BAC205 Corporate ReportingQuestion 18 Marks
Ninja Ltd’s profit before tax for the year ended 30 June 2020 was $18,500. Included in this profit are the following items of income and expense:
|Amortisation of development costs||$10,000|
|Depreciation – equipment (20%)||20,000|
|Depreciation – motor vehicle (25%)||20,000|
|Depreciation – building (5%)||15,000|
|Fines and penalties||1,000|
|Doubtful debts expense||2,300|
|Proceeds on sale of equipment||19,000|
|Carrying amount of equipment sold||18,000|
|Employee benefits expense||5,000|
|Royalty revenue (exempt income)||5,000|
At 30 June, the company’s draft statements of financial position showed the following balances:
|Allowance for doubtful debts||(3,000)||(2,500)|
|Deferred tax asset||?||6,450|
|Goodwill - accumulated impairment losses||(3,000)||(1,000)|
|Current tax liability||?||7,600|
|Provision for employee benefits||4,500||6,000|
|Provision for warranties||2,900||2,000|
|Deferred tax liability||?||2,745|
Question 28 Marks
Salad Ltd acquired all the net assets of an existing business, Lettuce Ltd on 1 July 2020. The statements of financial position of the two companies immediately prior to the acquisition were as follows:
|Salad Ltd||Lettuce Ltd|
|Cultivation equipment (net)||69,000||46,000|
|Loan - Bank of NSW||155,000||79,000|
|Loan - Bernard Bros||35,000||34,000|
|Loan - Golds Corp.||72,000||52,500|
|Share capital||110,000 shares||110,000||-|
All of the assets of Lettuce Ltd are recorded at fair value, with the exception of:
*Fair value excluding Lettuce’s vacant land.
The terms of the acquisition are as follows:
|Carrying amount||Fair Value|
You are finishing your Accounting internship at Rainbow Ltd., where John is working as an accountant and Sky as a CFO. Rainbow Ltd. is a parent company that on 1 July 2020 acquired the controlling interest in Blue Ltd. (subsidiary).
On 15 July 2020, you along with John and Sky attended a meeting in which they discussed accounting of acquisition of Blue Ltd. During the meeting you heard John disclosing to Sky that Blue Ltd. has not measured their assets at fair value to which Sky questioned if under AASB standards at the acquisition date an adjustment entry is needed to record the assets and liabilities of Blue Ltd. at fair value. After the meeting, John as a part of your internship project entrust you to prepare a one-page memo answering Sky’s concern.
Write a memo to Sky and John answering following questions:
Use relevant standards from AASB to support your answer to each of above 4 questions.
This assignment is designed to assess your ability to:
SLO 4 Evaluate financial statements and disclosures as required by Australian Accounting Standards including the preparation of consolidated financial statements and accounting for equity investments and joint ventures (arrangements).
SLO 3 Analyse financial accounting records for specified transactions and events in accord with relevant Australian Accounting Standards and generally accepted accounting principles.
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