Evaluation of Financial Information with Accounting Standards

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EVALUATION OF THE FINANCIAL INFORMATION WITH ACCOUNTING
STANDARDS
ADAMS AUSTRALIA PTY LTD
1/12/2019
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Contents
INTRODUCTION...........................................................................................................................................3
ACQUISITION ASSETS...................................................................................................................................3
AMOUNT TO BE RECORDED IN THE BALANCE SHEET FOR THE ASSETS AND JOURNAL ENTRY................3
CALCULATION OF DEPRECIATION AND CARRYING AMOUNTS................................................................3
NEW MACHINE............................................................................................................................................4
COST OF THE ROBOTIC ASSEMBLY MACHINE AND JOURNAL ENTRY.......................................................4
ELEMENTS OF MACHINE COST WITH REFERENCE TO ACCOUNTING STANDARD....................................4
ANNUAL DEPRECIATION EXPENSE...........................................................................................................4
EFFECT ON ESTIMATED FULL YEAR PROFIT..............................................................................................5
INVENTORY PURCHASES / STOCK TAKE.......................................................................................................5
JOURNAL ENTRY – PERIODIC INVENTORY METHOD................................................................................5
CONCEPT OF OWNERSHIP.......................................................................................................................6
CALCULATION OF CLOSING STOCK – WEIGHTED AVERAGE.....................................................................6
JOURNAL ENTRY – SALE OF CONVEYOR SYSTEM AND COST ASSOCIATED...............................................7
EFFECT OF NEW ITEMS VALUE ON CLOSING STOCK................................................................................8
DRILLING EQUIPMENT.................................................................................................................................8
IMPAIRMENT...........................................................................................................................................8
RECORDING OF IMPAIRMENT OF DRILLING EQUIPMENT........................................................................8
RECORDING OF SALE OF DRILLING EQUIPMENT......................................................................................9
ACCOUNTS RECEIVABLE............................................................................................................................10
REASON FOR UNDERSTATEMENT OF PROVISION FOR DOUBTFUL DEBTS.............................................10
JOURNAL ENTRY FOR NON COLLECTION OF DEBT.................................................................................10
WAREHOUSE DAMAGE..............................................................................................................................11
JOURNAL ENTRY FOR IMPAIRMENT OF WAREHOUSE...........................................................................11
BUILDING REVALUATION...........................................................................................................................12
CONECPT OF VERIFIABLE MEASUREMENT.............................................................................................12
CONCLUSION.............................................................................................................................................12
REFERENCES..............................................................................................................................................13

INTRODUCTION
Accounting standards are the backbone for each type of organization. It is because of the major reason
that it paves the way as to how the particular accounting transaction is required to be recorded in the
books of accounts and in turn how the financial position and financial performance of the company shall
be reported to the stakeholders of the company. Through this report, the emphasis has been laid on the
detail of recording of each and every transaction and that too with reference to the relevant accounting
standards. The report is based on the transactions entered by Adams Australia Pty Ltd and has covered
main aspects of the recording of the non-current assets, inventories and accounts receivables. In order
to achieve the objects, the report has been divided into seven main headings and sub headings included
therein.
ACQUISITION ASSETS
AMOUNT TO BE RECORDED IN THE BALANCE SHEET FOR THE ASSETS AND
JOURNAL ENTRY
The amount to be recorded in the balance sheet for the Assets will be $ 1300000 as the value equal to
the cost of the asset or the market price whichever is lower (Para 2, AASB 116).
Date Particulars Debit Credit
01-01-2014 Building $717,532
Warehouse $405,195
Drilling Equipment Account $177,273
Cash $1300000
(Being assets recorded as Para
number 2 of AASB 116)
Particular Fair Value Purchase Value
Building $850,000 $717,532
Warehouse $480,000 $405,195
Drilling Equipment $210,000 $177,273
Total $1,540,000 $1,300,000
CALCULATION OF DEPRECIATION AND CARRYING AMOUNTS

NEW MACHINE
COST OF THE ROBOTIC ASSEMBLY MACHINE AND JOURNAL ENTRY
The cost of the machine includes the purchase cost and any other incidental expenses which is
necessary to be incurred to bring the machinery to the current location and condition (Para 4, AASB
116). In view of the above statement, the cost of the robotic machine is as follows:
Amount in Dollar
a) Purchase Cost € 320,000
Conversion Rate for 08-08-2018 0.62 $ 198,400
b
) Shipping Charges $ 24,000
c) GST $ 53,300
d
) Modification Work $ 12,000
Total Cost of New Machine $ 287,700
ELEMENTS OF MACHINE COST WITH REFERENCE TO ACCOUNTING STANDARD
With reference to AASB 116, elements of the cost are:
- Cost of purchase
- Installation cost
- Shipping and insurance charges and other transportation
- Duties and Taxes and
- Any other expense for bringing the machine to the present location and condition.
ANNUAL DEPRECIATION EXPENSE
Straight Line - Depreciation
Particulars Amount
Purchase Value $287,700
Depreciation for 2018 - 4 months ($287700 / 8 *4 / 12) $11,988
Carrying Amount 31-12-2018 $275,713
Units of Production - Depreciation
Particulars Amount
Purchase Value $287,700