Application A/c Dr |
18900000 |
||
|
Share Option A/c Dr. |
30000 |
||
|
To, Share Capital A/c |
18012000 |
||
|
To, Share Allotment A/c |
900000 |
||
|
To, Profit on Option A/c |
18000 |
||
|
(Allotment from shares and profit from option) |
|||
|
02-12-16 |
Share Allotment A/c Dr. |
6000000 |
|
|
To, Share Capital A/c |
6000000 |
||
|
(Allotment of 6,000,000 shares) |
|||
|
03-12-16 |
Bank A/c Dr. |
5080000 |
|
|
Calls-in-Arrear A/c Dr. |
20000 |
||
|
To, Share Allotment A/c |
5100000 |
||
|
(Amount received at allotment) |
|||
|
20/03/2016 |
Share Capital A/c Dr. |
80000 |
|
|
To, Calls-in-Arrear A/c |
20000 |
||
|
To, Share Forfeiture A/c |
60000 |
||
|
(Forfeiting of shares) |
|||
|
04-05-16 |
Bank A/c Dr. |
74000 |
|
|
Share Forfeiture A/c Dr. |
60000 |
||
|
To, Share Capital A/c |
80000 |
||
|
To, Profit on Forfeiture A/c |
54000 |
||
|
(Share reissue) |
|||
|
Cost of Re-Issue A/c Dr. |
3600 |
||
|
To, Bank A/c |
3600 |
||
|
(Expenses of reissue paid) |
3a.
|
Calculation for Current Tax Liabilities |
|||
|
Particulars |
Amount |
Amount |
|
|
Accounting Profit Before Tax |
190750 |
||
|
Add: |
Depreciation on Equipment: |
||
|
Taxable Amount |
60000 |
||
|
Accounting Amount |
-40000 |
20000 |
|
|
Depreciation on Motor Cycle: |
|||
|
Taxable Amount |
12000 |
||
|
Accounting Amount |
-15000 |
-3000 |
|
|
Government Grant |
-30000 |
||
|
Entertainment Expenses |
4500 |
||
|
Prepaid Insurance |
-3000 |
||
|
Rent Payable |
6000 |
||
|
Taxable Profit Before Tax |
|
185250 |
|
|
Difference between Book Value & Taxable Value |
|
5500 |
|
|
|
1650 |
||
|
Current Tax |
|
57225 |
|
Deferred Tax Worksheet |
||||
|
Particulars |
Book Value |
Taxable Value |
Difference |
Deferred Tax (Assets/Liability) |
|
Equipment |
400000 |
400000 |
||
|
Less : Depreciation |
40000 |
60000 |
||
|
Net Value |
360000 |
340000 |
20000 |
6000 |
|
Motor Cycle |
60000 |
60000 |
||
|
Less : Depreciation |
15000 |
12000 |
||
|
Net Value |
45000 |
48000 |
-3000 |
-900 |
3b.
|
In the Books of Blaze Ltd. |
|||
|
Journal Entries |
|||
|
Date |
Particulars |
Amount |
Amount |
|
30/06/2016 |
Profit & Loss A/c Dr. |
58875 |
|
|
To, Provision for Income Tax A/c |
57225 |
||
|
To, Deferred Tax Liability A/c |
1650 |
||
|
(Charged tax liability) |
|||
|
Deferred Tax Assets Dr. |
6000 |
||
|
To, Revenue Reserve A/c |
6000 |
||
|
(Increased reserves by adding Tax assets) |
|||
|
Revenue Reserve A/c Dr. |
900 |
||
|
To, Deferred Tax Liability A/c |
900 |
||
|
(Decreasing the reserves by deducting tax liability) |
|
4.
|
In the Books of Sunshine Ltd. |
|||
|
Journal Entries |
|||
|
Date |
Particulars |
Amount |
Amount |
|
07-01-13 |
Equipment A/c Dr. |
800000 |
|
|
To, Bank A/c |
800000 |
||
|
(Equipment bought) |
|||
|
30/06/2014 |
Depreciation A/c Dr. |
152000 |
|
|
To, Equipment A/c |
152000 |
||
|
(Depreciation charged on equipment) |
|||
|
Income Statement A/c Dr. |
152000 |
||
|
To, Depreciation A/c. |
152000 |
||
|
(Depreciation charge adjusted with the income statement) |
|||
|
07-01-14 |
Equipment A/c Dr. |
82000 |
|
|
To, Revaluation Surplus A/c |
82000 |
||
|
(Inclusion of valuation hike in revaluation surplus) |
|||
|
30/06/2015 |
Depreciation A/c Dr. |
136000 |
|
|
To, Equipment A/c |
136000 |
||
|
(De[recitation charged on equipment) |
|||
|
Income Statement A/c Dr. |
136000 |
||
|
To, Depreciation A/c |
136000 |
||
|
(Depreciation charge adjusted with the income statement) |
|||
|
Revaluation Surplus A/c Dr. |
82000 |
||
|
To, Income Statement A/c |
82000 |
||
|
(Inclusion of valuation hike in revaluation surplus) |
|||
|
30/06/2016 |
Depreciation A/c Dr. |
136000 |
|
|
To, Equipment A/c |
136000 |
||
|
(Depreciation charged on Equipment) |
|||
|
Income Statement A/c Dr. |
136000 |
||
|
To, Depreciation A/c. |
136000 |
||
|
(Depreciation charge adjusted with the income statement) |
|||
|
06-01-16 |
Loss on Revaluation A/c Dr. |
48000 |
|
|
To, Equipment A/c |
48000 |
||
|
(Subtraction of valuation fall in revaluation surplus) |
|||
|
30/06/2016 |
Depreciation A/c Dr. |
18000 |
|
|
To, Equipment A/c |
18000 |
||
|
(Depreciation charged on Equipment) |
|||
|
Bank A/c. Dr. |
390000 |
||
|
To, Equipment A/c |
382000 |
||
|
To, Profit on Sales A/c |
8000 |
||
|
(Inclusion of profit from bank revaluation) |
5a.
|
Calculating the Impairment Loss |
||
|
Cinema |
DVD Sales |
|
|
Assets: |
$ Amount |
$ Amount |
|
Inventory |
4,000 |
85,000 |
|
Furniture and fittings |
250,000 |
35,000 |
|
Less: accumulated depreciation |
-45,000 |
-10,000 |
|
Electrical equipment |
165,000 |
25,000 |
|
Less: accumulated depreciation |
-55,000 |
-15,000 |
|
Land and buildings |
650,000 |
185,000 |
|
Less: Accumulated depreciation (buildings) |
-25,000 |
-6,000 |
|
Licence |
25,000 |
– |
|
Goodwill |
45000 |
15000 |
|
Carrying amount of cash generating unit |
1,014,000 |
314,000 |
|
Fair Value, less, Cost of Sales |
780000 |
318000 |
|
Value in Use |
900000 |
290000 |
|
Recoverable Amount (Higher of Fair Value & Value in Use) |
900000 |
318000 |
|
Impairment Loss |
114,000 |
0 |
|
Impairment Loss Exchange Goodwill |
69,000 |
0 |
|
Apportionment of Impairment Loss, Exchange Goodwill |
|||
|
Particulars |
Amount |
Percentage |
Amount |
|
Inventory |
4,000 |
0.41% |
284.8 |
|
Furniture and fittings |
205,000 |
21.16% |
14597.5 |
|
Electrical equipment |
110,000 |
11.35% |
7832.8 |
|
Land and buildings |
625,000 |
64.50% |
44504.6 |
|
Licence |
25,000 |
2.58% |
1780.2 |
|
Total |
969,000 |
1 |
69,000 |
5b.
|
In the Books of Movies Ltd. |
|||
|
Journal Entries |
|||
|
Date |
Particulars |
Amount |
Amount |
|
30/06/2016 |
Impairment Loss A/c Dr. |
69,000 |
|
|
To, Goodwill A/c |
45000 |
||
|
To, Inventory A/c |
285 |
||
|
To, Furniture & Fitting A/c |
14598 |
||
|
To, Electrical Equipment A/c |
7833 |
||
|
To, Land & Building A/c |
44505 |
||
|
To, License A/c |
1780 |
||
|
(Charged impaired loss from assets) |
|||
|
Impairment Loss A/c Dr. |
4000 |
||
|
Accumulated Depreciation A/c Dr. |
6000 |
||
|
To, Land & Building A/c |
10000 |
||
|
(Deducting the impairment loss and accumulated depreciation) |
The entries pertaining to impairment loss have been framed in accordance with the paragraph 5 of AASB 136 (Amiraslani, Iatridis & Pope, 2013). Thus, the exact amount of impairment loss has been represented to gain an overview of the financial disclosures of the organisation.
References:
AASB, C. A. S. (2016). Consolidated Financial Statements.
Aasb.gov.au. (2016). Retrieved 27 August 2016, from https://www.aasb.gov.au/News.aspx.
Amiraslani, H., Iatridis, G.E. & Pope, P.F. (2013). Accounting for asset impairment: a test for IFRS compliance across Europe. Centre for Financial Analysis and Reporting Research (CeFARR).
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