In accordance with AASB 116, revising an asset’s economic life would automatically result in a change in accounting estimate with no change needed in accounting policy. Hence, no retrospection is required for restatement of accounts (Aasb.gov.au, 2018). Thus, the financial statements of the prospective years only would be affected by such change. In this situation, it is necessary to carry out the following calculations:
Book value on 1st July 2017 = ${800,000 – 2 x (800,000/10)} = $640,000
Depreciation expense to be incurred per year for the leftover six years = $640,000/6 = $106,667
Thus, when an accounting estimate change is obvious, disclosure in the form of notes to accounts is required.
The accounts payable would be used for recording the due amount of $20,000, which would fall under the head of current liabilities in the balance sheet statement of Superstore Limited on June 30, 2018. However, as this expense has been incurred in 2018, it is restricted by accounting, matching and accrual accounting principles to disclose repairs cost as an expense in the books of accounts of the organisation for the year 2017. Moreover, as this account n longer exists after 2017, there is need of readjusting the retained earnings account depicting the accumulated profits after dividend payments to the shareholders (Dagwell, Wines & Lambert, 2015).
If an investment value declines after the completion of the accounting period, the event is deemed to be non-adjusting. Therefore, as per AASB 110, the events are to be disclosed as financial footnotes, if sufficient evidences are obtained that these events contain material amounts (Aasb.gov.au, 2018). As per the provided situation, massive decline could be found in the value of an investment to $250,000 from $600,000, which is matter of concern for the users of the financial statements of Superstore Limited, particularly the investors and the shareholders. Despite there is no need of asset valuation due to decline in market value, financial footnotes need to be used for disclosure in the 2018 annual report of the organisation. On the other hand, the effect would be inherent in the 2019 financial statements, in which investment is needed to be written down to $250,000 resulting in loss for the organisation. Hence, in this case, income statement account needs to be debited and the investment account needs to be credited and the amount for both the accounts would be $350,000.
It is necessary for an organisation to adjust events through adjustment of the likely financial effects in the financial reports before issuance and finalisation (Hoskin, Fizzell & Cherry, 2014). When there is detection of error or fraud at the time of reporting, the event is needed to be adjusted. Hence, advertising cost and Max are the accounts needing adjustments.
The amount returned was not $3.50, according to the claim of one shareholder of the organisation. This is due to share forfeiture, in which $4,000 is incurred as excess amount for reissuing the shares. When reissue is completed, it is possible to receive $3.20, which would result in loss of $0.80. Moreover, another loss amount of $0.10 would be faced because of reissuance cost. Hence, the shareholders would suffer a total loss of $0.90. Therefore, the shareholders would make $2.50 per share rather than $3.50 per share.
References:
Aasb.gov.au. (2018). Retrieved 18 September 2018, from https://www.aasb.gov.au/admin/file/content105/c9/AASB110_08-15.pdf
Aasb.gov.au. (2018). Retrieved 18 September 2018, from https://www.aasb.gov.au/admin/file/content105/c9/AASB116_08-15_COMPoct15_01-18.pdf
Dagwell, R., Wines, G., & Lambert, C. (2015). Corporate accounting in Australia. Pearson Higher Education AU.
Hoskin, R. E., Fizzell, M. R., & Cherry, D. C. (2014). Financial Accounting: a user perspective. Wiley Global Education.
