ACC210 ATMC Financial Accounting

Added on -2020-02-24

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ACC210 (ATMC) - Financial AccountingTask 2 – Major AssignmentSemester 2 - 2017Student Name:Student ID #:Campus:
Table of ContentsQuestion 1. Ex 3.1..................................................................................................................................3Accounting Justification:................................................................................................................3Relevant Issues:.............................................................................................................................31. Determine subject of measurement..........................................................................................32. Determine valuation premise/method......................................................................................33. Determine market.....................................................................................................................34. Determine Valuation technique.................................................................................................3Question 2. Ex 5.18................................................................................................................................4Accounting Justification:................................................................................................................4Relevant Issues:.............................................................................................................................41. Calculations & General Journal Entries 1/7/16 to 30/6/17:.......................................................42. Calculations & General Journal Entries 1/8/18:.........................................................................43. Calculations & General Journal Entries 30/6/18:.......................................................................4Question 3. Ex 6.11................................................................................................................................5Accounting Justification:................................................................................................................5Relevant Issues:.............................................................................................................................51. Explain accounting issues...........................................................................................................52. Differences Internally Generated vs Acquired...........................................................................53. Reasons for Reluctance..............................................................................................................5Question 4. Ex 9.19................................................................................................................................6Accounting Justification:................................................................................................................6Relevant Issues:.............................................................................................................................61. Deficit of Fund...........................................................................................................................62. Net Defined Benefit Liability......................................................................................................63. Net Interest................................................................................................................................64. Reconciliation............................................................................................................................65. Summary Journal.......................................................................................................................6Page 2 of 13
Question 1. Ex 3.1Accounting Justification:Conceptual Framework AASB para. 100; Criteria: Basis of measurement, Definition: Defines variousmethods such as historical cost, current cost, present values, realisable cost (AASB, 2016).Relevant Issues:1. Determine subject of measurementFair value refers to the price that is expected to be received if the asset is sold or paid in caseof a liability transfer arising on account of market participants enabled transaction taken placeon the date of measurement. Thus, it is noteworthy that fair value would be measures byundertaking the assumptions which would be utilised by the market participants when theyhave to price a particular asset or liability.2. Determine valuation premise/methodFor asset valuation which applies to fixed assets (such as land and building), AASB 13 pavesway for application of the three valuation techniques namely market approach, replacementapproach and income approach. In accordance with the applicable accounting standard, theunderlying entity can choose a suitable technique for valuation which is suitable in theunderlying circumstances considering the availability of data for measurement of fair value(AASB, 2015c).Market approach involves value derivation considering comparable assets. Income approachinvolves value derivation on the basis of income which can be derived from a particular assetafter discounting the same. Replacement approach considers asset valuation considering thereplacement value of a comparable asset (Deegan, 2014).3. Determine marketIf the given land is utilised for residential purpose, then in accordance with the propertyvalue, the value of the land would be $ 1,000,000. However, in order to realise the same, itwould be required to dismantle the building of the factory at an estimated cost of $ 100,000.Page 3 of 13
Hence, the fair value of land in line with the market approach is estimated at $ 900,000.Further, it is known that the building serving as factory can be substituted for an approximatecost of $780,000. Hence the building fair value in accordance with the replacement costmethod is $780,000.4. Determine Valuation techniqueIn accordance with the given information, it is apparent that Maple Ltd has a land on which afactory for manufacturing has been built. As on June 30, 2017, the land has a book value of $200,000 while the building has a book value of $ 260,000. Based on the information given, itis known that Perth has witnessed a property boom on account of residential houses demandand hence the prices of these properties have doubled. For the given company i.e. Maple Ltd,the information provided also suggests that the same land can be used for residential purposealso. Thus, the land’s fair value would assume the value which is higher amongst the factoryvalue and the residential development site value (Deegan, 2014).Page 4 of 13

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