Assignment about What is Your Definition of Accounting?

Running head: ACCOUNTING
Accounting
April 6
2020

ACCOUNTING 2
Contents
Question 1...................................................................................................................................................1
Question 2...................................................................................................................................................4
Part A......................................................................................................................................................4
Part B.......................................................................................................................................................6
Part C...........................................................................................................................................................8
Question 3.............................................................................................................................................10
Bibliography..............................................................................................................................................13

ACCOUNTING 3
Question 1
An asset is said to be impaired if the book value of the asset is higher than undiscounted cash
flows expected from the asset
Date Particular Debit Credit
31/07/2018 Land A/C Dr. 3000000
Machinery A/C Dr 2000000
To Cash 5000000
30/06/19 Impairment Loss on Land A/C Dr. 600000
To Accumulated Impairment Loss on Land 600000
30/06/19 Impairment Loss on Equipment A/C Dr. 700000
To Accumulated Impairment Loss on Equipment 7000000
30-06-20 Impairment Loss on Equipment A/C Dr. 550000
To Accumulated Impairment Loss on Equipment 550000
Working
Notes
Land:
Land does not have depreciation. So cost is carrying value
Book Value = $3,000,000
Impairment = Book value - Recoverable amount
Recoverable amount is higher of:

ACCOUNTING 4
A. Fair value - Selling
costs 2500000-200000
2300000
B. Value in Use = $2400000 (it is higher)
Therefore, Impairment
Loss= $3000000 - 2400000
600000
New book value = $3,00,000 - $600,000 = $2,400,000
Equipment
Since revaluation model used, no depreciation
Book Value = $2,000,000
Impairment = Book value - Recoverable amount
Recoverable amount is higher of:
A. Fair value - Selling
costs = 1200000
B. Value in use = 1300000 (it is higher)
Impairment loss = $2,000,000 - $1,300,000
700000
New book value = $2,00,000 - $700,000 = $1,300,000
30/06/20
Land

ACCOUNTING 5
Book value is same as recoverable amount. No Impairment
Equipment
Book value at 2020 is higher than its recoverable amount. So
impairment
Book Value = $1,300,000
Impairment = Book value - Recoverable amount
Recoverable amount is higher of:
A. Fair value - Selling costs = $700,000
B. Value in use = $750,000 (is higher)
Impairment loss = $1,300,000 - $750,000
$
550,000.00

ACCOUNTING 6
Question 2
Part A
Provisions of AASB 16 'Leases'
In compliance with paragraph 9, at the very outset, an agency must determine whether the
provider is a lease or includes a lease. If, in return for payment, the arrangement allows for the
right to manage the use of defined properties, it can be claimed that this deal is a lease or a lease.
Section B9-B31 provides guidelines for the assessment of a contract to determine if a contract
does or does not contain a mortgage. In para B13 the property is defined as the expressly referred
asset or indirectly stated asset for the customer's use when the property is available1.
Para B9 notes that if the organizations have the following two items in the usage period, a
contract protects the right to monitor the use of the defined asset:
 The right to significantly gain all economic benefits through the use of the resources
defined
 Ability to use the defined commodity directly2
The Para line B22, where the business is entitled to economic advantages under the stated
restrictions of the customer's right to use services, it does not have the right to adversity in the
usage of the existing asset in the pursuit of substantive financial benefits. B22 When an
arrangement stipulates, for instance, that a corporation can only operate a car for a certain
number of miles within a term of operation; the entity shall not increase the expense of driving a
vehicle within the specified kilometer if the deal only pays for a certain number of miles during
the duration of operation.3.
1Michelle JoubertLLeandaGarvie, and Gabrielle Parle. "Implications of the New Accounting Standard for Leases
AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet." (2017), 15.2 The Journal of New
Business Ideas & Trends 1-11.
2SilvanaFilomenaSECINARO et al. "Relevance in the Application of IFRS 16 for Financial Statements: Empirical
Evidence the Impact of the Financial Method in SMEs." (2020): 1-15.
3David Bond, Brett Govendir, and Peter Wells. "An evaluation of asset impairment decisions by Australian firms
and whether this was impacted by AASB 136." (2016).

ACCOUNTING 7
In compliance with paragraph B24 of the Law, an individual has the right to direct use of the
asset defined when the predetermination of the asset is rendered in compliance with the contract
and the reason for which the asset is to be used4.
Facts and analysis of the case
In the actual situation, Moshman Ltd is the reporting entity (or corporation or client) and Lessor
Ltd is the owner (or supplier) of the reporting entity. Within a week (time contract), Moshman
Ltd has entered into an deal with Lessor Ltd to use a truck to convey the coal from central
Queensland to the Brisbane Harbour. The truck is here the commodity that has been
remembered. The problem states Lessor Ltd doesn't have any substitution rights which mean that
Lessor Ltd will not substitute or alter any truck for the purpose of the arrangement that is
specified by the contract as an established possession.
The contract covenants define the following:
1. amount of ore to be transported
2. pickup and delivery of ore
3. the maximum distance the truck can be driven
The contractual terms are the definite reason on which the lorry may be used and for what
reason.
Nonetheless, in compliance with the contractual criteria Moshman Ltd can select travel specifics
(speed, distance and rest stops). Moshman Ltd cannot use the asset after a week. The service of
the truck is the transportation information.
Assessing the contract in light of the following parameters:
 Right to make use of assets — Moshman Ltd has exclusive right to pick travel details (or
asset operations) and Lessor Ltd cannot alter or steer the travel information. Lessor Ltd.
4XiaojiaoWang "Compliance Over Time by Australian Firms with IFRS Disclosure Requirements.
(2019)29.4" Australian Accounting Review 679-691.

ACCOUNTING 8
 Right to gain considerable economic benefits from the use of defined properties-the
Economic Vorteil resulting from the shipment of ore is assigned to Moshman Ltd. Such
commercial gains are not negatively affected by the collective arrangements.
 Right to manage defined properties – Moshman Ltd can be deemed to have the right to
operate the truck if the first two requirements are fulfilled5.
Thus, the contract is a lease contract of the truck for Moshman Ltd.
Part B
Journ
al
Entrie
s
Journal Entries in the books of Moshman Ltd for first year from 1 July 2020
to 30 June 2021
Date Particular Debit Credit
1/7/20
20 Lease Assets A/C Dr 1001153
To Cash 100000
To Lease Liabilities 901153
30/06/
2021 Lease Liability A/C Dr 183954
Interest Expenses A/C 36046
To Cash 220000
5Brad Potter et al. "Keeping it private: financial reporting by large proprietary companies in
Australia."(2019)59.1 Accounting & Finance, 87-113.

ACCOUNTING 9
Worki
ng
Notes
1)
Year Payment
Discounted
Factor
Present
Value
0 2020 100000 1 100000
1 2021 220000 0.961538462
211538.46
15
2 2022 220000 0.924556213
203402.36
69
3 2023 220000 0.888996359
195579.19
89
4 2024 340000 0.854804191
290633.42
5
1100000
1001153.4
52
2)
As Net present value of
minimum lease payment is
morethan 90% as standard
condition
Prese
nt
Value 1001153.452
Fair
Value 1001154

ACCOUNTING 10
% 100%
3)
Amortization Schedule
Present Value 1001153 Interest Rate 4%
Paid in July
2020 100000
Balance 901153
Year Opening Balance Interest Instalment
Principal
Payment
Closing
Balance
2021 901153 36046 220000 183954 717200
2022 717200 28688 220000 191312 525888
2023 525888 21036 220000 198964 326924
2024 326924 13077 340000 326923 0
Part C

ACCOUNTING 11
In the leasing countries, AASB 116 'Leases' states that, according to paragraphs 17 to 23, the
term of the lease cannot be cancelled and justifies that the lease can be extended only if the lessor
wishes to extend the term of the lease. While deciding whether the leaser is reasonably confident
of exercising or not a lease extension of a right to terminate a lease, an entity shall review any
relevant fact and situation which provides for the right of renewal of the lease to be exercised by
it to create a Federal Register of Legislative Instruments for Standard Economic Motivation. If
the non-cancellable term of a lease is changed, an agency may amend the lease term. For
instance, if: (a) the lease has an option which the company did not previously take into account
when deciding the lease term. The leaser would not then exercise an option which the agency has
previously provided in deciding the lease term. Therefore, an occurrence obligates the renter to
apply an option not included previously in the lease term on a contractual basis. The rental was
also assessed under other criteria set out in paragraphs 23 to 28, where the rental obligation
calculation was based on the present value of the rent set in paragraph 26. An estimation of the
cost for a lower party in dismantle and disposal of the asset, restoration of the site at which it
resides or reconstruction of the underlying asset, unless such costs occur in the process of
product growth, under the conditions stated in the contract. At the date of commencement or as a
result of using the underlying properties within a defined period, the lessor shall be responsible
for these expenses6.
The requirements of AASB 116 ‘Leases’ states that lease term that is a contract between a lessor
and a lessee that is non-cancellable. In the given facts there is a lease of four years that Moshman
Ltd does not wants to extend. From the above statements of the lessee term that has been given
as the lease term is already been agreed between the parties and it concludes that the Lease
contract made between the Moshman Ltd and the Lessor Ltd was justified. In addition, it was
provided that a residual value of $120,000 was decided upon by Moshman. At the start of the
contract the fair value of the equipment is $1.001.154 and also the 4 per cent of the interest rate
specified in the contract. So in accordance with AASB 116 Leases Mohsam has paid according
to the present rate and also according to the rate of interest. So it has been concluded that the
Lessor Ltd lease agreement is justified. Threforen it has been assumed that the lessor and the
6 Michelle Joubert, Leanda Garvie, and Gabrielle Parle. "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 (2017): 1-11.

ACCOUNTING 12
lessee has made the lease contract in accordance with all the norms and rules of AASB 116
Leasse7.
Question 3
Journal
Entries
Date Particular Dr Cr
30-6-2020
Current Tax
Expenses
A/C Dr. 498000
To Prepaid
Tax 498000
30-6-2020
Deferred Tax
Expenses
A/C Dr. 232500
to Deferred
Tax
Liabilities 232500
30-6-2020
Deffered Tax
Assets A/C
Dr. 80250
To Deferred
Tax
Expenses 80250
7 Cassandra Harms . FASB Lease Accounting Standard Update 2016-02: (2020). An Exploration of Similarities and
Differences to IFRS 16. Diss

ACCOUNTING 13
Working Notes
1 Tax @ 30% 476250 498000
2 Calculation of Temprory Difference
Particular 30/06/19 30/06/20
Disallowance
Bad Debt 220000 60000
Prepaid Expenses 650000 465000
Warranty Expenses 700000 285000
Dep in Bad Debts 675000 675000
Allowance
Bad Debt -227500 -250000
Warranty Expenses -470000 -540000
Prepaid Expenses -380000 -570000
Depreciation Prepaid Tax -900000 -900000
Net Disallowed 267500
Net allowed -775000
deferred Tax 80250 -232500
(Assets) (Liabilities)
3
Calculation of Taxable Income as well as
Current Tax
Particular 30/06/19 30/06/20
Profit Before Tax 1200000 2775000
Add: Disallowed Per Tax
Legal Expenses 120000 -
Bad & Doubtful Debts 220000 60000

ACCOUNTING 14
Prepaid Expenses 650000 465000
Warranty Expenses 700000 285000
Depreciation 675000 675000
Less: Allowance per tax:
Exempt Income 0 -340000
Bad Debts w/off -227500 -250000
Warranty Expenses -470000 -540000
Prepaid Expenses in cash * -380000 -570000
Dep per tax (5.4 m/6) -900000 -900000
Taxable Income 1587500 1660000
*
Calculation of Prepaid
Expenses
Prepaid
Expenses
A/C
Opening Balance
(30/06/18) 780000 By P& L 650000
To Cash (B/F) 380000 Closing Balance (30/06/19) 510000
1160000 1160000
Opening Balance on
(30/06/19) 510000 By P & L 465000
To Cash (B/F) 570000
Closing Balance on
30/06/20 615000
1080000 1080000

ACCOUNTING 15
Bibliography
Joubert, Michelle, LeandaGarvie, and Gabrielle Parle."Implications of the New Accounting
Standard for Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance
Sheet."(2017), 15(2 The Journal of New Business Ideas & Trends 1-11
SECINARO, SilvanaFilomena, et al. "Relevance in the Application of IFRS 16 for Financial
Statements: Empirical Evidence the Impact of the Financial Method in SMEs." (2020): 1-15.
Bond, David, Brett Govendir, and Peter Wells. "An evaluation of asset impairment decisions by
Australian firms and whether this was impacted by AASB 136." (2016).
Wang, Xiaojiao. "Compliance Over Time by Australian Firms with IFRS Disclosure
Requirements." (2019), 29(4) Australian Accounting Review : 679-691.
Potter, Brad, et al. "Keeping it private: financial reporting by large proprietary companies in
Australia." (2019) 59(1) Accounting & Finance : 87-113.
Joubert, Michelle, Leanda Garvie, and Gabrielle Parle. "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 (2017): 1-11.
Harms, Cassandra. FASB Lease Accounting Standard Update 2016-02: (2020). An Exploration
of Similarities and Differences to IFRS 16. Diss

ACCOUNTING 16