Company Accounting Assignment - Financial Accounting Principles

This assignment solution focuses on company accounting principles, addressing various aspects of financial reporting. It covers the valuation of fixed assets, including cost less accumulated depreciation and impairment losses. The solution provides detailed answers to questions involving fair value m...Read More

Running head: COMPANY ACCOUNTING
Company Accounting
Name of the Student
Name of the University
Author Note

1COMPANY ACCOUNTING
Marking criteria sheet
Student name(s) Student ID(s)
Part B Marking Criteria Sheet Marks available Marks awarded
10 marks
Question 1 3
Question 2 5
Question 3 10
Question 4 7
Question 5 8
Question 6 4
Formatting, word count and marking criteria sheet 3
Part B Assignment Total 40 marks
Part B Assignment: 15% weighting 10 marks
Less: Late penalty (5% per day)
Part B Assignment: Final mark 10 marks
Additional comments from marker
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Student Name
Student ID-

2COMPANY ACCOUNTING
Table of Contents
Answer 1..........................................................................................................................................3
Answer 2..........................................................................................................................................3
Answer 3..........................................................................................................................................3
Answer 4..........................................................................................................................................4
Answer 5..........................................................................................................................................5
Answer 6..........................................................................................................................................5
References........................................................................................................................................7
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3COMPANY ACCOUNTING
Answer 1
Once the recognition of fixed asset is done, the corresponding asset shall be valued at cost less
depreciation that has been accumulated till end of year,also further deducting losses from
impairment of assets (Yoo, Choi & Pae, 2018)
Answer 2
Fair value of a particular asset is a market based measuring tool that is not an entity specific
measurement.The market specific information might not be available for particular
assets .However the purpose of fixing up fair value is to assess the price involving a transaction
on selling an asset would take place between the people who take part in the market on the date
of measurement under present scenario of the market.The definition of fair value primarily lays
importance on assets and liabilities since they are an important source of measurement.Also, it
can be applied to an entity’s own investments at fair value. (Filip, Jeanjean, & Paugam,
2015.When measuring fair value, there is an underlying assumption used by the entity in that the
people who take part in the market use this concept while fixing the price of an asset or liability
under present market scenario , including assumptions about risk.(Filip, Jeanjean, & Paugam,
2015).
Answer 3
The above journal entries are not correct .The first journal entry recorded in the books of
Valdivia Company has to be rectified. Accumulated depreciation in this case is 30000. The
figure mentioned in this case is not right. Instead of 33000, it should be 30000.Accumulated
depreciation should be debited by 33000 to cancel its effect. Also no depreciation on revalued
asset would be provided in the year ending 1/7/2018.So the depreciation of 8000 should be
credited to cancel its effect. The correct journal entry should be debiting revaluation loss
9000,accumulated depreciation 30000 and crediting equipment a/c by 39000( refer working
notes).
Working Notes:
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4COMPANY ACCOUNTING
Accumulated Depreciation= Cost- Residual Value = 55000-5000 = 10000 * 3= $30000
Life of the Asset 5
Carrying value =Cost – Accumulated Depreciation= $55000-$30000=$25000
Revaluation loss= Carrying value – Revalued Value= $25000- $16000= $9000
Answer 4
The revalued figure of the machine on 1st July 2018 is 16000(already calculated above).The
revised depreciation amount will be 16000-5000=11000/2=5500.Therefore WDV of the machine
on 1st July , 2019 is 16000-5500=10500.The revalued figure of equipment is 13000.Therefore the
gain on revaluation is 13000-10500=2500
Therefore the journal entry for the following is :
Date Particulars l/f Dr($) Cr($)
a) 01.07.2019
b) 30.06.2020
Equipment A/c Dr
Cr Revaluation Surplus A/c
(Being asset revalued from 10500 to 13000)
Depreciation A/c Dr
Cr Equipment A/c
(Being depreciation provided at year end)
2500
10000
2500
10000
Working Notes
Calculation of depreciation for the year ended 30.06.2020-
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5COMPANY ACCOUNTING
Value of the asset on 1st july, 2019-13000
Depreciation for the year ended= Original Cost- Residual Value =13000-3000=10000
Useful life of the asset 1
Answer 5
a) The above journal entry is not correct.Impairment loss of $ 30 000 is to be credited back and
and accumulated deprecation is to be debited back by $ 30000 to cancel its effect.The carrying
amount in this case is $ 240,000.The amount to be recovered is the maximum of fair value less
selling costs and usage value..Fair value less selling costs in this case is $ 210,000. Value in use
is the present value of future cash flows which amounts to $ 225000.Recoverable value is the
higher of $ 210000 and $ 225000.Carrying amount is $ 240000 while recoverable amount is $
225000.An impairment loss of $15000 is to be recognized.
Date Particulars l/f Dr($) Cr($)
b)1.7.2017
c) 30.6.2018
Impairment loss a/c Dr
Cr Accumulated Impairment Losses a/c
(Being impairment loss recognized)
Depreciation A/c Dr
Cr Accumulated Depreciation a/c
( Being depreciation provided for)
15000
24000
15000
24000
Working notes for part C
Carrying amount of the asset on 1.7.2018= $ 240000
Depreciation for the year ended 30.06.2018= 2,40,000/10= $ 24000
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6COMPANY ACCOUNTING
Answer 6
The revalued value of the plant is $240000. The carrying value of the asset in use on 1.7.2018
after deducting depreciation $ 24000 is $ 216000.The revalued figure is $ 240000. So there is a
revaluation gain of $ 24000( $ 240000- $ 216000).This amount is to be transferred to revaluation
reserve and then transferred to statement of comprehensive income account.
Date Particulars Dr Cr
1.7.2018 Plant A/c Dr
To Revaluation Reserve A/c
( Being asset revalued)
24000
24000
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7COMPANY ACCOUNTING
References:
Filip, A., Jeanjean, T., & Paugam, L. (2015). Using real activities to avoid goodwill impairment
losses: Evidence and effect on future performance. Journal of Business Finance &
Accounting, 42(3-4), 515-554
Yoo, C. Y., Choi, T. H., & Pae, J. (2018). Demand for fair value accounting: The case of the
asset revaluation boom in Korea during the global financial crisis. Journal of Business
Finance & Accounting, 45(1-2), 92-114.
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