HI5020 Corporate Accounting- Cost of Acquisition of an asset

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HI5020 Corporate Accounting

Task

Assessment Task – Tutorial Questions Assignment

Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in this unit.

Description: Each week students were provided with three tutorial questions of varying degrees of difficulty. The tutorial questions are available in the Tutorial Folder, for each week, on Blackboard. The Interactive Tutorials are designed to assist students with the process, skills and knowledge to answer the provided tutorial questions. Your task is to answer a selection of tutorial questions for weeks 1 to 11 inclusive and submit these answers in a single document.

The questions to be answered are:

Question 1 Week 1 (7 marks)

In accounting for the acquisition of assets, the assets acquired are to be recorded at the ‘cost of acquisition’. How would you determine the ‘costs of acquisition’ of an asset?

 Question 2 Week 4 (7 marks)

How are changes in accounting policies accounted for and disclosed?

Question 3 Week 5 (7 marks)

Following information relate to Hawke Ltd for the financial year ended 2020

Hawke Ltd

Statement of Financial position As at 30 June 2020 

2020

2019

Assets

Cash at bank

84200

100000

Accounts receivable

208000

172000


Inventory

200000

208000

Prepaid insurance

12000

20000

Interest receivable

400

600

Investments

80000

40000

Plant and equipment

800000

720000

Less: Accumulated depreciation

-200000

-180000

Total assets

1184600

1080600

Liabilities

Accounts payable

152000

128000

Provision for employee benefits

24000

16000

Other expenses payable

8000

12000

Equity

Share capital

800000

800000

Retained earnings

200600

124600

Total liabilities and equity

1184600

1080600

Hawke Ltd

Statement of Financial performance For the period ended 30 June 2020

2020

Income

Sales revenue

$1,920,000

Interest revenue on investments

$4,000

$1,924,000

Less: Expenses

Cost of sales

$1,344,000

Employee expenses

$260,000

Insurance expense

$32,000

Loss on sale of equipment

$8,000

Depreciation expense – plant and equipment

$80,000

Other expenses

$44,000

$1,768,000

Profit for the year

$156,000

Additional information

The loss on sale of equipment relates to an item that originally cost $80 000 and had a carrying amount of $20000 when sold.

Required: Calculate the following: 

(a) Cash collected from customers (1 mark)

(b) Cash paid to suppliers (2 marks)

(c) Cash paid to employees for wages and salary (1 mark)

(d) Cash spent on plant and equipment (1 mark)

(e) Proceeds from sale of equipment (1 mark)

(f) Cash paid for insurance (1 mark)

Question 4 Week 6 (7 marks)

 On 1 July 2017, Bright Star Ltd was incorporated. The accounting profit and other relevant information of Bright Star for the two years to 2019 are as follows:

2019

2018

Profit before tax

$4 500 000

$3 600 000

Warranty expense

1500 000

Depreciation expense – machinery

60 000

60 000

Gain on sale of machinery for accounting

Warranty paid

750 000

Tax depreciation – machinery

90 000

90 000

Gain on sale of machinery for tax

Provision for warranty – carrying amount

750 000

1500 000

Provision for warranty – tax base

Machinery – carrying amount

180 000

240 000

Machinery – tax base

120 000

210 000

The company tax rate is 30%.

Required

(a) Calculate the current and deferred tax of Bright Star Ltd for each year, 2018 and 2019 (4 marks)

(b) Prepare the required tax journal entries for each year. (3 marks)

Question 5 Week 12 (11 marks)

On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 60,000. RoadTime’s December 31, 20X1, Trial balance in SFr is as follows:

Debit (SFr)

Credit (SFr)

Cash

7000

Accounts Receivable

20000

Receivable from Popular Creek

5000

Inventory

25000

Plant and Equipment

100000

Accumulated Depreciation

10000

Accounts Payable

12000

Bonds Payable

50000

Common Stock

60000

Sales

150000

Cost of goods sold

70000

Depreciation Expense

10000

Operating Expense

30000

Dividend paid

15000

Total

SFr282,000

SFr 282,000

Additional Information

1. The receivable from Popular Creek is denominated in Swiss Popular Creek’s books show a $4,000 payable to RoadTime.

2. Purchases of inventory goods are made evenly during the Items in the ending inventory were purchased November 1.

3. Equipment is  depreciated  by  the  straight-line  method  with  a  10-year  life  and  no  residual   A  full  year’s depreciation is taken in the year of acquisition. The equipment was acquired on March 1.

4. The dividends were declared and paid on November

5. Exchange rates were as follows:

January 1

1SFr=$.73

March 1

1SFr=$.74

November 1

1SFr=$.77

December 31

1SFr=$.80

20X1 Average

1SFr=$.75

6. The Swiss franc is the functional.

Required

(a) Prepare a schedule translating the December 31, 20X1, trial balance from Swiss francs to dollars. (8 marks)

(b) Where is the translation adjustment reported on Popular Creek’s consolidated financial statements and its foreign subsidiary? (3 marks)

Question 6 Week 8 (11 marks)

(a) Zealandia ltd is the parent company holding 90 percent interest in the Oceania ltd. For each of the following independent cases, provide adjusting entries necessary to eliminate the effect of intragroup transaction at 30 June 2020:

(i) During the period Oceania Ltd sold inventory to Zealandia Ltd at a price of $240000. The cost of the inventory to Oceania ltd was $168000. Ninety percent (90%) of the inventory has been sold by Zealandia Ltd to outside third parties by the end of the period. (2 marks)

(ii) During the period, Oceania borrowed $1500000 from Zealandia Ltd which is still unpaid by the end of the period. During the period Oceania Ltd has paid $30000 interest to Zealandia Ltd for the borrowing. (2 marks)

(iii) At the end of the year, Oceania Ltd declared and paid a dividend amounting to $180000. Zealandia Ltd has declared and paid a dividend of $150000. (2 marks)

(iv) One year ago, at 1 July 2019, Oceania Ltd sold equipment to Zealandia Ltd for a price of $810000. At the time of the sale, the carrying value of the equipment in the Oceania Ltd.’s account was $450000 and the accumulated depreciation was $450000. Zealandia is depreciating the equipment over a further 5 years period. The expected salvage value is zero. Assume a corporate tax rate of 30 percent. (2 marks)

(v) During the period Zealandia has paid a consultancy fee to Oceania Ltd of $75000. Zealandia has provided a management service to Oceania Ltd for $80000 which ahs not been paid as yet by Oceania Ltd. (2 marks)



(b) When are profits realised in relation to inventory transfers within the group? (1 mark)

HI5020 Corporate Accounting

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