Online Library for Study Material with Solved Assignments - Desklib

This content includes solved assignments, essays, dissertations, and more related to accounting. It also covers topics like income tax, journal entries, consolidation worksheet, lease payment, and dividend proposed for the year. The content is subject-specific and covers courses like accounting, finance, and management. The university/college is not mentioned.

ACCOUNTING

Table of Contents
Question 1...................................................................................................................................3
Question 3...................................................................................................................................3
Question 4...................................................................................................................................8
Question 5...................................................................................................................................9
Question 6.................................................................................................................................10
Question 7.................................................................................................................................10
Question 8.................................................................................................................................11

Question 1
Q1(a).
The main objectives of income tax are to record the amount of income taxes payable or
refundable for the current financial year and to recognize the deferred tax assets and liabilities
for the future tax circumstances of events that had been recorded in the company's financial
statements or tax returns.
Q1(b)
Principle state the fact that every expense belong to the current financial year must be
recorded under the books of accounts of the organisation. The current tax liability should be
recognised as a tax payable which further be paid by the company on due date. The tax liability
must be deducted from the current year profit of the company as this is an existing obligation
require to be paid by the organisation. The principle of reporting the tax liability in books of
accounts meet the objective related to accounting.
Question 3
Journal
Date Accounts Debit Credit
30 June, 2020 Sales revenue account 68000
30 June, 2020 To cost of goods sold 68000
(intragroup sales has been eliminated)
30 June, 2020 Sales revenue 18500
30 June, 2020 To cost of sales 16000
30 June, 2020 To inventory 2500
(Treatment of closing inventory)
30 June, 2020 Sales revenue a/c 8500
30 June, 2020 To cost of sales 5000
30 June, 2020 To inventory 3500
30 June, 2020 Deferred tax assets 1800
30 June, 2020 to income tax expenses 1800

30 June, 2020 Retained earnings (as at 1st July 2019) a/c 2000
30 June, 2020 Income tax expenses a/c dr. 600
30 June, 2020 To cost of sales 2600
(Unrealised profit in opening inventory)
30 June, 2020 Impairment loss (goodwill) 2000
30 June, 2020 To Accumulated impairment losses—goodwill 2000
(Retained earnings as at 1st July )
30 June, 2020 Proceeds from the sale of plant 100000
30 June, 2020 To carrying amount of the plant sold 75000
30 June, 2020 To Plant 25000
30 June, 2020 Deferred tax asset 7500
30 June, 2020 To income tax expenses 7500
30 June, 2020 Accumulated depreciation a/c 5000
30 June, 2020 To depreciation expenses (WN 1) 5000
30 June, 2020 management fee revenue 25000
30 June, 2020 To management fee expenses 25000
30 June, 2020 Dividend declared 50000
30 June, 2020 To dividend payable 50000
30 June, 2020 dividend receivable 50000
30 June, 2020 To dividend income 50000
Working Note 1:

Adjustment of depreciation
100000 / 5 = 20000
75000 / 5 = 15000
CONSOLIDATION WORKSHEETCONSOLIDATION WORKSHEET
Nei
l
Ltd
( $0
00)
Nei
l
Ltd
( $0
00)
Young Ltd
( $000 )Youn
g Ltd ( $000
)
Eliminations
( $000)Eliminations
( $000)
Consol.
( $000 )Cons
ol.
( $000 )
Dr
Dr
CrCr
Sales
RevenueSales
Revenue
450 400
Nei
l
Ltd
( $0
00)
Nei
l
Ltd
( $0
00)
Young Ltd
( $000 )Youn
g Ltd
( $000 )
Eliminations
( $000)Eliminations
( $000)
Consol.
( $000 )Cons
ol.
( $000 )
Dr CrCr

Dr
Sales
RevenueSales
Revenue
450 400 270
00 823000
Cost of Goods
SoldCost of
Goods Sold
300 150 210
00 429000
Gross
ProfitGross
Profit
150 250
600
0 394000
Other
RevenueOther
Revenue
Dividends from
YoungDividends
from Young
50
50 0
Management Fee
Rev.Management
Fee Rev.
25
50 0
Profit – sale of
PlantProfit – sale
of Plant
25
25 0
ExpensesExpens
es
Administrative
ExpAdministrativ
e Exp
15 20
DepreciationDepr
eciation
15 40
5 50
Management Fee
Exp
25
25 0

Other Exp 75 40 115
Profit before tax 145 125 229
Tax Expense 44 40 8.7 75.3
Profit for Year 101 85 153.7
Retained Earnings
30/6/2019
200 165 4 361
301 250 514.7
Dividends Paid 76 50 50 76
Retained Earnings
30/6/2020
225 200 438.7
Neil Ltd
($000)
Young Ltd
($000)
Eliminations
($000)
Consol.
($000)
Dr Cr
BALANCE S
HEET
Shareholders
Equity
Retained
Earnings
225 200
225
Share Capital 250 200 250
Current
Liabilities
Accounts
Payable
30
30
Tax Payable 70 20 90

Non Current
Liabilities
Loans 205 210 415
750 660 1010
Current Assets
Accounts
Receivable
25 35
60
Inventory 75 225 6 294
Non Current
Assets
Deferred Tax
Asset 9.3 9.3
Land &
Buildings
150 250
400
Plant at cost 225 250 25 450
Accum
Deprecation
(50) (100)
5 -145
Investment in
Young
Ltd
325
325 0
Goodwill 75.3 68.3
Accum Impair
Losses 15 2
-17
750 660 1010
Question 4
Particulars Carrying
amount
fair value gain bargain
purchase
(Fair value –
Carrying

amount)
Cash 15000 15000 0
Accounts
receivable 68000 68000 0
inventory 112000 240000 128000
land 360000 120000 -240000
plant 220000 420000 200000
loans payable -170000 -170000 0
accounts
payable -58000 -58000 0
contingent
liabilities 0 -46000 46000
Total 1003000 1137000 134000
Question 5
a)
Capital gain
Existing portfolio
Sales 3700000
Less: Original investment -2500000
Capital gain 1200000
SPI Future Contract
Sales 1632000 (2720 * 60 * 10)
Less: Original investment -1500000
Capital gain 132000
Total capital gain:

1200000 + 132000
= 1332000
(Note: Due to absence of any information regarding year of investment for existing portfolio this
has been assumed that it is a short term investment)
b)
Particular Debit Credit
Bank a/c 5332000
To investment 4000000
To Capital gain 1332000
Question 6
Income for tax purpose
Profit before tax 100000
Add: Non deductive expenses
Entertainment expense 4000
Depreciation @ 10% 34000
Less: eligible deduction as per income tax act
Depreciation -51000
Income for tax purpose 87000
Less:
Tax liability @ 30% 26100
Question 7
a) Present value of lease payment:
FV / (1 + r)n
= 54000 / (1+ .1)3
= 40571

b)
Schedule of Lease Payment for the Lessee
Date Lease Interest Expense Liability
Reduction
Liability Balance
30 June, 2018 20000 5400 14600 39400
30 June, 2019 20000 3940 16060 23340
30 June, 2020 20000 2334 17666 5674
c)
Date Particular Debit Credit
1 July, 2017 Truck a/c 54000
To lease payable a/c 54000
d)
Date Particular Debit Credit
30 June,
2018
Lease payable a/c 20000
To bank a/c 20000
Question 8
As per accounting Standard 4, Dividend proposed for the year is not shown as a liability
if that is not approved by the shareholders. Therefore the dividend of £1 per share subsequent to
the AGM on 13th August is not considered as a current liability but it is to be shown as a
contingent liability in the notes to accounts of the company.