Advanced Financial Accounting Assignment: ACC204, Semester 2, Analysis

This document provides a comprehensive solution to an Advanced Financial Accounting assignment. It addresses the revaluation of non-current assets according to fair value principles, referencing AASB 116 and including journal entries for Anderson Pty Ltd. The assignment also covers the fair value determination and journal entries for debentures issued by Kruger Ltd, referencing AASB 9. Furthermore, it analyzes a construction contract for Sun City Limited, calculating gross profit and providing journal entries under the percentage of completion method. Finally, it revisits the asset revaluation for AD Pty Limited, mirroring the principles applied to Anderson Pty Ltd. All solutions include detailed calculations and journal entries to facilitate understanding of the accounting principles.

Running head: ADVANCED FINANICAL ACCOUNTING
Advanced Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:

1ADVANCED FINANICAL ACCOUNTING
Table of Contents
Answer to question 1:.................................................................................................................2
Sub part a:..............................................................................................................................2
Sub part b:..............................................................................................................................3
Answer to question 2:.................................................................................................................3
Sub part a:..............................................................................................................................3
Sub part b:..............................................................................................................................4
Answer to question 3:.................................................................................................................4
Sub part a:..............................................................................................................................4
Sub part b:..............................................................................................................................5
Sub part c:..............................................................................................................................5
Answer to question 4:.................................................................................................................6
Sub part a:..............................................................................................................................6
Sub part b:..............................................................................................................................8
References and Bibliography:....................................................................................................9

2ADVANCED FINANICAL ACCOUNTING
Answer to question 1:
Sub part a:
The given case study requires revaluation of noncurrent assets according to the fair
value concept. AASB 116 governs the rules and procedures of revaluation of assets. The
Accounting Standard requires revaluing the assets and recording them in their fair value if the
fair value of such assets can be determined reliably at the date of the revaluation. There must
be a specific frequency of revaluation and it must be done with sufficient regularity and
materiality. There should not be significant difference between carrying amount and fair
value of the assets.
Anderson Pty Ltd is having various noncurrent assets under the head property, plant
and equipment. They are having a carrying value of those assets and reliably determined fair
value. To revalue their assets as per the fair value, net fair value loss or gain is to be
computed comparing the net carrying value and fair value. The carrying value of those assets
is to be restated in their fair in their books of accounts. Their net gain or loss on revaluation
can be computed as under.
Property, Plant and Equipment
Carrying
Value
Current
Fair value Gain or Loss
Factory (NSW)
Land $ 1,00,000 $ 1,50,000 $ 50,000
Building (Net of depreciation) $ 50,000 $ 80,000 $ 30,000
Factory (Qld)
Land $ 1,50,000 $ 1,20,000 $ (30,000)
Building (Net of depreciation) $ 80,000 $ 70,000 $ (10,000)
Net gain in revaluation of assets $ 40,000

3ADVANCED FINANICAL ACCOUNTING
Sub part b:
Following journal entries needs to be passed to record the revaluation of assets of
Anderson Pty Ltd.
Anderson Pty Ltd.
General Journal
Dat
e Name of Accounts Debit Credit
Land (NSW) $ 50,000
Building (NSW) $ 30,000
Land (Qld) $ 30,000
Building (Qld) $ 10,000
Revaluation surplus $ 40,000
(To record revaluation of assets)
Answer to question 2:
Sub part a:
As per AASB 9 financial liabilities of an entity needs to be revalued and restated in
the books of accounts in their fair value. Fair value of debentures of Kruger Ltd Can be
determined as follows.
Computation of fair value of debenture
Face Value $10,00,000
Annual coupon rate 6%
Market required return 4%
Years to maturity 6
Payament frequency 2
Fair value of debenture $7,88,493

4ADVANCED FINANICAL ACCOUNTING
Sub part b:
Kruger Ltd
General Journal
Date Name of Accounts Debit Credit
01-Jul-15 Bank $7,88,493
Discount on debenture $2,11,507
6% Debenture $10,00,000
(To record issue of debenture)
31-Dec-15 Interest Expense $ 30,000
Interest payable $ 30,000
(To record interest expense)
Interest Payable $ 30,000
Bank $ 30,000
(To record payment of Interest)
30-Jun-16 Interest Expense $ 30,000
Interest payable $ 30,000
(To record interest expense)
Interest Payable $ 30,000
Bank $ 30,000
(To record payment of Interest)
Answer to question 3:
Sub part a:
Sun City Limited
Computation of Gross profit from the construction contract
2015 2016 2017
Contract Price $ 5,00,00,000 $ 5,00,00,000 $ 5,00,00,000
Less: Estimated Cost
Cost to date $ 1,00,00,000 $ 2,80,00,000 $ 4,00,00,000
Estimated cost to compelte $ 2,80,00,000 $ 1,20,00,000 $ -
Total Costs $ 3,80,00,000 $ 4,00,00,000 $ 4,00,00,000
Gross Profit $ 1,20,00,000 $ 1,00,00,000 $ 1,00,00,000

5ADVANCED FINANICAL ACCOUNTING
Sub part b:
Sun City Limited
General Journal
Dat
e Name of Accounts Debit Credit
Construction in progress $1,00,00,000
Accounts Payable $1,00,00,000
(To record payables for expenses)
Accounts Receivable $ 1,20,00,000
Construction in progress $ 1,20,00,000
(To record progress billing)
Cash $ 1,10,00,000
Accounts receivable $ 1,10,00,000
(To record collection of cash)
Construction Expense $ 1,00,00,000
Construction in progress $ 31,57,895
Construction revenue $ 1,31,57,895
(To record recognition of revenue)
Sub part c:
Sun City Limited
General Journal
Dat
e Name of Accounts Debit Credit
Construction in progress $1,00,00,000
Accounts Payable $1,00,00,000
(To record payables for expenses)
Accounts Receivable $ 1,20,00,000
Construction in progress $ 1,20,00,000
(To record progress billing)
Cash $ 1,10,00,000
Accounts receivable $ 1,10,00,000
(To record collection of cash)
Construction Expense $ 1,00,00,000
Construction revenue $ 1,00,00,000

6ADVANCED FINANICAL ACCOUNTING
(To record recognition of revenue, restricted to
$10m)
Construction in progress $ 20,00,000
Contract liability $ 20,00,000
(To record excess of amount received from the
customer over the construction completed)
Answer to question 4:
Sub part a:
AD Pty limited is also revaluing their noncurrent assets to the fair value. Revaluation
of assets means measuring the fair market value of assets or the realizable value of assets and
incorporating those values in the books of accounts. AASB 116 governs the provisions of
revaluation of assets and relevant disclosure requirements. As per AASB 116, the fair value
of the assets must be assessed with regularity and the value of the asses must be restated in
the fair value. There must be a proper frequency of such revaluation. Following the
guidelines of AASB 116, AD Pty Limited needs to restate the value of their Plant, Property
and equipment to the reliably assessed fair value of those assets. As per AASB 116 net
revaluation gain or loss to be recorded along with increasing or decreasing the carrying value
of such assets. Revaluation gain or loss can be computed for different assets class. Following
table shows their revaluation gain or loss assets class wise and also the net revaluation gain or
loss.
Property, Plant and Equipment
Carrying
Value
Current
Fair value Gain or Loss
Factory (NSW)
Land $ 1,00,000 $ 1,50,000 $ 50,000
Building (Net of depreciation) $ 50,000 $ 80,000 $ 30,000
Factory (Qld)
Land $ 1,50,000 $ 1,20,000 $ (30,000)
Building (Net of depreciation) $ 80,000 $ 70,000 $ (10,000)
Net gain in revaluation of assets $ 40,000

7ADVANCED FINANICAL ACCOUNTING

8ADVANCED FINANICAL ACCOUNTING
Sub part b:
AD Pty Ltd.
General Journal
Dat
e Name of Accounts Debit Credit
Land (NSW) $ 50,000
Building (NSW) $ 30,000
Land (Qld) $ 30,000
Building (Qld) $ 10,000
Revaluation surplus $ 40,000
(To record revaluation of assets)

9ADVANCED FINANICAL ACCOUNTING
References and Bibliography:
AASB, Compiled AASB Standard. "Investment property." (2015).
Bond, D., Govendir, B. and Wells, P., 2016. An evaluation of asset impairment decisions by
Australian firms and whether this was impacted by AASB 136.
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.
Joubert, M., Garvie, L. and Parle, G., 2017. 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), pp.1-11.