Corporate Accounting for Jacky Ltd

This article covers the Corporate Accounting for Jacky Ltd including Deferred Tax Worksheet, Journal Entries, and Computation of Revaluation Gain/Loss and Deferred Tax. It also explains the situations faced by the accountant of Jacky Ltd while preparing the financial accounts of the business.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Author’s Note

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CORPORATE ACCOUNTING
Table of Contents
Answer to Question 1......................................................................................................................2
Requirement a..............................................................................................................................2
Answer to Question 2......................................................................................................................3
Journal Entries.............................................................................................................................3
Answer to Question 3......................................................................................................................6
Reference.........................................................................................................................................9

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CORPORATE ACCOUNTING
Answer to Question 1
Requirement a
Deferred Tax Worksheet
Particulars Carrying Amount Tax Base Taxable
Temp’y Diffs
Deductible
Temp’y Diffs
$ $ $ $
Assets
Cash $20,000 $20,000
Accounts Receivables $80,000 $80,000
Allowance for Doubtful Debts ($4,000) $0 $4,000
Inventories $85,900 $85,900
Prepaid Insurance $3,000 $3,000
Equipment $4,00,000 $4,00,000
Accumulated Depreciation ($40,000) ($60,000) ($20,000)
Motor Vehicles $60,000 $60,000
Accumulated Depreciation ($15,000) ($12,000) $3,000
Liabilities
Accounts Payables $50,250 $50,250
Provision for Warranties $6,900 $6,900
Provision for Annual Leave $11,000 $11,000
Rent Payable $6,000 $6,000
Loan $25,000 $25,000
Total Temporary differences $3,000 $10,900
Deferred tax liability (30%) $900
Deferred tax asset (30%) $3,270
Deferred Tax Worksheet:
Figure 1: (Statement showing Deferred Tax Worksheet)
Source: (Created by Author)

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CORPORATE ACCOUNTING
Journal Entries Relating to Current and Deferred Tax Assets and Liabilities
Dr. Cr.
Date Amount Amount
30-06-2016 Income Tax Expense A/c. Dr. $51,945
Income Tax Refundable A/c. Dr. $1,73,355
To, Advance Tax Paid A/c. $2,25,300
Deferred Tax Assets A/c. Dr. $3,270
To, Deferred Tax Liability A/c. $900
To, Income Tax Expense A/c. $2,370
Profit & loss A/c. $51,045
To, Income Tax Expense A/c. $51,045
(Being income tax expense transferred to P/L A/c.)
(Being deferred tax assets and deferred tax liabilities
recorded)
Particulars
(Being Income tax expenses adjusterd with advance tax
paid and income tax refundable recorded)
Figure 2: (Statement showing Journal Entries)
Source: (Created by Author)
Answer to Question 2
Journal Entries
In the books of XYZ Ltd.
Journal Entries
Dr. Cr
Date Particulars Amount Amount

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CORPORATE ACCOUNTING
01-07-
2013 Equipment A/c.
$8,00,00
0
Bank A/c.
$8,00,00
0
(Being equipment acquired for cash)
30-06-
2014 Depreciation Expense A/c.
$1,52,00
0
Accum. Dep. - Equipment A/c.
$1,52,00
0
(Being depreciation charged on equipment)
01-07-
2014 Accum. Dep. - Equipment A/c.
$1,52,00
0
Equipment A/c. $70,000
Profit on Revaluation A/c. $82,000
(Being Equipment revalued at fair value and profit on
revaluation recorded)
30-06-
2015 Profit on Revaluation A/c. $82,000
Asset Revaluation Reserve
A/c. $82,000
(Being the gain on revaluation transferred to asset revaluation
reserve)
Deferred Tax Assets A/c. $24,600
Income Tax Expense A/c. $24,600
(Being deferred tax recorded for the asset revaluation)
Depreciation Expense A/c.
$1,15,00
0
Accum. Dep. - Equipment A/c.
$1,15,00
0
(Being depreciation charged on equipment)
Profit & Loss A/c.
$1,15,00
0
Depreciation Expense A/c.
$1,15,00
0
(Being depreciation expenses closed)
30-06-
2016 Depreciation Expense A/c.
$1,15,00
0

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CORPORATE ACCOUNTING
Accum. Dep. - Equipment A/c.
$1,15,00
0
(Being depreciation charged on equipment)
Accum. Dep. - Equipment A/c.
$2,30,00
0
Loss on Revaluation A/c.
$1,00,00
0
Equipment A/c.
$3,30,00
0
(Being Equipment revalued at fair value and loss on revaluation
recorded)
Income Tax Expense A/c. $30,000
Deferred Tax Liabilities A/c. $30,000
(Being deferred tax recorded for the asset revaluation)
Profit & Loss A/c.
$1,15,00
0
Depreciation Expense A/c.
$1,15,00
0
(Being depreciation expenses closed)
Asset Revaluation Reserve
A/c.
$1,00,00
0
Loss on Revaluation A/c.
$1,00,00
0
(Being the loss on revaluation transferred to asset revaluation
reserve)
30-09-
2016 Depreciation Expense A/c. $22,500
Accum. Dep. - Equipment A/c. $22,500
(Being depreciation charged on equipment)
Accum. Dep. - Equipment A/c. $22,500
Bank A/c.
$3,90,00
0
Equipment A/c.
$4,00,00
0
Profit on Sale of Asset A/c. $12,500
(Being equipment sold on profit)
Figure 3: (Table Showing Journal Entries)

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CORPORATE ACCOUNTING
Source: (Created by Author)
Year
Opening
Balance
Estimated
Life (in years)
Residual
Value
Depreciation
p.a.
Closing
Value
Fair
Value/Sale
Value Gain/(Loss)
Deferred Tax
Assets/
(Liabilities)
A B C D=(A-C)/B E=A-D F G=F-E H=Gx30%
2013-14 $8,00,000 5 $40,000 $1,52,000 $6,48,000 $7,30,000 $82,000 $24,600
2014-15 $7,30,000 6 $40,000 $1,15,000 $6,15,000 $6,15,000 $0 $0
2015-16 $6,15,000 5 $40,000 $1,15,000 $5,00,000 $4,00,000 ($1,00,000) ($30,000)
30-06-2016 $4,00,000 4 $40,000 $22,500 $3,77,500 $3,90,000 $12,500
Computation of Revaluation Gain/(Loss) & Deferred Tax:
Plant A:
Figure 4: (Statement showing Revaluation Fain/Loss and Deferred Tax)
Source: (Created by Author)
Answer to Question 3
The case study states that the accountant of Jacky ltd faces the following circumstances
while preparing the financial accounts of the business. The situations which arises are explained
below in details:
a. As per the situation which arises in the question, on the basis of the regular review which
is to be done on the depreciable assets and useful life of the assets as per AASB 116, the
directors of the company identify that change in the useful life of the asset is required
(Hu, Percy and Yao 2015). The equipment which is the concern for the directors was
purchased in 2013 and at that time it was estimated that the useful life of the equipment
will be of 10 years and the residual value of the equipment is considered to be nil
(Benkedjouh et al. 2013). The equipment which Jacky ltd purchased was for $ 5,00,000
in 2013. The equipment was depreciated on a straight-line basis as per the policy of the

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CORPORATE ACCOUNTING
company (Del Giudice, Manganelli and De Paola 2016). As per para 51 of AASB 116,
the residual value and useful life of the assets is to be reviewed at least once in a financial
year and if the review results are different from the estimated results. Then such a change
shall be regarded as a change in accounting estimated and will be recorded in financial
statements and such a change shall be considered as a change in accounting estimate as
per AASB 108 Accounting Policies, Change in Accounting Estimates and Errors
(Henderson et al. 2015). Therefore, the change in depreciation model and change in
estimates need to be recorded in the financial statements (Edmonds et al. 2016).
b. As per the situation which is provided in the case of Jacky ltd, the account payable
officers recognized that an invoice of $ 25,000 was not recorded in the books of accounts
which was incurred during the month of June and the payment for which was made in the
month of July. The management of the Jacky ltd needs to record the transaction in the
month of June itself and thereby include in the financial statements of the year. The
principle of accrual basis requires the business to recognize transactions as and when they
accrue and therefore the expenses of $ 25,000 needs to be included in the books of
accounts of the business (Weil, Schipper and Francis 2013). The expenses which are
incurred by the business is also subjected to tax provisions and deductions during the
year. The accountant of Jacky ltd needs to passes necessary journal entries for the
purpose of recording the transactions which are related to the expenses which are
incurred during the year.
Supplies A/c Dr $3,50,000
To Account Payable A/c $3,50,000

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CORPORATE ACCOUNTING
c. As per the situation which is mentioned in the case, the management of Jacky ltd holds
shares in the Bobsmith Ltd which is of the value of $ 8,00,000. This holding of shares are
to be taken as investments which are made by Jacky ltd and the same will be shown in the
balance sheet of Jacky ltd (Needles, Powers and Crosson 2013). The value of such
holdings of Jacky Ltd falls before the financial statement is finalized and the value of the
shareholdings of Jacky ltd in Bobsmith ltd falls from $ 8,00,000 to $ 4,50,000. The
business will be incurring in an unrealized loss for the fall in the stock prices of the
business (Macve 2015). The transaction which the business needs to pass in such a
situation is given below:
Unrealized loss on Trading Stock A/c Dr $3,50,000
To Trading Securities A/c
$3,50,000
d. As per the case which is given in the case study, Jacky ltd has a major debtor which has
filed for bankruptcy from which the company will be receiving debt of $ 9,00,000 for
which the business has made a provision of $ 4,50,000. The business needs to amend the
financial statements of the business and record the loss which the business will be
suffering as the debtor is unable to pay any debts and thus the same will be considered as
bad debts of the company. The business will be passing the given below entry to write off
the debt of the business
Provision for Bad Debt A/c Dr $9,00,000

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To Account Receivable A/c
$9,00,000
Reference
Benkedjouh, T., Medjaher, K., Zerhouni, N. and Rechak, S., 2013. Remaining useful life
estimation based on nonlinear feature reduction and support vector regression. Engineering
Applications of Artificial Intelligence, 26(7), pp.1751-1760.
Del Giudice, V., Manganelli, B. and De Paola, P., 2016, July. Depreciation methods for firm’s
assets. In International Conference on Computational Science and Its Applications(pp. 214-227).
Springer, Cham.
Edmonds, T.P., Edmonds, C.D., Tsay, B.Y. and Olds, P.R., 2016. Fundamental managerial
accounting concepts. McGraw-Hill Education.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting.
Pearson Higher Education AU.
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.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.

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Needles, B.E., Powers, M. and Crosson, S.V., 2013. Principles of accounting. Cengage
Learning.
Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to
concepts, methods and uses. Cengage Learning.