Detailed Analysis of Issues in Financial Reporting - Coursework

This finance report addresses key issues in financial reporting, providing a comprehensive analysis of various accounting aspects. The report begins by examining the financial liability associated with convertible notes, calculating the present value of the principal and interest, and determining the equity component. It includes an amortization schedule and relevant journal entries. The second part of the report focuses on equity share transactions, including share applications, call money, and share forfeitures, with corresponding journal entries. Finally, the report analyzes long service leave liabilities, presenting calculations of the aggregate annual salaries, probability of employees becoming entitled to leave, and the related journal entry. The report offers a practical understanding of financial reporting principles and their application in real-world scenarios.

ISSUE IN FINANCE
REPORTING

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
QUESTION 1..................................................................................................................................1
QUESTION 2..................................................................................................................................3
QUESTION 3..................................................................................................................................4

QUESTION 1
1
Amount of financial Liability
PV of the principal 2666989
PV of interest 249758
Total financial liability 2916747
Total Funds 3000000
less : Liability 2916747
Equity component 83253
Convertible notes
Financial Liability 2916747
Equity component 83253
2.
Amortisation schedule
Year Opening balance Interest
@4%
Closing
balance
0 2916747
1 2916747 116670 2800077
2 2800077 112003 2688074
3 2688074 107523 2580551
Total amortisation
cost
336196
3.
2020 2021 2022 2023
1

Journal Entries
01-
07-
2020
Bank a/c 300000
0
To Convertible notes 29167
47
To equity component 83253
30-
06-
2021
Interest expense 9000
0
9000
0
9000
0
To Bank 9000
0
9000
0
9000
0
30-
Jun
Finance cost 1166
70
1120
03
1075
23
To convertible notes 1166
70
1120
03
1075
23
i) Holders do not
exercise their options
Convertible notes 3000
000
To Bank 3000
000
ii) Holders Exercise the
option
Convertible notes 3000
000
To equity share 3000
2

capital 000
QUESTION 2
30-11-
2020
Bank a/c 42000
To equity share application 42000
60000/5 = 12000 right shares
12000 right shares @3.5
Equity share application 42000
To equity share capital 42000
16-Jan Equity share call money 750000
To equity share capital 750000
(250000*3)
Bank 705000
To Share call money 705000
Equity share capital 150000
To Share forfeiture 105000
To share application 45000
17-03-
2021
Bank 240000
To Options 240000
31-03- Options application 240000
3

2021
To Options 240000
31-12-
2021
Options 220000
Discount 275000
To equity share capital 495000
31-Jan Issue expenses 12000
To Bank 12000
b) Amount disclosed in notes to accounts
250,000 ‘A’ ordinary shares issued at $7.00 paid
to
2500000
100000 B ordinary shares 500000
Total Equity 3000000
QUESTION 3
Year
s of
servi
Numbe
r of
Aggrega
te
Aggreg
ate
Probability
of
@ 30
June
2020
employ
ees @
30
annual
salaries
for
2019/202
0
projecte
d
annual
salaries
when
leave is
becoming
uncondition
ally entitled
to LSL
MAT
URIT
Y
Interest
rate
Balan
ce
Long
service
leave
4

due
Jun-20 $ $
2 30 25,50,00
0
51,00,00
0
0.25 1 5% 12750
00
63750
6 45 65,25,00
0
97,87,50
0
0.7 4 3% 68512
50
205537
.59 26 46,80,00
0
47,73,60
0
1 8 2% 47736
00
95472
Total 364759
.5
Journal entry
b)
Employees Entitlement Expenses 364759
To Provisions for long service liability 364759
5