This document provides answers to questions related to advanced financial accounting, including revaluation of noncurrent assets, fair value of debentures, gross profit computation, and revaluation of assets.
Contribute Materials
Your contribution can guide someone’s learning journey. Share your
documents today.
Running head: ADVANCED FINANICAL ACCOUNTING Advanced Financial Accounting Name of the Student: Name of the University: Author’s Note:
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
1ADVANCED FINANICAL ACCOUNTING Table of Contents Answer to question 1:.................................................................................................................2 Sub part a:..............................................................................................................................2 Sub part b:..............................................................................................................................3 Answer to question 2:.................................................................................................................3 Sub part a:..............................................................................................................................3 Sub part b:..............................................................................................................................4 Answer to question 3:.................................................................................................................4 Sub part a:..............................................................................................................................4 Sub part b:..............................................................................................................................5 Sub part c:..............................................................................................................................5 Answer to question 4:.................................................................................................................6 Sub part a:..............................................................................................................................6 Sub part b:..............................................................................................................................8 References and Bibliography:....................................................................................................9
2ADVANCED FINANICAL ACCOUNTING Answer to question 1: Sub part a: The given case study requires revaluation of noncurrent assets according to the fair value concept. AASB 116 governs the rules and procedures of revaluation of assets. The Accounting Standard requires revaluing the assets and recording them in their fair value if the fair value of such assets can be determined reliably at the date of the revaluation. There must be a specific frequency of revaluation and it must be done with sufficient regularity and materiality. There should not be significant difference between carrying amount and fair value of the assets. Anderson Pty Ltd is having various noncurrent assets under the head property, plant and equipment. They are having a carrying value of those assets and reliably determined fair value. To revalue their assets as per the fair value, net fair value loss or gain is to be computed comparing the net carrying value and fair value. The carrying value of those assets is to be restated in their fair in their books of accounts. Their net gain or loss on revaluation can be computed as under. Property, Plant and Equipment Carrying Value Current Fair valueGain or Loss Factory (NSW) Land$ 1,00,000$ 1,50,000$50,000 Building (Net of depreciation)$50,000$80,000$30,000 Factory (Qld) Land$ 1,50,000$ 1,20,000$(30,000) Building (Net of depreciation)$80,000$70,000$(10,000) Net gain in revaluation of assets$40,000
3ADVANCED FINANICAL ACCOUNTING Sub part b: Following journal entries needs to be passed to record the revaluation of assets of Anderson Pty Ltd. Anderson Pty Ltd. General Journal Dat eName of AccountsDebitCredit Land (NSW)$50,000 Building (NSW)$30,000 Land (Qld)$30,000 Building (Qld)$10,000 Revaluation surplus$40,000 (To record revaluation of assets) Answer to question 2: Sub part a: As per AASB 9 financial liabilities of an entity needs to be revalued and restated in the books of accounts in their fair value. Fair value of debentures of Kruger Ltd Can be determined as follows. Computation of fair value of debenture Face Value$10,00,000 Annual coupon rate6% Market required return4% Years to maturity6 Payament frequency2 Fair value of debenture$7,88,493
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
4ADVANCED FINANICAL ACCOUNTING Sub part b: Kruger Ltd General Journal DateName of AccountsDebitCredit 01-Jul-15Bank$7,88,493 Discount on debenture$2,11,507 6% Debenture$10,00,000 (To record issue of debenture) 31-Dec-15Interest Expense$30,000 Interest payable$30,000 (To record interest expense) Interest Payable$30,000 Bank$30,000 (To record payment of Interest) 30-Jun-16Interest Expense$30,000 Interest payable$30,000 (To record interest expense) Interest Payable$30,000 Bank$30,000 (To record payment of Interest) Answer to question 3: Sub part a: Sun City Limited Computation of Gross profit from the construction contract 201520162017 Contract Price$ 5,00,00,000$ 5,00,00,000$ 5,00,00,000 Less: Estimated Cost Cost to date$ 1,00,00,000$ 2,80,00,000$ 4,00,00,000 Estimated cost to compelte$ 2,80,00,000$ 1,20,00,000$- Total Costs$ 3,80,00,000$ 4,00,00,000$ 4,00,00,000 Gross Profit$ 1,20,00,000$ 1,00,00,000$ 1,00,00,000
5ADVANCED FINANICAL ACCOUNTING Sub part b: Sun City Limited General Journal Dat eName of AccountsDebitCredit Construction in progress$1,00,00,000 Accounts Payable$1,00,00,000 (To record payables for expenses) Accounts Receivable$ 1,20,00,000 Construction in progress$ 1,20,00,000 (To record progress billing) Cash$ 1,10,00,000 Accounts receivable$ 1,10,00,000 (To record collection of cash) Construction Expense$ 1,00,00,000 Construction in progress$31,57,895 Construction revenue$ 1,31,57,895 (To record recognition of revenue) Sub part c: Sun City Limited General Journal Dat eName of AccountsDebitCredit Construction in progress$1,00,00,000 Accounts Payable$1,00,00,000 (To record payables for expenses) Accounts Receivable$ 1,20,00,000 Construction in progress$ 1,20,00,000 (To record progress billing) Cash$ 1,10,00,000 Accounts receivable$ 1,10,00,000 (To record collection of cash) Construction Expense$ 1,00,00,000 Construction revenue$ 1,00,00,000
6ADVANCED FINANICAL ACCOUNTING (To record recognition of revenue, restricted to $10m) Construction in progress$20,00,000 Contract liability$20,00,000 (To record excess of amount received from the customer over the construction completed) Answer to question 4: Sub part a: AD Pty limited is also revaluing their noncurrent assets to the fair value. Revaluation of assets means measuring the fair market value of assets or the realizable value of assets and incorporating those values in the books of accounts. AASB 116 governs the provisions of revaluation of assets and relevant disclosure requirements. As per AASB 116, the fair value of the assets must be assessed with regularity and the value of the asses must be restated in the fair value. There must be a proper frequency of such revaluation. Following the guidelines of AASB 116, AD Pty Limited needs to restate the value of their Plant, Property and equipment to the reliably assessed fair value of those assets. As per AASB 116 net revaluation gain or loss to be recorded along with increasing or decreasing the carrying value of such assets. Revaluation gain or loss can be computed for different assets class. Following table shows their revaluation gain or loss assets class wise and also the net revaluation gain or loss. Property, Plant and Equipment Carrying Value Current Fair valueGain or Loss Factory (NSW) Land$ 1,00,000$ 1,50,000$50,000 Building (Net of depreciation)$50,000$80,000$30,000 Factory (Qld) Land$ 1,50,000$ 1,20,000$(30,000) Building (Net of depreciation)$80,000$70,000$(10,000) Net gain in revaluation of assets$40,000
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
8ADVANCED FINANICAL ACCOUNTING Sub part b: AD Pty Ltd. General Journal Dat eName of AccountsDebitCredit Land (NSW)$50,000 Building (NSW)$30,000 Land (Qld)$30,000 Building (Qld)$10,000 Revaluation surplus$40,000 (To record revaluation of assets)
9ADVANCED FINANICAL ACCOUNTING References and Bibliography: AASB, Compiled AASB Standard. "Investment property." (2015). Bond, D., Govendir, B. and Wells, P., 2016. An evaluation of asset impairment decisions by Australian firms and whether this was impacted by AASB 136. Hu, F., Percy, M. and Yao, D., 2015. Asset revaluations and earnings management: Evidence from Australian companies.Corporate Ownership and Control,13(1), pp.930-939. Joubert, M., Garvie, L. and Parle, G., 2017. Implications of the New Accounting Standard for Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet.The Journal of New Business Ideas & Trends,15(2), pp.1-11.