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ACC210 - Financial Accounting

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ACC210 - Financial Accounting (ACC210)

   

Added on  2019-11-14

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This report is on "accounting justification". Accounting justification means fair value refers to the amount received on selling of an asset or paid for transferring the liability as per order between the market applications exactly on the measurement date. The price will fluctuate from entry to exit for any property. The four criteria applicable are subject of measurement, valuation premise, and determination of advantageous market and valuation technique. In the accounting justification report, we will discuss determine valuation premise/method, determine the market.

ACC210 - Financial Accounting

   

ACC210 - Financial Accounting (ACC210)

   Added on 2019-11-14

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ACC210 - Financial AccountingTask 2 – Major AssignmentSemester 2 - 2017Student Name:Student ID #:Campus:
ACC210 - Financial Accounting_1
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................................................................................................................................5Accounting Justification:...................................................................................................................5Relevant Issues:................................................................................................................................51. Calculations & General Journal Entries 1/7/16 to 30/6/17:.......................................................52. Calculations & General Journal Entries 1/8/18:.........................................................................63. Calculations & General Journal Entries 30/6/18:.......................................................................6Question 3. Ex 6.11................................................................................................................................7Accounting Justification:................................................................................................................7Relevant Issues:................................................................................................................................81. Explain accounting issues...........................................................................................................82. Differences Internally Generated vs Acquired...........................................................................83. Reasons for Reluctance..............................................................................................................8Question 4. Ex 9.19................................................................................................................................9Accounting Justification:................................................................................................................9Relevant Issues:................................................................................................................................91. Deficit of Fund...........................................................................................................................92. Net Defined Benefit Liability......................................................................................................93. Net Interest................................................................................................................................94. Reconciliation............................................................................................................................95. Summary Journal.....................................................................................................................10References...........................................................................................................................................11Question 1. Ex 3.1Accounting Justification:Fair value refers to the amount received on selling of an asset or paid for transferringthe liability as per order between the market applications exactly on measurement date. Page 2 of 11
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The price will fluctuate on entry to exit for any property. The four criteria applicable are subject of measurement, valuation premise, and determination of advantageous market and Valuation technique (Ernst & Young, 2012).International Accounting Standards Board (IASB) issues IFRS 13, incorporated by AASB 13 measurement of fair Value. AASB 13 helps in defining the fair value, sets a single standard framework and requires disclosures for measurement (AASB Standard, 2015). Criteria taken into concern while measurement the fair value is the location along with the condition of the assets and restrictions on use or sale of these assets are applicable or not (AASB Standard, 2015).Relevant Issues:1. Determine subject of measurementIn the case study, factory and land are the two assets, which can be measured at a fair value. Alternatively, factory and land can be considered at a single unit of asset for assessment.2. Determine valuation premise/methodEstimated value of Land is $1,000,000. Cost provided for demolishing the factory existing on the land is $100,000. Hence, the property can be sold at $900,000 for residential purposes. Here the land will be sold considering stand-alone basis and its fair value (Sangiuolo & Seidman, 2008).Factory and land can also be sold as a single unit. As per the mentioned data in the case study, factory price can be depreciated from the construction value $520,000 to combined value of land and factory at$260,000, which depicts depreciation of 50% till 30thJune 2017. Provided Cost of new factory is $780,000, therefore current replacement value of the factory after depreciation will be approximately $ 390,000. Here, the factory can be built on cheaper blocks but residential apartments will require better land blocks. Hence themarket for combined factory and land is not favourable based upon in-use valuation premise (Crowe Horwath, 2012). Hence, the buyer or market participant will be forced to buy the land along with factory at $ 900,000 considering its better use for residential purpose. 3. Determine marketThe market will offer maximum advantage, if the property is sold for residential purposes.4. Determine Valuation techniqueThe property including the land has a value of $900,000, which is same for residential use, but if the factory is separately sold, it will have no fair value.There are two ways of determining the use of the property considering the case study. I.Land’s value is calculated as a vacant block including factory at nil fair value for residential use.II.Land’s value is calculated, considering industrial purpose, where it will be included asa continuing asset. Page 3 of 11
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Out of these two ways, one with the higher value will have the best and highest use. If the first option is taken, then depreciation will not be calculated due to its nil fair value. Considering the second option, land and factory need to be separately valued for determining the depreciation. Page 4 of 11
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