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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

Deferred Tax Liability

 

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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