Corporate Accounting 1 Assignment: Detailed Task Solutions

This document presents a comprehensive solution set for a corporate accounting assignment. It begins with the calculation of acquisition costs, journal entries, and explanations of maintained cost calculations for a machine. The solution then delves into debentures, calculating issue prices and providing corresponding journal entries. Further, it includes detailed journal entries for RCK limited, followed by an explanation of items adjusted directly against equity rather than profit or loss, such as other comprehensive income. Finally, the assignment concludes with a cash flow statement for Fool’s Paradise Limited, providing interpretations and analysis of operating, investing, and financing activities, offering a complete overview of the financial accounting principles. The assignment references accounting standards and provides an in-depth analysis of the financial concepts.

CORPORATE ACCOUTING
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Contents
Contents...........................................................................................................................................2
TASK1.............................................................................................................................................3
Calculation of acquisition cost of the Gizmo Machine...............................................................3
Journal entries in the books of Gizmo Machine..........................................................................3
Explanation of maintained cost calculation.................................................................................3
TASK2.............................................................................................................................................4
Calculation of issue price of debenture.......................................................................................4
Journal entry of debenture...........................................................................................................4
TASK3.............................................................................................................................................5
Journal entries of RCK limited....................................................................................................5
TASK4.............................................................................................................................................6
Example of items that would be adjust directly against equity rather than being as part of profit
or loss...........................................................................................................................................6
TASK5.............................................................................................................................................8
Cash flow statement of Fool’s Paradise Limited.........................................................................8
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TASK1
Calculation of acquisition cost of the Gizmo Machine
Particular Amount in $
Cash 200000
Land 140000
Equipment 23000
Associate cost( 5000+2500+700) 8200
Acquisition cost of the machine on the basis of
depreciation
221200
Journal entries in the books of Gizmo Machine
Date Particular Post
Ref
Debit Credit
Machine a/c
Depreciation a/c
Loss on exchange of
equipment
To cash a/c
To Equipment a/c
To Land a/c
To profit on exchange of land
a/c
TO liabilities a/c
(Being purchase of machine)
221200
20000
7000
28200
50000
100000
40000
30000
Explanation of maintained cost calculation
Date Particular Post
Ref
Debit Credit
Maintenance expenses a/c Dr
To cash a/c
650
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650
The value of the maintained cost is not considered in the cost of acquisition of machine as the
rule of the accounting standard of Australia. The maintenance cost shod benched after the
purchasing of asset and it charge on the basis of expenditure incurred on the maintain thus it
cannot be caudate. The entry of maintain cost is recorded n the separate accounting and it not
included in the cost of purchasing of man chine( Tayob, 2019).
TASK2
Calculation of issue price of debenture
Debentures can be defined as long tern security and liability for business organization. It is a
yield with fixed rate of interpret rate issued by business organization and it was secured against
the business assets. Credit worthiness and resultants of the issuer take back debentures. It can be
refer as one of the best source of garneting funds for business organizations.
In this case the Bombo limited issued their debentures with coupon rate. Coupon rate can be
defined as actual value of the interest gained by debenture holders yearly while the yield o
maturing can be defined as the total rate of return values. If the value of interest rate is higher
than the coupon value they use to go for market rate as they gave more profits through the
interest rate. In this questing, the value of debenture issue can be calculating though this manner
(Arimany,Fitó, Moyaand Orgaz, 2018).
Face value: 200000
Coupon rate: 8 %
Maturity period 6 years
Interest payment: Semi annually
Numbers of interest payment till debenture maturity: 6*2 = 12
Interest payment= Face value 8 coupon rate /2
200000*8%/2 = 80000
The issue price of debenture 280000
Journal entry of debenture
Date Particular Debit Credit
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Bank a/c Dr
To 8 % debenture application
a/c(Being application money
received)
200000
200000
8 % Debenture application a/c Dr
Debenture interest a/c Dr
To 8 % debenture a/c
(Being debenture are redeemable
with its interest price)
200000
800000
280000
TASK3
Journal entries of RCK limited
Journal entry can be defined as those transactions which are used to record each transaction of
business activities in the books of accounts. These are the main basis for ledger, and financial
statement. Following are the entries of RCK limited
Date Particular Debit Credit
July 2018 Bank a/c Dr
To Share application a/c
(Application money being
received for 108 million shares
@ $1 each)
108000000 108000000
15-08- Share application a/c Dr
To Share capital a/c
To share allotment
(Being transfer of application
money into share capital a/c)
108000000
90000000
180000000
20-09- Share allotment a/c Dr
To Share capital
( Allotment money due already
72000000
722000000
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18 million received from
application money)
20-09- Cash a/c Dr
Calls in arrears a/c Dr
To share allotment a/c
To Share capital a/c
(Being allotment money received
(72-18=54) and 18 million shares
failed to pay allotment money)
54000000
18000000
18000000
54000000
30-09- Share capital a/c Dr
TO forfeited shares a/c
To Class in arrears a/c
(Being 18 million shares get
forfeited)
36000000
21600000
14400000
Total
Note: The value of forfeited shares represent that the organization already received amount of
shares from their potential shareholders. But it is a pro rata allotment thus a part of shares will be
adjusted. When company offers 108miilion shares but they issue 90 million shares applications.
The rest value of shares will be forfeited.
TASK4
Example of items that would be adjust directly against equity rather than being as part of profit
or loss
Accounting standard are used to developed for providing guideline and directions to the business
organizations of Australia, so that they can easily run their organization without any misconduct
and issue regarding recording and representation of accounting transaction .All the terms of
journal entire related to profit and loss must be included in the profit and loss statement f
business organizations. But there will be some exemption of items for which the accounting
international accounting committee made different rules. It is base there are not increase in the
amount and these transactions have no effect on the cash flow statement as these treated as
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unrealistic account transaction. All these item should be recognized as those accounts items
which not effect the profit and loss statement and directly link with the liability side of equality.
There will be some items of accounting transactions which directly concern with the adjustment
of equity and in balance sheet and not become the part of profit and loss of statement of business
organization(Ramachandra, S., Olesen, Narayan and Tsoy, 2014).
Other comprehensive income: These are those items which cannot be considered as the part of
profit and loss statement .Theses items shown below line of profit and loss statement. They can
be known as unrealized profit and loss of business assets. For examples if an assets is ready for
sold then the gain aeries from that assets considers as the part of other comprehensive income.
Unrealized profit and loss on bonds: If value of securities to be sold is reduce an or increase tat it
will be treated as unrealized income.
Foreign currency transaction : If organization sales their products and service outside Australia
then gain or loses incurs during the changes of value offering currency should be treated as the
unrealized transaction .
Profit and loss related with pension plans: If government changes the rules and schemes related
to pension plans then the profit earn from these policies should be treated another comprehensive
income.
Australian accounting standard also define the treatment of other comprehensive income. If the
value of assets of business organization increase after its revaluation then it should be treated as
other comprehensive income and the amount of accumulate profit should be added in the liability
side of equity., under the heading of surplus of profits. And if the revaluation effects the
decrement in the value of assets then it should be treated as deduction in the surplus heading of
liability side equity.
Value of unclear dividend: Dividend can be defining as part of revenue which is available for the
shareholders o the business organization. Unclear divided should add in the equity side of the
financial statement. Which describe future dividend value which is distributed in future among
the shareholders (Silva, Vale. and Branco, 2018).
All these items considered as the part of balance sheet and adjust in the equity side of balance
sheet either it increase the surplus value of the equity side or deserves the value of profit and
reserve or surplus account. These items are used for adjusting of unwanted risk and loss it means
within the business organizations.
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TASK5
Cash flow statement of Fool’s Paradise Limited
Cash flow: it can be defined as the statement which is used to determine the value of cash inflow
and out flow activities in a systematic manner. Cash flow is a part of financial reports and it can
be calculated by direct and indirect method of business accounting(Cruz, and Dias-Teixeira,
2016). One of the most important capital budgeting tasks for the evaluation of the project capital
investments is the estimation of the relevant cash flows for each project, which refers to the
incremental cash flow arising from each project. Because companies rely on accrual accounting
rather than cash accounting, adjustments are necessary to derive the cash flows from the
conventional financial accounting records. Estimating project cash flows is critical because
inaccurate or unreliable data can corrupt the entire capital budgeting process. Accurately
forecasting cash flows can be an arduous task. Experience help to identify factors influencing the
cash flows of some projects, but historical data may be unavailable on others. Estimating a new
project's cash flows involves great uncertainty and may be little more than educated guesswork.
Therefore, those individuals who prepare cash flow estimates should explicitly state the
assumptions underlying their estimates. Corporate managers should thoroughly evaluate and test
these assumptions, because faulty assumptions can easily translate into bad investment decisions.
The financial staff plays a key role in the cash flow estimation process by coordinating with
other departments, maintaining consistency of assumptions, and eliminating biases in the
forecasts. Firms use several methods to estimate cash flows. Some firms rely on sophisticated
mathematical models and computer simulation. Others use more qualitative methods to forecast
cash flows including management's subjective estimates and a survey of expert opinions. Large
corporations often combine quantitative and judgmental forecasts to improve their estimates.
In the accounting standard of Austria there will be a separate provision has to be made regarding
cash flow adjustment, which determine the whole process used the provision and last regarding
the cash flow statement. It considers 3 activities which is operating investing financial and
investing activities. Cash flow statement is different from fund flow statement as fund down
statement considered the calculation of working capital more this format is no made working
capital statement it just show all the calculation and adjustment within a systematic format
(Vasconcelos de Andrade and Dal Ri Murcia, 2019).
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Particular Amount Total Amount
Opening balance 400000
Cash flow from operating activities
From customers 6340000
To stock
-
6300000
To operating expenses -105000
Expenses of interest 90000-
Net Cash flow from operating activities -155000
Cash Flow From investing activities
Sale of plant of assets 360000
Dividend revenue 35000-
Interest on deposit 25000
Purchase new plant 237500-
Purchase short term investment 500000-
Net cash flow from investing activities 2500-
Cash flow from Financing activities
Borrow loan 850000
Issue shares 480000
Pay loan -900000
Payment of dividend 200000-
Net cash flow from financing activities 230000
Net cash balance 72500
Add value of opening balance 400000
Closing cash balance on 31st December
2019 472500
Interpretation: Cash flow statement of the Fool’s Paradise Limited had $ 472500 balance for
the next year. This statement show the overall cash inflow and cash out flow related active of
financial, investing and operating activities of business organization.
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REFRENCES
Books and journals
Sanguino, R., Barroso, A. and Gochhait, S., 2018. Entrepreneurship in Family Firms in
Developed and Developing Countries. In Entrepreneurship and Structural Change in
Dynamic Territories (pp. 91-108). Springer, Cham.
Arimany, N., Fitó, M .A., Moya, S. and Orgaz, N., 2018. What lies behind compliance with
operating leases disclosure?. Spanish Journal of Finance and Accounting/Revista
Española de Financiación y Contabilidad, 47(4), pp.485-506.
Tayob, S., 2019. Molecular Halal: Producing, Debating, and Evading Halal Certification in
South Africa. In Insatiable Appetite: Food as Cultural Signifier in the Middle East and
Beyond (pp. 100-118). Brill.
Silva, C., Vale, J. and Branco, M., 2018, September. Intellectual capital disclosure: a study
applied to the Shanghai ranking. In ECKM 2018 19th European Conference on
Knowledge Management (p. 783). Academic Conferences and publishing limited.
Ramachandra, S., Olesen, K., Narayan, A. K. and Tsoy, A., 2014. Compliance with international
financial reporting paradigm: A tale of two transition paths. CORPORATE OWNERSHIP
& CONTROL, p.338.
Cruz, J. and Dias-Teixeira, M., 2016. Work-related musculoskeletal disorders among the
hairdressers: a pilot study. In Advances in Physical Ergonomics and Human Factors (pp.
133-140). Springer, Cham.
Vasconcelos de Andrade, G. and Dal Ri Murcia, F., 2019. A critical analysis on the additional
adjustments considered in the disclosure of the non-GAAP" adjusted EBITDA" measure
in the reports of Brazilian listed companies. Revista de Educação e Pesquisa em
Contabilidade, 13(4).
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