Advance Financial Accounting Assessment - Desklib

This assessment consists of six (6) questions and is designed to assess your level of knowledge of the key topics covered in this unit. It covers topics like acquisition cost, revaluation, liabilities, lease asset, taxable profit, and accounting profit. The subject is Advance Financial Accounting with course code HA3011. The assessment is for Trimester 2, 2021. Get solved assignments, essays, dissertation, and more at Desklib.

Student Number: (enter on the line below)
Student Name: (enter on the line below)
HA3011
ADVANCED FINANCIAL ACCOUNTING
SUPPLEMENTARY ASSESSMENT
TRIMESTER 2, 2021
TIME ALLOWED: 4 Hours
All answers must be submitted within this time frame. Late submissions are not
accepted.
Assessment Weight: 50 total marks
Instructions:
 All questions must be answered by using the answer boxes provided in this paper.
 Completed answers must be submitted to Blackboard by the published due date
and time.
Submission instructions are at the end of this paper.
Purpose:
This assessment consists of six (6) questions and is designed to assess your level of
knowledge of the key topics covered in this unit
HA3011 Online Supp T2 2021

Question 1 (7 marks)
BMI Ltd acquired a Machine from BNS Ltd for the following consideration:
Cash $80 000, Land in the books of BMI Ltd the land is recorded at its cost of $950 000. It has a
fair value of $870 000.
BMI Ltd also agrees to assume the liability of BNS Ltd bank loan of $100 000 as part of the
Machine acquisition.
Required
(a) Calculate the acquisition cost of the Machine
(b) Provide the journal entries that would appear in BMI Ltd’s books to account for the
acquisition of the Machine
ANSWER: ** Answer box will enlarge as you type
A
Acquisition cost = 950000 + 100000 = 1050000
The book value of the machine is 950000 and the bank loan of BMI is also included as part of
machine acquisition so it will be included in cost of acquisition.
B
Machine a/c Dr 1050000
To cash 80000
To bank loan liability 100000
To BNS ltd 870000
(being machinery purchased and some part of cash is being paid along with taking the liability of
BNS as well in cost of machine.)
It is assumed that the balancing figure is being created as liability which is 870000
Question 2 (7 marks)
An item of depreciable machinery is acquired on 1 July 2015 for $320 000. It is expected to have
a useful life of 10 years and a zero-residual value (straight-line). On 1 July 2019, it is decided to
revalue the asset to its fair value of $280 000.
Required:
a) Provide journal entries to account for the revaluation (4 marks)
HA3011 Online Supp T2 2021

b) In your own words, what actions must be taken, if an item of plant, property and
equipment is measured at cost, but the recoverable amount of the assets is determined
to be less than cost? (3 marks)
ANSWER:
A
Machinery A/c dr 88000
To revaluation a/c 88000
(being revaluation of machinery being recorded within the books of account.)
B
In case when the recoverable amount of the asset is determined to be less than the cost, then
the company must revalue the asset. This is particularly because of the reason that when the
equipment is measured at cost then it is necessary for the company that they must try to
improve the value of asset. The reason underlying this fact is that when the cost of machine will
be good then the recoverable amount should also be good.
HA3011 Online Supp T2 2021

Question 3 (7 marks)
Determine whether the following items would be classified and recorded as liabilities:
(a) provision for repairs
(b) provision for long-service leave
(c) dividends payable
(d) a guarantee for the debts of a subsidiary
ANSWER:
A
Yes, the provision for repairs will be classified and recorded as the liability. The reason
underlying this fact is that when the provision is being created then this implies that it is current
liability and will be recorded in balance sheet as current liability.
B
In case the long service leave is an entitlement which is being accumulated by the employees
within the reported period and will result in cash outflow by the employer in future then it will
be treated as liability. In case the cash outflow is within one year then it will be current liability or
in case it is more than one year then it will be long term liability.
C
Yes, the dividend payable is also classified as a liability because it is the responsibility of the
company to pay dividend to the shareholders and due to this, it is being treated as liability of the
company.
D
The guarantee for the debt relating to a subsidiary is never disclosed within the financial
statement rather it is a contingent liability which occurs only in the situation wherein the
subsidiary does not pay its obligations.
Question 4 (11 marks)
In your own words, explain why would the carrying amount of a lease asset typically reduce
more quickly than the carrying amount of a lease liability?
ANSWER:
The carrying amount of lease asset typically reduces more quickly than the carrying amount of
lease liability. The reason pertaining to the fact is that as a result of this there will be reduction in
HA3011 Online Supp T2 2021

the reported equity compared to IAS 17 for the companies which states that there must be
material off balance sheet lease. Along with this, the newly lease asset is the non- current
financial asset and on the other hand, the lease liability is the part or either current or non-
current liability. Hence, as a result of this, the carrying amount of lease asset is written off more
quickly as compared to lease liability.
HA3011 Online Supp T2 2021

Question 5 (11 marks)
Based on the following information form the accounts of JXY Ltd for the year ending 30 June
2019
Cash Sales 650 000
Cost of Goods Sold 55 000
Amount received in advance for services to be performed in August 2019 9 500
Rent expenses for year ended 30 June 2019 10 500
Rent Prepaid for two months to 31 August 2019 1 200
Doubtful debts expenses 1 200
Amount provided in 2019 for employees’ long-service leave entitlements 5 000
Goodwill impairment expenses 2 000
Required:
Calculate the taxable profit and accounting profit for the year ending 30 June 2019.
ANSWER:
Particular Amount
Cash Sales 650000
Less
Cost of Goods Sold 55000
Gross profit 595000
Less:
Rent expenses for year ended 30 June 2019 10500
Doubtful debts expenses 1200
Amount provided in 2019 for employees’ long-service leave entitlements 5000
Goodwill impairment expenses 2000
taxable profit 576300
Question 6 (7 marks)
On 5 June 2022 ABC Ltd acquires goods on credit from a supplier in London. The goods are
shipped FOB London on 5 June 2022. The cost of the goods is UK£300 000 and the debt remains
unpaid at 30 June 2022.
On 5 June 2022 the exchange rate is A$ 1.00 = UK£0.50. On 30 June 2022 it is A$1 .00 = UK£0.45.
ABC Ltd's reporting date is 30 June.
HA3011 Online Supp T2 2021

Required:
Provide the accounting entries necessary to account for the above purchase transaction for the
year ending 30 June 2022
ANSWER:
Purchase a/c Dr 300000
To Supplier in London a/c 300000
(being goods purchased on credit from London)
END OF SUPPLEMENTARY ASSESSMENT
Submission instructions:
 Save submission with your STUDENT ID NUMBER and UNIT CODE e.g. EMV54897
HA3011
 Submission must be in MICROSOFT WORD FORMAT ONLY
 Upload your submission to the appropriate link on Blackboard
 Only one submission is accepted. Please ensure your submission is the correct
document
 Incorrect unit or blank documents are not accepted
 All submissions are automatically passed through SafeAssign to assess academic integrity.
HA3011 Online Supp T2 2021