Dismantling the Plant and Revaluation of Assets

Journal entries for Midnight Boil Ltd include the purchase of land for $1 million on January 7, 2016, revaluation of land for $50,000 gain in June 30, 2017, impairment loss of $40,000 and accumulated impairment loss of $80,000 by June 30, 2019. The company also dismantled a plant and equipment for $2,100,000 with a present value of $809,640.91, recognizing contingent liability and depreciation expenses.

Running head: ACCOUNTING FOR COST STRUCTURE
Accounting for Cost Structure
Name of the Student:
Name of the University:
Author’s Note:

1ACCOUNTING FOR COST STRUCTURE
Table of Contents
Answer to Question 17.19:..............................................................................................................2
Answer to Question 14.43:..............................................................................................................2
Requirement a:.............................................................................................................................2
Requirement b:.............................................................................................................................3
Answer to 28.2:................................................................................................................................3
Answer to 28.15:..............................................................................................................................3
Answer to 11.9:................................................................................................................................4
Answer to 10.19:..............................................................................................................................4
Requirement a:.............................................................................................................................4
Requirement b:.............................................................................................................................5
Answer to 8.17:................................................................................................................................5
Answer to 6.25:................................................................................................................................6
Requirement a:.............................................................................................................................6
Requirement b:.............................................................................................................................6
Requirement c:.............................................................................................................................7
Answer to 4.26:................................................................................................................................8
Bibliography:.................................................................................................................................10

2ACCOUNTING FOR COST STRUCTURE

3ACCOUNTING FOR COST STRUCTURE
Answer to Question 17.19:
In the books of Lurline Ltd.
Journal Entries
Dr. Cr.
Date Particulars Amount Amount
30/06/2021
Employee Compensation
Expense A/c. Dr. 50000
To, Employee Stock Option
Outstanding A/c. 50000
Profit & Loss A/c. Dr. 50000
To, Employee
Compensation Expense
A/c. 50000
30/06/2022
Employee Compensation
Expense A/c. Dr. 100000
To, Employee Stock Option
Outstanding A/c. 100000
Profit & Loss A/c. Dr. 100000
To, Employee
Compensation Expense
A/c. 100000
1/7/2022 Bank A/c. Dr. 500000
Employee Stock Option
Outstanding A/c. Dr. 150000
To, Equity Share Capital A/c. 450000
To, Securities Premium A/c. 200000

4ACCOUNTING FOR COST STRUCTURE
Answer to Question 14.43:
Requirement a:
The foreign exchange rates fluctuate very highly. Hence, the business firms often face
problems in business deals, which involve foreign currency transaction. Forward rate agreement
ensures that the firms would receive or pay the expected amount in their home currency in
exchange of the fixed amount in foreign currency. Thus, it can reduce the risk of receiving lesser
amount or paying higher amount in home currency in exchange of fixed amount of foreign
currency.
Requirement b:
Particulars Amount
Value of the Deal (in US$) 500000
Forward Rate (in US$) 0.72
Receipt in Australian Dollar 694444
Answer to 28.2:
At the end of the accounting periods, it is necessary to adjust the gain or loss, generated
from the exchange of foreign currency in the annual reports properly.
The gain or loss on foreign currency exchange should be adjusted with the net profit after
tax in the statement of other comprehensive income.
Answer to 28.15:
In the books of Kanga Ltd.
Journal Entries

5ACCOUNTING FOR COST STRUCTURE
Dr. Cr.
Date Particulars Amount Amount
30/6/201
8 Derivative Position A/c. Dr. 595238
To, Other Comprehensive
Income A/c. 595238
1/8/2018 Derivative Position A/c. Dr. 101626
To, Other Comprehensive
Income A/c. 101626
Other Comprehensive
Income A/c. Dr. 696864
Purchase A/c. Dr.
357142
9
To,
Bank A/c.
357142
9
To, Derivative A/c. 696864
Answer to 11.9:
If the lease transaction is to be capitalized, then the lesser of fair market value of the
present values of lease payments should be recorded as the amount of lease assets and the
amount of lease liability should be equal to lease assets.
Answer to 10.19:
Requirement a:
Particulars Amount
Face Value $1,000,000
Interest Rate p.a. 10%
Nos. of Payments pa. 2
Effective Interest Rate 10.25%
Interest Payment $51,250

6ACCOUNTING FOR COST STRUCTURE
Market Rate p.a. 8%
Effective Market Rate per six
months 4.08%
Total nos. of Interest Payments 10
Issue Price of Bond $1,084,422
Requirement b:
In the books of Michaela Ltd.
Journal Entries
Dr. Cr.
Date Particulars Amount Amont
1/7/201
8 Bank A/c. Dr.
$1,084,42
2
To, Debentures A/c.
$1,000,00
0
To, Premium on Debenture A/c. $84,422
30/6/19
Amortization of Premium
A/c. Dr. $16,884
To, Interest Expenses A/c. $16,884
Premium on Debenture A/c. Dr. $16,884
To,
Amortization of Premium
A/c. $16,884
Interest Expense A/c. Dr. $51,250
To, Bank A/c. $51,250
Profit & Loss A/c. Dr. $85,616
To, Interest Expense A/c. $85,616
30/6/19
Amortization of Premium
A/c. Dr. $16,884
To, Interest Expenses A/c. $16,884
Interest Expense A/c. Dr. $16,884
To,
Amortization of Premium
A/c. $16,884

7ACCOUNTING FOR COST STRUCTURE
Interest Expense A/c. Dr. $51,250
To, Bank A/c. $51,250
Profit & Loss A/c. Dr. $85,616
To, Interest Expense A/c. $85,616
Answer to 8.17:
Particulars Amount Amount
Purchase Consideration:
Cash $70,000
Fair Value of Plant &
Equipment
$250,00
0
Fair Value of Land
$300,00
0
Total Purchase Value
$620,00
0
Less:
Total Assets of Bronte's Ltd.at
Fair Value
$800,00
0
Less: Total Liabilities of
Bronte's Ltd.
$300,00
0
Total Equity of Bronte's Ltd.
$500,00
0
Goodwill
$120,00
0
Answer to 6.25:
Requirement a:
Date
Carrying
Amount
Revaluation
Gain/(Loss) Closing Balance
1/7/2016 $1,000,000 $0 $1,000,000

8ACCOUNTING FOR COST STRUCTURE
30/6/2017 $1,000,000 $50,000 $1,050,000
30/6/2018 $1,050,000 ($90,000) $960,000
30/6/2019 $960,000 ($40,000) $920,000
Requirement b:
Date
Carrying
Amount
Impairment
Loss Closing Balance
1/7/2016 $1,000,000 $0 $1,000,000
30/6/2017 $1,000,000 $0 $1,000,000
30/6/2018 $1,000,000 ($40,000) $960,000
30/6/2019 $960,000 ($40,000) $920,000
In the Books of Big Wednesday Ltd.
Jornal Entries
Dr. Cr.
Date Particulars Amount Amount
1/7/2016 Land A/c. Dr. $1,000,000
To, Bank A/c. $1,000,000
30/6/2018 Loss on Impairment A/c. Dr. $40,000
To,
Accumulated
Impairment Loss - Land
A/c. $40,000
Profit & Loss A/c. Dr. $40,000
To, Loss on Impairment A/c. $40,000
30/6/2019 Loss on Impairment A/c. Dr. $40,000
To,
Accumulated
Impairment Loss - Land
A/c. $40,000
Profit & Loss A/c. Dr. $40,000

9ACCOUNTING FOR COST STRUCTURE
To, Loss on Impairment A/c. $40,000
Requirement c:
Date
Carrying
Amount
Revaluation
Gain/(Loss) Closing Balance
1/7/2016 $1,000,000 $0 $1,000,000
30/6/2017 $1,000,000 $50,000 $1,050,000
30/6/2018 $1,050,000 ($90,000) $960,000
30/6/2019 $960,000 ($40,000) $920,000
In the Books of Big Wednesday Ltd.
Journal Entries
Dr. Cr.
Date Particulars Amount Amount
1/7/2016 Land A/c. Dr. $1,000,000
To, Bank A/c. $1,000,000
30/6/201
7 Land A/c. Dr. $50,000
To,
Gain on Revaluation
A/c. $50,000
Gain on Revaluation A/c. Dr. $50,000
To,
Asset Revaluation
Reserve A/c. $50,000
30/6/201
8 Asset Revaluation Reserve A/c. Dr. $50,000
Loss on Impairment A/c. Dr. $40,000
To, Land A/c. $50,000
To,
Accumulated
Impairment Loss -
Land A/c. $40,000
Profit & Loss A/c. Dr. $40,000
To,
Loss on Impairment
A/c. $40,000

10ACCOUNTING FOR COST STRUCTURE
30/6/201
9 Loss on Impairment A/c. Dr. $40,000
To,
Accumulated
Impairment Loss -
Land A/c. $40,000
Profit & Loss A/c. Dr. $40,000
To,
Loss on Impairment
A/c. $40,000
Answer to 4.26:
Particulars Amount
Dismatling the Plant $750,500
Environmental Remediation Cost $1,249,500
Replacement of Flora & Fauna $100,000
Total Cost of Dismantling $2,100,000
Discount Rate 10%
Period 10
Present Value of Dismatling
Cost
$809,640.9
1
In the books Midnight Boil Ltd.
Journal Entries
Dr. Cr.
Date Particulars Amount Amount
30/6/201
8 Plant & Equipment A/c. Dr.
1655150
0
To,
Bank A/c.
1655150
0
Dismantling Cost A/c. Dr. $809,641
To, Contingent Liability A/c. $809,641

11ACCOUNTING FOR COST STRUCTURE
Profit & Loss A/c. Dr. $809,641
To, Dismantling Cost A/c. $809,641
30/6/201
9 Depreciation Expenses A/c. Dr. 1241363
To, Accum. Depreciation -
Plant & Equipment A/c. 1241363
30/6/202
4 Depreciation Expenses A/c. Dr. 1241363
To, Accum. Depreciation -
Plant & Equipment A/c. 1241363

12ACCOUNTING FOR COST STRUCTURE
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Edwards, J.R., 2013. A History of Financial Accounting (RLE Accounting)(Vol. 29). Routledge
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Pearson Higher Education AU.
Hoskin, R.E., Fizzell, M.R. and Cherry, D.C., 2014. Financial Accounting: a user perspective.
Wiley Global Education.
May, G.O., 2013. Financial accounting. Read Books Ltd
Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to
concepts, methods and uses. Cengage Learning.
Williams, J., 2014. Financial accounting. McGraw-Hill Higher Education.