ACC210(ATMC) Financial Accounting
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Added on 2020-04-01
ACC210(ATMC) Financial Accounting
Added on 2020-04-01
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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 11
Question 1. Ex 3.1Accounting Justification:The Australian accounting standard number thirteen - Measurement of Fair value,prescribes the framework for determining the fair value of the asset as mentioned in thestatement of affairs. In accordance with the clause number 9 of the thirteen numberstandards, the fair value of the asset will be equivalent to the amount which the seller willreceive from selling the asset in the market or the amount which will be paid in order to setoff the obligation in relation to that asset (AASB, 2011). Relevant Issues:The issue involved in this heading is to how the measurement of the fair value shall be done as per the given circumstances and which method shall be adopted in order to confirm with the correct valuation of the asset and along with this, the type of market has also been detailed. 1. Determine subject of measurementThe subject of the fair value determination and the measurement comprises of the twoforms of assets as given in the study. One is factory and other one is land. On measurementof the fair value of the asset, both the assets are required to be treated as either jointly orseverally. It means either the fair value shall be measured by considering it as the singlegroup or by treating it as to different and separate. 2. Determine valuation premise/methodIn accordance with the paragraph number thirty one of the accounting standard numberthirteen, the valuation premise is defined and determined with the highest and bestpossible use of the concerned asset. In the given case the assets are land and factory asseparate and joint. When it is probable that the highest and best use has been achievedthen the fair value will be equal to the price at which the asset will be sold to the othermarket participant and the other market participant will use the same asset in different way.Thus, valuation premise depends upon the use and the sale price from the point of view ofthe other market participant (Draft and Standard, 2005). In the given case, the valuationpremise will determine the fair value of the asset as equivalent to the sale price minus theamount paid for the bringing the asset for the use by the other market participant which iscost of demolishing. Fair value is thus equals to 900000 dollar (1000000 dollar – 100000dollar) 3. Determine marketIn the given case, the market determines is the active one. It is because of the fact that theprice of land has been considerably increased over the years with the increase in thedemand of the residential houses. Secondly both the parties to the contracts are dealing inan active and efficient manner(Marton, 2009). Page 3 of 11
4. Determine Valuation techniqueValuation techniques will be cost approach and accordingly fair value will be the amountincurred for replacing the current asset which is 900000 dollar. Question 2. Ex 5.18Accounting Justification:The definitions, procedures and the accounting treatment relating to the property plant andequipment are dealt with the Australian accounting standard number sixteen (Aboody,Barth and Kasznik, 2009). It defines two valuation methods - one is cost model and second isrevaluation model. In the initial year cost model is used, the choice is made available fromthe subsequent year. ( Easton and Eddey and Harris, 2013). Relevant Issues:The major issue concerned with this heading is the accounting treatment of the property plant and equipment and its related depreciation. 1. Calculations & General Journal Entries 1/7/16 to 30/6/17:DateAccountDRCR1/7/2016Machine A100000Machine B60000Cash160000030/06/2017Depreciation – Machine A (100000/5)20000Depreciation – Machine B (60000/3)20000Accumulated Depreciation – Machine A20000Accumulated Depreciation – Machine B2000030/06/2017Machine A (84000-80000)4000Revaluation Surplus400030/06/2017Revaluation Surplus (40000-38000)2000Machine B20002. Calculations & General Journal Entries 1/8/18:DateAccountDRCR01/01/2018Depreciation – Machine B9500Page 4 of 11
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