Accounting and Financial Reporting: Financial Statement Disclosures, Share Capital, Income Tax, Revaluation of Property, Impairment of Assets

This article covers various topics related to accounting and financial reporting such as financial statement disclosures, accounting for share capital, accounting for income tax, revaluation of property, plant and equipment, and impairment of assets.

Running head: ACCOUNTING AND FINANCIAL REPORTING
Accounting and Financial Reporting
Name of the Student:
Name of the University:
Author’s Note:
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1ACCOUNTING AND FINANCIAL REPORTING
Table of Contents
Question 1: Financial statement disclosures....................................................................................2
Part i:............................................................................................................................................2
Part ii:...........................................................................................................................................4
Question 2: Accounting for share capital........................................................................................5
Part i:............................................................................................................................................5
Part ii:...........................................................................................................................................6
Question 3: Accounting for income tax...........................................................................................7
Part i:............................................................................................................................................7
Part ii:...........................................................................................................................................8
Question 4: Revaluation of property, plant and equipment.............................................................9
Question 5: Impairment of assets..................................................................................................11
References:....................................................................................................................................12

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Question 1: Financial statement disclosures
Part i:
Scenario 1:
It is clearly evident from “Paragraph 51 of AASB 116” that when any modification is
made in the useful life of an asset, it would be taken into account as a modification in accounting
estimate as well (Laing & Perrin, 2014). Therefore, it is not necessary to restate accounts
retrospectively. The impact of the change would be on the financial reports of the prospective
years.
Lastly, the accounting estimate change is to be disclosed in the form of notes to accounts
of Superstore Limited.
Scenario 2:
The amount due of $20,000 would be included as accounts payable in the current liability
section of the balance sheet statement of the organisation in 2018. As the repairs expense
pertained to the last date of the financial year 2017, it could not be shown as expense in the 2018
income statement of the organisation, since there is no provision for the same under accrual,
matching and accounting principles. Therefore, for adjustments, the use of retained earnings
account would be made, since the repairs expense account has been closed.

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Scenario 3:
An event is said as non-adjusting, if there is decline in value of investment after the
reporting year. “Paragraph 21 of AASB 110” cites that the events are to be disclosed as financial
footnotes at the time they contain material amounts. If no material amounts are present, these
events could be ignored (O’Donnell et al., 2015). Although no adjustment is needed for asset
valuation in order to report in the balance sheet statement of 2018, adequate disclosure should be
provided as financial footnotes. However, investment is to be written down to $250,000 in 2019,
which would result in loss for Superstore Limited. Under such condition, profit and loss account
or revenue account is to be debited by $350,000 and investment account is to be credited by
$350,000.
Scenario 4:
It is evident from “Paragraph 8 of AASB 110” that a firm has to account for adjusting
events by adjusting the probable financial impact in the financial statements before they are
issued and finalised (O’Donnell et al., 2015). Thus, an adjusting event is an event, in which a
fraud or error is detected after the reporting date. Therefore, advertising expense and Max are the
two accounts that require adjustments.

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Part ii:

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Question 2: Accounting for share capital
Part i:
Date Particulars Debit amount Credit amount
10-Aug-17 Cash Account.........................................................Dr 15,000,000$
To Share Application Account 15,000,000$
(Record of allocation money received)
10-Aug-17 Share Application Account.....................................Dr 15,000,000$
To Share Capital Account 12,500,000$
To Share Allotment Account 2,500,000$
(Record of transfer of money to share capital)
12-Aug-17 Underwriting Commission Account........................Dr 12,000$
To Cash Account 12,000$
(Record of payment of underwriting commission)
10-Sep-17 Share Allotment Account........................................Dr 5,000,000$
To Share Capital Account 5,000,000$
(Record of due amount related to share allotment)
10-Sep-17 Cash Account..........................................................Dr 2,500,000$
Share Application Account.......................................Dr 2,500,000$
To Share Allotment Account 5,000,000$
(Record of allocation money received)
1-Feb-18 Share First Call Account.........................................Dr 2,500,000$
To Share Capital Account 2,500,000$
(Record of due amount for share first call)
28-Feb-18 Cash Account...........................................................Dr 2,480,000$
Call-in-Arrears Account..........................................Dr 20,000$
To Share First Call Account 2,500,000$
(Record of money received from shares)
20-Mar-18 Share Capital Account.............................................Dr 160,000$
To Share Forfeiture Account 140,000$
To Call-in-Arrears Account 20,000$
(Record of share forfeiture)
20-Mar-18 Cash Account..........................................................Dr 128,000$
Share Forfeiture Account.........................................Dr 32,000$
To Share Capital Account 160,000$
(Record of share reissuance)
20-Mar-18 Share Reissue Cost Account....................................Dr 4,000$
To Cash Account 4,000$
(Record of share reissue cost)
25-Mar-18 Share Forfeiture Account.........................................Dr 108,000$
To Share Reissue Cost Account 4,000$
To Shareholders Account 104,000$
(Record of refund money to shareholders)
25-Mar-18 Shareholders Account...............................................Dr 104,000$
To Cash Account 104,000$
(Record of refund amount)
In the Books of Rippa Limited
Journal Entries
For the year ended 30 June 2018

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Part ii:
The amount refunded does not match with the demand of one shareholder, which has
been $3.50. This is because there has been failure of the individual to make payment within time.
This has lead to share forfeiture due to which $3.20 would be received, instead of $4. Hence, a
loss of 0.80 would be encountered by Rippa Limited and it has bear reissue cost of $0.10 as well,
which is obtained by dividing the reissue cost by the total number of shares. Hence, the total loss
to be borne by the shareholders would be $0.90. Hence, the amount to be received per share by
the shareholders would be $2.60 rather than $3.50.

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Question 3: Accounting for income tax
Part i:

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Part ii:

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Question 4: Revaluation of property, plant and equipment

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Question 5: Impairment of assets

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References:
Laing, G.K. & Perrin, R.W. (2014). Deconstructing an accounting paradigm shift: AASB 116
non-current asset measurement models. International Journal of Critical
Accounting, 6(5-6), 509-519.
O’Donnell, K., Hicks, B., Streeter, J. & Shantapriyan, P. (2015). Getting it right: directors’
assessment of information. Managerial Auditing Journal, 30(2), 117-131.