Impairment of Assets Journal Entries

This assignment focuses on the impairment of assets in the books of Blizzard Ltd. It provides a breakdown of various asset categories, their carrying amounts, estimated fair values, and calculated impairment losses. Specific journal entries are required to record these impairments, including entries for Impairment Loss A/c., Land A/c., Patent A/c., Goodwill A/c., Motor Vehicle A/c., Plant & Equipment A/c., and Profit & Loss A/c. The assignment also includes calculations of depreciation based on percentages given.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:

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FINANCIAL ACCOUNTING
Table of Contents
Answer to Question No 1...........................................................................................................2
Answer to Question No 2...........................................................................................................6
Answer to Question No 3...........................................................................................................9
Requirement (i)......................................................................................................................9
Requirement (ii)...................................................................................................................10
Requirement (iii)..................................................................................................................11
Answer to Question No 4.........................................................................................................15
Answer to Question No 5.........................................................................................................17
Reference List..........................................................................................................................19

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FINANCIAL ACCOUNTING
Answer to Question No 1
To,
The Chairperson
International Standard Accounting Board
35 Mayo Street, London- EX5CM 7HX, United Kingdom
Date: 17th September 2017
Subject: Guidance and recommendation for enhancing the communication and information
effectiveness in the financial report
Respected Sir,
Being an investor, I propose to construct certain plans in regards to the IASB
proposition in accordance to the efficiency of the information that is available within the
financial report. I have been looking to make certain investments in Westpac and ANZ,
which are two companies that are listed in the ASX. Due to this interest, I have assessed and
compared the annual report of the present accounting year of both the companies. During the
time of assessing the report, I have observed certain areas that can be developed for an
enhanced presentation and disclosure of the precise information. The construction of the
financial report is considered as intricate job by the one who prepares the report and in certain
cases it is considered by the users and the investors that this information may not have been
explained in a precise manner. There has been a development in the corporate reporting
quality even when there lays an opportunity for making additional developments. The
construction of a proper connection of information within the annual report has gone ahead of

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FINANCIAL ACCOUNTING
any description with respect to the character of linkage and underlining the associated
disclosure region.
The improper disclosure of the financial information wipes out the information that is
valuable and which are contained within the annual report and this aspect in certain cases is
not understood properly by the investors. These are the factors that restrict the investors and
make it tough to undertake any financial decisions that are feasible. I have been able to
establish the requirement for making an efficient interpretation of the communication after
evaluating the annual report of Westpac and ANZ Bank. Conversely, there is an existence of
certain differences in the disclosure of the information of both the companies. It has been
revealed that with respect to the construction of the financial statements and the disclosure of
information of both the companies, there is a requirement for generalization. I have well
made myself well informed with respect to the seven principles available in Section 2 of the
explanation paper that associates simple and clear, comparable, entity distinct, in a suitable
format, independent from irrelevant replication and constructed to focus on the essential
matters (Pelger, 2016). It has been explained after assessment of the annual report for
Westpac and ANZ Bank that they are in compliance with certain principles but has certain
faults in most of the sections.
The banks being a part of the financial institutions are needed to undertake a precise liquidity
and credit risk disclosure and undertake the sectional evaluation for moderating the investors
to take decisions with respect to the investment. The well known and the reputed banks needs
to reveal their information in such a manner so that it provides a pure image of the financial
condition within a glance that can only be gained by implementing certain efficient principles
that are absent. There is no segmental evaluation undertaken by ANZ Bank within their
financial report. Furthermore, segmental evaluation has not been undertaken by Westpac by
sustainably explaining the segments. Segmental evaluation has not been undertaken by ANZ

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FINANCIAL ACCOUNTING
Bank and there is no individual analysis. Additionally, for toughening the regulations of the
banking industry, Basel has been implemented which an inclusive tool for a measure of
transformations. I have observed that there are individual disclosures that are necessary.
Conversely, very less data with respect to the same was explained in the financial statement
notes. In accordance to Westpac, there has been suitable explanation of the information and
the requirements about Basel and the information with respect to risk in the banking industry.
On the other hand, the financial statement of ANZ Bank does not have any data in regards to
Tier I and Tier II. On the other hand, Westpac have revealed disclosures about both the Tiers.
The divisional enactment of Westpac has been presented accurately in their financial report in
comparison to ANZ Bank who has not revealed this distinct aspect.
The financial annual reports of the companies should utilise the graphical process for
revealing their financial information that would make the investors ease down during the
assessment of the performance. By making use of the graphs it would be suitable in spite of
exploiting some descriptive disclosures as in certain cases such data becomes outmoded.
After undertaking the assessment of the financial reports and in respect to all the information
in regards to the above recognised disclosures, it has been regarded that interpretation of the
data in the annual report needs key developments. Certain principles of efficient
communications that requires implementing most of them into action are competent of
making entity distinct and comparable (Jorissen et al., 2014).
For making sure that interpretation is highlighted, the companies in certain cases consider the
combination of the investors. The investors look to recognise the value entity distinct data
and giving effective and enhancement of every segment, nucleus range of products is of
specific assistance. The companies should implement the information that forward seeking
and quantitative targets for computing the performance against the constructed strategic aims.
The principle of being entity distinct and the process with the help of which the data are

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FINANCIAL ACCOUNTING
disclosed should be implemented by the companies. The data presented in the annual report is
improved and enhanced with respect to the entity situations rather than being common by
implementing the entity specific principle. It would be preferred and ideal by the investors to
look at the distinct data as they can simply access the standard information about the firms
from sources that are external. Additionally, the disclosed financial data and other precise
data should be helpful in making simple comparison among various periods of reporting that
need not negotiate the effectiveness of the data in the process of decision making.
The usefulness of the communication of the data can be developed by making use of precise
formatting as recognized by various stakeholders. There are several reports that are disclosed
by the financial institutions with respect to the usage of the graphs and tables for the
disclosure of the financial information. Conversely, there are doubts that are existent with
regards to the use of formats and hence, I would suggest making use of efficient formatting
for an enhanced communication of the data. I think that the investors would have a simple
process in undertaking the financial decisions if they are capable of comparing the
information and evaluate the pattern of the financial performance over several periods. The
development of the formats should be dependent and reliable on the factors that are entity
distinct. The international standards are needed to be developed in an intense guidance on the
use of the suitable format.
I would advise being an investor those certain principles of undertaking efficient
communication, which should be implemented by the companies. After the precise evaluation
of the financial statement of both the companies, some of the most efficient principles that
require to be implemented have been making use of precise formatting and entity distinct.
Yours Sincerely,
Malcolm Johnson

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FINANCIAL ACCOUNTING
Answer to Question No 2
In the books of Harriette Ltd.
Journal Entries
Dr. Cr.
Date Particulars Amount Amount
31/03/2017 Bank A/c. Dr. $8,200,000
To. Preference Share
Application A/c. $1,600,000
To. Ordinary Share Application
A/c. $6,600,000
(Being application money received for 2,000,000
ordinary shares and 1,000,000 preference shares)
15/4/2017
Preference Share
Application A/c. Dr. $1,600,000
To. Preference Share Capital
A/c. $1,600,000
(Being application money received for pf. Shares
transferred to Pf. Share capital)
Ordinary Share
Application A/c. Dr. $6,600,000
To. Ordinary Share Capital A/c. $6,000,000
To. Ordinary Share Allotment
A/c. $600,000
(Being application money received for ordinary share
capital transferred to ordinary share capital and excess
amount adjusted with due allotment)
Ordinary Share
Allotment A/c. Dr. $3,000,000
To. Ordinary Share Capital A/c. $3,000,000
(Being allotment money due on allotted shares)
15/5/2017 Bank A/c. Dr. $2,400,000
To. Ordinary Share Allotment
A/c. $2,400,000
(Being due allotment money received)
1/8/2017 Ordinary Share Call A/c. Dr. $1,000,000
To. Ordinary Share Capital A/c. $1,000,000
(Being call money due on alloted shares)

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FINANCIAL ACCOUNTING
1/9/2017 Bank A/c. Dr. $975,000
Calls-in-Arrear A/c. Dr. $25,000
To. Ordinary Share Call A/c. $1,000,000
(Being due call money received except for 50000
shares)
15/9/2017
Ordinary Share Capital
A/c. Dr. $250,000
To. Calls-in-Arrear A/c. $25,000
To. Ordinary Share Forfeiture
A/c. $225,000
(Being the 50000 shares, for which call money is due,
forfeited accordingly)
Bank A/c. Dr. $210,000
Ordinary Share
Forfeiture A/c. Dr. $40,000
To. Ordinary Share Capital A/c. $250,000
(Being the forfeited shares reissued for $4.20 per
shares)
Cost of Forfeiture &
Reissue A/c. Dr. $7,500
To. Bank A/c. $7,500
(Being cost of forfeiture and reissue of shares paid)
Ordinary Share
Forfeiture A/c. Dr. $185,000
To. Cost of Forfeiture &
Reissue A/c. $7,500
To. Capital Reserve A/c. $177,500
(Being the balance of share forfeiture a/c. after
adjusting with cost of forfeiture and reissue transferred
to capital reserve)
Workings:
Particulars
Nos. Of
Shares
Value per
Share Amount

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FINANCIAL ACCOUNTING
Pf. Share Application Received A 800000 $2
$1,600,00
0
Ordinary Share Application
Received B 2200000 $3
$6,600,00
0
Ordinary Share Application
Allotted C 2000000 $3
$6,000,00
0
Ordinary Share Application
Adjusted
D=B
-C 200000 $3 $600,000
Ordinary Share Allotment Due E 2000000 $1.50
$3,000,00
0
Ordinary Share Allotment
Received
F=E-
D 1800000
$2,400,00
0
Ordinary Share Call Due G 2000000 $0.50
$1,000,00
0
Ordinary Share Call Received H 1950000 $0.50 $975,000
Calls-in-Arrear I 50000 $0.50 $25,000
Share Capital Forfeited J 50000 $5 $250,000
Share Forfeiture
K=I-
J 50000 $225,000
Share Capital received fro L 50000 $4.20 $210,000

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FINANCIAL ACCOUNTING
Reissue
Share forfeiture adjusted with
reissue
M=J-
L 50000 $40,000
Answer to Question No 3
Requirement (i)
Worksheet for Current Tax Liability/(Refundable):
Particulars Amount Amount
Accounting profit before tax $66,000
Add:
Doubtful Debt Expense $5,000
Annual Leave $23,000
Warranty Expense $12,000
Depreciation Expense for accounting purpose $60,000
Insurance $40,000 $140,000
$206,000

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FINANCIAL ACCOUNTING
Less:
Government Grant $20,000
Bad debt expense $1,000
Annual Leave Paid $3,000
Insurance Paid $50,000
Warranty Expense Paid $2,000
Depreciation Expense for Tax Purpose $50,000 $126,000
Taxable income $80,000
Tax on taxable income @30% $24,000
Less: 30% Tax paid on Sales Revenue $205,800
Income Tax Refundable ($181,800)
Deferred Tax Worksheet:
Particulars Carrying
Amount
Tax Base Taxable
Temp’y
Diffs
Deductible
Temp’y
Diffs
$ $ $ $
Assets
Cash $10,000 $10,000
Trade Receivables $125,000 $125,000
Allowance for Doubtful Debts ($4,000) $0 $4,000

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FINANCIAL ACCOUNTING
Inventories $60,000 $60,000
Prepaid Insurance $10,000 $10,000
Goodwill $20,000 $20,000
Equipment $300,000 $300,000
Accumulated Depreciation ($60,000) ($50,000) $10,000
Liabilities
Trade Payables $35,000 $35,000
Provision for Warranties $10,000 $10,000
Provision for Annual Leave $20,000 $20,000
Loan Payable $90,000 $90,000
Total Temporary differences $10,000 $44,000
Deferred tax liability (30%) $3,000
Deferred tax asset (30%) $13,200
Requirement (ii)
Dr. Cr.
Date Particulars Amount Amount
30/06/201
7 Income Tax Expense A/c. Dr. $24,000
Income Tax Refundable
A/c. Dr. $181,800
To, Advance Tax Paid A/c. $205,800
(Being Income tax expenses adjusterd with advance
tax paid and income tax refundable recorded)
$13,200
Deferred Tax Assets A/c. Dr. $3,000
To,
Deferred Tax Liability
A/c. $10,200
To,
Income Tax Expense
A/c.
(Being deferred tax assets and deferred tax liabilities
recorded)
Profit & loss A/c. $21,000
To,
Income Tax Expense
A/c. $21,000
(Being income tax expense transferred to P/L A/c.)

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FINANCIAL ACCOUNTING
Requirement (iii)
Worksheet for Current Tax Liability/(Refundable):
Particulars Amount Amount
Accounting profit before tax ($44,000)
Add:
Doubtful Debt Expense $5,000
Annual Leave $23,000
Warranty Expense $12,000
Depreciation Expense for accounting purpose $60,000
Insurance $40,000 $140,000
$96,000
Less:
Government Grant $20,000
Bad debt expense $1,000
Annual Leave Paid $3,000
Insurance Paid $50,000
Warranty Expense Paid $2,000
Depreciation Expense for Tax Purpose $50,000 $126,000
Taxable income ($30,000)
Tax on taxable income @30% $0
Less: 30% Tax paid on Sales Revenue $172,800
Income Tax Refundable ($172,800
)
Deferred Tax Worksheet:
Particulars Carrying
Amount
Tax Base Taxable
Temp’y
Diffs
Deductible
Temp’y
Diffs
$ $ $ $
Assets
Cash $10,000 $10,000
Trade Receivables $125,000 $125,000

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FINANCIAL ACCOUNTING
Allowance for Doubtful Debts ($4,000) $0 $4,000
Inventories $60,000 $60,000
Prepaid Insurance $10,000 $0 $10,000
Goodwill $20,000 $20,000
Equipment (Net) $300,000 $300,000
Accumulated Depreciation ($60,000) ($50,000) $10,000
Liabilities
Trade Payables $35,000 $35,000
Provision for Warranties $10,000 $0 $10,000
Provision for Annual Leave $20,000 $0 $20,000
Loan Payable $90,000 $90,000
Total Temporary differences $10,000 $44,000
Deferred tax liability (30%) $3,000
Deferred tax asset (30%) $13,200
Workings:
Base
Particulars
Accountin
g Tax
Equipment-at Cost $300,000
$300,00
0
Useful Life (in years) 5 6
Depreciation Expenses
p.a. $60,000 $50,000
Period of Utilization (in 1 1

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FINANCIAL ACCOUNTING
years)
Accumulated
Depreciation $60,000 $50,000
Equipment (net Value) $240,000
$250,00
0
Particulars Amount
Doubtful Debt Expense $5,000
Less: Prov. For Doubtful
debt $4,000
Bad Debt Expense $1,000
Annual Leave Expense $23,000
Less: Prov. For Annual
Leave $20,000

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FINANCIAL ACCOUNTING
Annual Leave Paid $3,000
Warranty Expense $12,000
Less: Prov. For Warranty $10,000
Warranty Expense Paid $2,000
Insurance Expense $40,000
Add: Prepaid Insurance $10,000
Insurance Paid $50,000
Answer to Question No 4
In the books of Snowy Ltd.
Journal Entries

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FINANCIAL ACCOUNTING
Dr. Cr
Date Particulars
Amoun
t
Amoun
t
1/7/2015 Plant-A A/c.
######
#
Plant-B A/c.
######
#
Bank A/c.
######
#
(Being Plant A and Plant B acquired for cash)
30/6/2016 Depreciation Expense A/c. 65000
Accum. Dep. - Plant A A/c. 15000
Accum. Dep. - Plant B A/c. 50000
(Being depreciation charged on Plant A & Plant B)
Accum. Dep. - Plant A A/c. 15000
Loss on Revaluation A/c. $15,000
Plant A A/c. $30,000
(Being Plant A revalued at fair value and loss on revaluation
recorded)
Accum. Dep. - Plant B A/c. 50000
Gain on Revaluation A/c. $35,000
Plant B A/c. $15,000
(Being Plant B revalued at fair value and gain on revaluation
recorded)
Gain on Revaluation A/c. $35,000
Loss on Revaluation A/c. 15000
Asset Revaluation Reserve
A/c. $20,000
(Being the gain and loss of revaluation transferred to asset
revaluation reserve)
Deferred Tax Assets A/c. $10,500
Deferred Tax Liabilities A/c. $4,500
Income Tax Expense A/c. $6,000
(Being deferred tax recorded for the asset revaluation)
30/06/201
7 Depreciation Expense A/c. 72083

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FINANCIAL ACCOUNTING
Accum. Dep. - Plant A A/c. 13333
Accum. Dep. - Plant B A/c. 58750
(Being depreciation charged on Plant A & Plant B)
Accum. Dep. - Plant A A/c. 13333
Gain on Revaluation A/c. $8,333
Plant A A/c. $5,000
(Being Plant A revalued at fair value and gain on revaluation
recorded)
Accum. Dep. - Plant B A/c. 58750
Loss on Revaluation A/c. $46,250
Plant B A/c.
######
#
(Being Plant B revalued at fair value and loss on revaluation
recorded)
Gain on Revaluation A/c. $8,333
Asset Revaluation Reserve A/c. $37,917
Loss on Revaluation A/c. $46,250
(Being the gain and loss of revaluation transferred to asset
revaluation reserve)
Deferred Tax Assets A/c. $2,500
Income Tax Expense A/c. $11,375
Deferred Tax Liabilities A/c. $13,875
(Being deferred tax recorded for the asset revaluation)
Workings:
Year
Opening
Balance
Estimated
Life (in
years)
Residual
Value
Depreciation
p.a.
Closing
Value Fair Value
Revaluation
Gain/(Loss)
Deferred
Tax Assets/
(Liabilities)
A B C D=(A-C)/B E=A-D F G=F-E H=Gx30%
2015-16 $150,000 10 $0 15000 $135,000 $120,000 ($15,000) ($4,500)
2016-17 $120,000 9 $0 13333 $106,667 $115,000 $8,333 $2,500
2015-16 $250,000 5 $0 50000 $200,000 $235,000 $35,000 $10,500
2016-17 $235,000 4 $0 58750 $176,250 $130,000 ($46,250) ($13,875)
Plant A:
Plant B:
Computation of Revaluation Gain/(Loss) & Deferred Tax:

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Answer to Question No 5
Calculation of Impairment Loss:
Particulars Amount
Fair Value,less, Cost to Sell $820,000
Value in Use $900,000
Recoverable Amount $900,000
(Higher of Fair Value &
Value in use)
Less: Carrying Amount of
CGU
$1,055,00
0
Total Impairment
Gain/(Loss)
($155,000
)
Allocation of Specified Impairment Loss:
Particulars
Carrying
Amount
Fair
Value
Impairmen
t Loss
Total Impairment Loss $155,000
Less:
Cash $32,000 $32,000 $0
Land $600,000 $520,000 $80,000
Inventory $5,000 $5,000 $0
Accounts Receivable $13,000 $13,000 $0
Patent $60,000 $50,000 $10,000
Goodwill $15,000 $0 $15,000
Balance Impairment Loss $50,000
Impairment Loss Allocation as per Weightage:
Particulars
Carrying
Amount
Net
Carrying
Amount
Weightag
e
Impairmen
t Loss
Balance Impairment $50,000

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FINANCIAL ACCOUNTING
Loss
Motor Vehicle $300,000
Less: Accum. Depreciation ($120,000) $180,000 55% $27,273
Plant & Equipment $200,000
Less: Accum. Depreciation ($50,000) $150,000 45% $22,727
Total $330,000 $330,000 100% $50,000
In the books of Blizzard Ltd.
Journal Entries
Dr. Cr.
Date Particulars Amount Amount
30/06/2017 Impairment Loss A/c. #######
Land A/c. $80,000
Patent A/c. $10,000
Goodwill A/c. $15,000
Motor Vehicle A/c. $27,273
Plant & Equipment A/c. $22,727
(Being assets under the specific cash generating unit
impaired)
Profit & Loss A/c. #######
Impairment Loss A/c. #######
(Being impairment loss transferred to P/L A/c.)