Journal Entries for Financing Company Operations, Property Plant and Equipment, Lease, and Intangible Assets

This document provides journal entries for various scenarios including financing company operations, property plant and equipment, lease, and intangible assets. It includes detailed explanations and examples.

ChiHerbal Ltd
General Journal
Scenario 1 Financing Company Operations
Date Particulars Debit Credit
On Receipt of Application Money
01-Aug-17 Bank a/c
18,00,000
To Share Application A/c
18,00,000
(Application money received on 6,00,000 shares of 3
each)
15-Aug-17 On transferring the Application Money
Share Application A/c Dr
18,00,000
To Share Capital A/c
15,00,000

To Bank
300,000
(Application money transferred to share capital
A/c)
(Application money on 5,00,000 shares refunded to the
applicants)
15-Aug-17 Share application money 7,000
Underwriting commission exp 29,000
Cssh 36,000
(Being share application money paid)
Receipt of allotment money
30-Sept-17 Bank A/c Dr
18,00,000
To Share Allotment A/c.
18,00,000
(Receipt of the amount due on allotment of 600,000 shares)

Call Money is Due
01-May-18 Share First Call A/c Dr
750,000
To Share Capital A/c
750,000
(Call money due on 500,000 share @ 1.5 per
share).
01-July-18 Share 2ndt Call A/c Dr
500,000
To Share Capital A/c
500,000
(Call money due on 500,000 share @ 1 per
share).
Receipt of call money
15-Aug-18 Bank A/c Dr
12,12,000
To Share First & 2nd call
12,12,000
(Call money received for 485000 @2.5/share)

Forfeiture of Share capital
01-Sept-18 Share Capital A/c Dr 37,500
To Share Forfeited A/c
37,500
(15000 shares forfeited)
Auction of forfeited shares
15-Sept-18 Bank A/c (the amount received on reissue) Dr. 90,000
Share Forfeited A/c (the amount allowed as
discount) Dr. 30,000
To Share Capital A/c (paid up amount)
120,000
(Reissue of forfeited 15,000 shares)
15-Sept-18 Share Forfeited A/c Dr 75,000
To Capital Reserve A/c
75,000

(Transfer of surplus share forfeited amount to capital reserve
A/c)
15-Sept-18 Share Re-issue expenses A/C Dr. 4,000
To Bank A/c
4,000
(Share reissue expenses incurred)
Scenario 2 Property, Plant and Equipment
Journal Entry
01/04/17
Truck A Dr 90000
Cash Cr 90000
(Acquisition of Truck A)
30/06/17
Equipment Dr 140,000
Cash Cr 140,000

31/08/17
Repairs & maintenance expense Dr 2500
Cash Cr 2500
(Repairs and maintenance on Truck A)
01/09/17
Depreciation – Equipment Dr 25000
Accumulated depreciation – Equipment Cr 25000
(Depreciation of equipment (140000-115000=25000)
01/03/18
Cash Dr 59,0000
Proceeds on sale of Truck A Cr 590000
(Sale of Truck A)
30/06/2018
Accumulated depreciation – equipment Dr 1166
Equipment Cr 1166
(140000*1/10*1/12)
Equipment Dr 50000
Gain on revaluation of equipment (OCI) Cr 5000
(Recognition of revaluation increment: 120,000 to 115,000)
Gain on revaluation of equipment (OCI) Dr 5000
Asset revaluation surplus Cr 5000
(Accumulation of revaluation surplus in equity)

Scenario 3 Lease
1) The lease course of action qualifies as a "Working Lease". The reasons are as per the
following:
an) A lease, wherein renter utilizes the benefit for a term littler than its valuable life (for the most
part under 75% of its life) for rental installments is known as "Working Lease". Since in the
given lease game plan, ChiHerbal Ltd is going to utilize the equipment for a long time out of its
8 years' monetary life, it is a working lease.
b) A critical part of an account lease is the presence of proprietorship exchange alternative from
the lessor to renter. This choice doesn't exist in the given lease as ChiHerbal doesn't plan
purchase the machine toward the finish of the lease term.
c) Under an account lease, the resident is in charge of fix and support of leased resource and all
the cost is borne by the tenant. Since ChiHerbal isn't paying something besides yearly lease
installment of $8,000, this lease doesn't qualify as account lease.
2) The bookkeeping sections made by Cessnock Ltd. in its books is perceive yearly lease
installments as incomes and deterioration would likewise be charged each year.
The lease ought to be grouped by the two gatherings as a money lease as considerably the
majority of the dangers and prizes coincidental with responsibility for equipment have been
exchanged from the lessor to the renter as demonstrated by the accompanying:
Lessee
the lease is non-cancellable (by definition),
the lease term, at 62.5%, which is, apparently, a noteworthy piece of the bulldozer's financial
life, yet
the present estimation of the base lease installments is considerably the majority of the
reasonable estimation of the benefit at the lease commencement, as determined underneath:
For Lessee
PV of MLP = PV of lease payments + PV of guaranteed residual
= $8 000 x 3.8897 [T2 9% 5 yrs] +$2,160 x 0.6499 [T1 9% 5yrs]
= 32521

This is equal to 96.1% of fair value at lease inception.
ChiHerbal
Date MLP
Interest
Expense
Liability
Reduction
Balance of
Liability
01/08/2017 32521
30/07/2018 8000 3011 4989 27532
30/07/2019 8000 2562 5438 22094
30/07/2020 8000 2073 5927 16167
30/07/2021 8000 1539 6461 9706
30/07/2022 10,160 958 9,202
42160 10143 32017
For Lessor
PV of MLP = PV of lease payments + PV of guaranteed residual
= $8 000 x 3.8897 [T2 9% 5 yrs] +$2,160 x 0.6499 [T1 9% 5yrs]
= 32521
This is equal to 96.1% of fair value at lease inception.
Cessnock Ltd
Date MLP Interest Expense Receivable Reduction Balance of Receivable
01/08/2017 32521
30/07/2018 8000 3222 4778 27743
30/07/2019 8000 2792 5208 22535
30/07/2020 8000 2323 5677 16858
30/07/2021 8000 1812 6188 10670
30/07/2022 10,160 1254 8,906

42160 11403 30757
Date Particulars Debit Credit
01-Jul-17 Machine A/C $35322.00
Cash $35322.00
01-Jul-17 Lease Agreement Expense $3,000.00
Cash $3,000.00
30-Jun-18 Cash $8,000.00
Lease Rental Revenue $8,000.00
30-Jun-18 Depreciation Expense $2595
Accumulated Depreciation $25958,699.25
30-Jun-18 Cash $8,000.00
Lease Rental Revenue $8,000.00

30-Jun-18 Depreciation Expense $2595
Accumulated Depreciation $2595
30-Jun-19 Cash $8,000.00
Lease Rental Revenue $8,000.00
30-Jun-19 Depreciation Expense $2595
Accumulated Depreciation $2595
30-Jun-20 Cash $8,000.00
Lease Rental Revenue $8,000.00
30-Jun-20 Depreciation Expense $2595
Accumulated Depreciation $2595
30-Jun-21 Cash $8,000.00
Lease Rental Revenue $8,000.00
30-Jun-21 Depreciation Expense $2595

Accumulated Depreciation $2595
30-Jun-22 Cash $8,000.00
Lease Rental Revenue $8,000.00
30-Jun-22 Depreciation Expense $2595
Accumulated Depreciation $2595
A deal and leaseback exchange happens when a proprietor sells an advantage and quickly
reacquires the privilege to utilize the benefit by going into a lease with the buyer. A typical
model is an organization pitching the title to its office/processing plant to a budgetary
foundation.
Before managing the representing the deal and leaseback exchange itself, the conveying
estimation of the benefit being referred to ought to be audited. In the event that the advantage has
endured a debilitation in incentive beneath its conveying sum it ought to be recorded promptly to
its reasonable esteem.
The consequent advances will rely upon whether the leaseback is a working lease or a fund lease.
In the event that the advantage is land and structures, at that point it is probably going to be a
working lease.
Scenario 4 Intangible Assets
Intangible assets are the ones which are not in physical nature. Assets like brand, generosity,
licensed innovation, for example, licenses, trademarks, copyrights, and so forth are intangible
assets. Then again, land, hardware, building, and so forth are instances of tangible assets.
a.) In the examination period of an inner task, a substance can't exhibit that an intangible asset
exists that will produce likely future financial advantages. Along these lines, this consumption
will be treated as a cost when it is acquired.
In this undertaking , there is no examination cost.

b) .An intangible asset emerging from the development period of an inside undertaking will be
perceived if, and just if, a substance can exhibit the accompanying:
(1) the specialized plausibility of finishing the intangible asset with the goal that it will be
accessible for use or deal.
(2) its goal to finish the intangible asset and use or offer it.
(3) how the intangible asset will produce plausible future financial advantages.
(4) its capacity to gauge dependably the use inferable from the intangible asset amid its
development.
Obviously the product development cost and interview expenses are met the above
acknowledgment conditions.
Along these lines , all the above expenses are perceived as intangible assets and there is no
development cost perceived as costs.
c. ) The measure of development capitalized = ( $ 380,000 + $ 620,000 ) = $ 1,000,000
Tangible assets are things like property, plant, gear, apparatus, money, stock, and structures.
Tangible assets are otherwise called fixed assets or plant assets. Tangible assets deteriorate after
some time of its helpful life. Intangible assets are the direct inverse of tangible assets since they
need physical substance. Intangible assets are things like licenses, trademarks, copyrights,
generosity, innovative work, or brand acknowledgment.
Intangible assets are amortized, or spreading the expense of the advantage over its valuable life.
Concurring to University of Phoenix Plant Assets, Natural Resources, and Intangible Assets
(2012), "Generosity speaks to the estimation of every single good ascribe that identify with an
organization. These incorporate excellent administration, alluring area, great client relations,
talented workers, astounding items, and amicable relations with worker's guilds. Altruism is
extraordinary: Unlike assets, for example, speculations and plant assets, which can be sold
separately in the commercial center, generosity can be recognized just with the business all in
all." Goodwill is just recorded by organizations at whatever point the whole business is obtained.
"In chronicle the buy of a business, the organization charges (expands) the net assets at their
honest qualities, credits (diminishes) money at the buy cost, and charges generosity for the
distinction. Generosity isn't amortized (on the grounds that it is considered to have an
inconclusive life). Organizations report generosity to be determined sheet under intangible
assets." (University of Phoenix, 2012, p. 417). In exertion to get a patent, copyright, new
procedure or items, organizations will spend a lot of cash in innovative work. Innovative work is
recorded as a cost in fiscal reports.

Reference
Ampofo, A., & Sellani, R. (2005). Examining the differences between United States
Generally Accepted Accounting Principles (U.S. GAAP) and International Accounting
Standards (IAS): implications for the harmonization of accounting standards. Accounting Forum,
29(2), 219-231. doi: 10.1016/j.accfor.2004.11.002
Accounting Tools. (2016). What is Capital Expenditure? Retrieved from
http://www.accountingtools.com/questions-and-answers/what-is-a-capital-
expenditure.html
University of Phoenix. (2012). Plant Assets, Natural Resources, and Intangible Assets.
Retrieved from University of Phoenix, XACC/291 Principles of Accounting 11
website.
Blake, J., & Lunt, H. (2018). Accounting standards. Harlow, Essex, England: Pearson
Education.