Accounting Theory and Current Issues

This document covers various topics related to accounting theory and current issues. It includes discussions on machine revaluation, AASB 116, lease life, weekly payroll, net income after tax, diluted EPS, foreign currency rate change, CSR, and more.

Accounting Theory
And
Current Issues

Contents
Question 3 - Week 3........................................................................................................................3
Question 2 - Week 5........................................................................................................................5
Question 2 - Week 6........................................................................................................................5
Question 3 - Week 9........................................................................................................................7
Question 3 - Week 10......................................................................................................................9
a....................................................................................................................................................9
b...................................................................................................................................................9
Question 4........................................................................................................................................9
a....................................................................................................................................................9
b.................................................................................................................................................10

Question 3 - Week 3
On 30th June, 2020:
Machine Cost: $650000
Accumulated Depreciation: $110000
Value After Revaluation: $450000
Useful Life of machine: 5 year
Residual Value: $50000
On 1st July 2023
Fair Value of Machine: $460000
Computation of value of machine and revolution effects:
Machine Cost 650000
Less: Accumulated
Depreciation
110000
540000
Revalued At 450000
Decrease in value due to
revaluation
90000
Depreciation during period 2022-23 = (450000 - 50000)/5 = 80000
Value as on 1st July after depreciation = 450000 – 80000 = 370000
Fair Value As on 1st July 2023 = 460000
Increase in Value of Machine = 90000
Journal Entries:

AASB 116: This requirement is designed to administer property, plants and equipment towards
financial accounting purposes in order to allow users of Financial Statements for interpret facts
about transactions in, and improvements in, their PPE of an company. Identification of assets,
assessment of carrying numbers, and depreciation, reduction of damages in conjunction with the
properties, plants and facilities are the major concerns to be addressed. This Standard uses the
below words for the defined meanings:
The carrying value is amount of the asset accepted after all cumulative depreciations and accrued
disability damages have been excluded.
Cost applies to the amounts of cash charged or to the other compensation granted at the period of
its purchase or creation to obtain a property, or, where appropriate, the value assigned to the
property as originally accepted in compliance with several other Australian AS like AASB2
Share-Based Payment) relevant criteria.
Depreciation is sum of an asset, minus residual value of assets or any quantity offset by loss.
Date Particulars Dr. Cr.
30-06-2022 Machinery 650000
Cash at Bank 650000
30-06-2022 Depreciation 110000
Accumulated Depreciation 110000
30-06-2022 Accumulated Depreciation 110000
Machinery 110000
30-06-2022 Revaluation 90000
Machinery 90000
01-07-2023 Depreciation 80000
Accumulated Depreciation 80000
01-07-2023 Accumulated Depreciation 80000

Machinery 80000
01-07-2023 Machinery 90000
Revaluation 90000
Question 2 - Week 5
Lease Life 5 years
Asset Life 6 years
Unguaranteed residual value 40000
Lease payments inception (at the
start)
60000
Annual payments (5) 65000
Implied rate 11.00%
Year Lease
Payment
PV Factors @ 11%
1 60000 0.900901 54054.05
2 65000 0.811622 52755.46
3 65000 0.731191 47527.44
4 65000 0.658731 42817.51
5 65000 0.593451 38574.34
6 65000 0.534641 34751.65
Unguaranteed residual
value
40000 0.534641 21385.63
Fair Value of Lease
Assets
291866.1
Question 2 - Week 6
Weekly Payroll 200000
Employees Entitled to: 2 weeks non vesting leave per
year

employees will take the full 2
weeks' sick leave
56%
employees will take 1 week's leave
each year
22%
Expected annual sick-leave expense for
Dainty Ltd:
= 200000 * 56% * 2 Weeks + 200000 * 22%
* 1 Week
= $ 268000
Journal Enteries:
Sick Leave Expense
Obligation
268000
Employee benefits expenses 268000
Employee benefits
expenses
268000
Profit and Loss Account 268000
Weekly Salary $600
Per Day Salary $600 /
5
120
2 day off
salary
$120
*2
240
Net Weekly
Salary
360
PAYG Tax 30%

Journal Entry:
Salary
Expenses
360
PAYG Tax 108
Salary payable 468
Question 3 - Week 9
Net income after tax 2000000
Shares at the beg, 900000
Shares issues on 1st Jan
2018
300000
Bonus Issue on 1st Mar
2018
1200000 * (1/5)
240000
5% Preference Shares 500000 @ 1.00
Basic EPS as on
30/06/2017
1.5 per share
Shares at the beg, 900000
Shares issues on 1st Jan 2018 300000
Add: Bonus Issue on 1st Mar
2018
1200000 *
(1/5)
240000
Total 1440000
Net income after tax 2000000
Bonus Issue 600000
1400000
Preference Share
Dividend
25000
1375000
Total shares (number) 1440000
EPS 0.954861111

Diluted EPS: Diluted EPS is measure used once all convertible shares have been performed to
determine the consistency of a corporation earnings per share (EPS). Any remaining convertible
preference shares, convertible notes, share warrants, and bonds are convertible shares. A diluted-
EPS would typically be smaller than basic EPS, although it can be greater in the occasional
situation where anti-dilutive shares are present. Just the simple EPS is stated in financial
statements in that same situation.
What will occur if dilutive shares are exercised is called by Diluted EPS. Dilutive shares
are shares which, if the owner uses the choice, are not common stock but may be transformed to
common shares. Dilutive securities essentially raise weighted no. of outstanding shares when
issued, which reduces EPS.
Popular forms of dilutive shares are convertible preferred shares, inventory options,
including convertible bonds. Convertible preferred stock is preferred share which can be
exchanged at any period to common share. share options, a general perk for staff, give the
purchaser right at a certain time to acquire common shares at a fixed price. Convertible bonds,
since they are exchanged into common shares at values and times stated in their terms, are
comparable to convertible preferred shares. When exercised, both of these shares will boost the
numbers of outstanding securities as well as reduce EPS.

Question 3 - Week 10
a.
1 March 2020: NZ$ 750000 * 1.2 = $ 900000
30 June 2020: NZ$ 750000 * 1.25 = $ 937500
b.
01-Mar-
20
Machinery 900000
Payable to New Zealand company 900000
01-Jun-
21
Machinery 900000
Loss due to foreign currency rate
change
37500
Payable to New Zealand company 937500
Question 4
a.
CSR is an independent business framework that enables an organisation to be socially
conscious – for itself, its partners and public. Corporations are mindful of the sort of effect they
have on all facets of society, namely fiscal, social , and environmental, through exercising
corporate social responsibilities, also considered corporate citizenry. Involving CSR ensures that
a organisation works in a natural manner that benefits society, environment and does not add to
them adversely. To be socially conscious, a corporation must first be transparent with itself
including its owners. Firms who implement CSR systems have also evolved to such a degree that
they will return to community. CSR is therefore essentially a broad business approach.
Furthermore, the more visible and profitable an organisation is, more responsibility they have
with their colleagues, competitions and market to establish ethical criteria. these are valid
reasons why corporations should take the opportunity to bring benefits for society and
enterprises. Next, culture would request it in an integrated world faced by unparalleled
environmental and societal problems. Consumers, policymakers and cities are continually

required to produce meaningful net positive returns for their corporation, not only for investors.
The arrangement or licence to work would be portion of all this.
b.
CSR is effective ways businesses can acquire credibility. CSR is most powerful. Even so,
since general knowledge of corporate social responsibility and outrageous corporate conduct is
raising public skepticism about their own actions. Even so, legitimacy of CSR practices is
determined by business behaviors, but this is also embedded in the underlying social cultural
norms and assessor philosophies. The research explores the validity of CSR practices of publicly
listed firms in respect of forest resources as contrasted with family owned organizations in the
field of natural resources. The findings show that publicly listed firms have less justification for
CSR behavior than community-based enterprises. In order to survive and succeed in a society,
businesses must take into account credibility: credibility is a requirement for a corporate licence
to work in society and the availability of the required capital, from investments, dedicated
workers, business associates, revenue and usage to political assistance and sponsorship from a
growing variety of diversified stakeholders. The relationship between industry and rest of
society, however, varies with social structure and facilitates through shifting mechanisms of
legitimacy. Today, the legal , social and corporate obligation of companies shifts towards wider
principles embodied in corporate ethics as well as triple fundamental line, which provides a
balance between social , financial, economic concerns and social obligations. Corporate
credibility meets complex, unclear principles, such that ethics, communication capabilities and
procedures are a critical prerequisite for managing an inherently diverse and diversified
community. In reality, the content and justification of legitimacy including contradictions of
legitimacy has shifted and that this is major challenge to create sustainability among business,
ethical and corporate responsibilities as well as corporate governance.