Financial Accounting Assignment: FNSACC504 Assessment 2 Solution

This document presents a comprehensive solution to a financial accounting assignment, specifically addressing the requirements of FNSACC504 Assessment 2. The solution includes detailed preparation of a Profit and Loss (P&L) account, along with supporting notes and illustrations of expenses. It covers the preparation of a statement of changes in equity, a balance sheet with accompanying notes according to Australian accounting standards, and a cash flow statement. Furthermore, the assignment delves into consolidation, providing consolidated worksheets, journal entries, and an overview of the use of accounting software like MYOB. The solution encompasses all five questions outlined in the assignment brief, offering a thorough understanding of financial accounting principles and practices.

Accounting

Table of Contents
QUESTION 1...................................................................................................................................3
1. Preparation of P&L a/c ..........................................................................................................3
2. Notes preparation for the below mentioned aspects ..............................................................3
3. Presenting or illustrating expenses .......................................................................................4
Part b: Preparation of statement of changes in equity ................................................................4
QUESTION 2...................................................................................................................................5
a. Preparing balance sheet ...........................................................................................................5
2. Preparation of notes according to Australian accounting standard Board ..............................7
QUESTION 3...................................................................................................................................7
a....................................................................................................................................................7
b. ..................................................................................................................................................8
QUESTION 4...................................................................................................................................8
a....................................................................................................................................................8
b....................................................................................................................................................9
c..................................................................................................................................................10
QUESTION 5.................................................................................................................................10

QUESTION 1
1. Preparation of P&L a/c
P&L for the year ended at 30 June 2016
Particulars Gross Amount (in AU$) Net Amount (in AU$)
Sales revenue 1055
Less: cost of sales 295
Gross profit (GP) 760
Add: Profit on reevaluation of
building
50
Commission received 50
Interest received 20 (50+50+20) = 120
Total operating income 880
Less: Operating or indirect
expense
Distribution expenses 195
Marketing expenses 85
Occupancy expenses 110
Administration expenses 150
Other expenses 48
Finance cost expenses 42
Total indirect expenses 630
Net profit before taxation Total operating income –
operating expenditure
250
Less: tax amount (250*30%) 75
Net profit after taxation 175
2. Notes preparation for the below mentioned aspects
 Profit: Net income after taxation which was generated by over the expenses amounted to
$175000. Hence, such amount is used by the business unit for offering dividend to the
shareholders.
Net profit = Total income – operating expenses
 Dividend
Interim dividend: 1500000 * 0.04 = 60000

Proposed dividend = 1700000 *0.05 = 85000
Interim dividend is considered by an accountant while preparing statement of changes in
equity.
 Dividend franking credit: Value of franking credit is $0.02 which in turn allows
company
3. Presenting or illustrating expenses
In the above mentioned illustration direct and indirect expenses are separately included
by the firm. Direct expenditure includes which are associated with production such as COGS. On
the other side, indirect expenses contain information about dividend paid, administration
expenses etc.
Graph of direct expenses
Graph of indirect or operating expenses
Part b: Preparation of statement of changes in equity
Statement of changes in equity for the year ended at 30 June 2016
Particulars
Amou
nt (in
$)
Share
capita
l
Additional
paid in-
capital
Genera
l
reserve
Retain
ed
profit
Asset
revaluation
reserve
Total
Amount
(in $)
Balance at 1
June 2015
15000
00 30000 288000 110000 1928000
issue of new
shares
20000
0 50000 250000
Net income 35000 35000
Transfer to
capital
reserve 25000 -25000
dividend -60000
reevaluation
profit 50000
Balance at 17350 50000 55000 203000 160000 2213000

30 June
2016 00
QUESTION 2
a. Preparing balance sheet
Statement of financial position of Matisse Ltd for the year ended at 30 June 2016
Assets
Gross
Amount
(in $)
Net
Amount
(in $)
Fixed assets
P&M 969000
Depreciation 191250 777750
Investment 459000
Contingent assets 150000
Goodwill 165750
Impairment 51000 114750
Deferred tax assets 18360
Trademark 63750
Land and building
(1) 3570000
Bad debts on
lawsuit
(500000*30%) [2] 150000
Total fixed assets 5153610
Current assets
Cast at bank 55080
Petty cash 1275) 1275
Bills receivable 220575
Provision for bad
debt 6375 214200
stock 124950
Prepaid expenses
(Long service leave
payable [3] 12000

Total current
assets
Total assets
(current + fixed)
407505
Liabilities
Current liabilities
Accrued expenses 16320
Bills payable 106080
Taxation 70125
Deferred tax
liabilities 6885
Total current
liabilities
199410
Long term debt
Mortgage 1530000
Provision for long
service lease 33900
Total Long term
debt
Shareholders’ equity
Share capital 2550000
Net profit 174000
General reserve 127500
Asset revaluation
reserve 114750
Retained earnings 831555 3797805
Total liabilities
(Current + long
term +
shareholders
equity)
5561115
Working notes
1. Land and Building

 Amount of land reevaluation = $2420000
 Amount of building reevaluation = $1150000
According the reevaluation business unit has not attained any gain on revaluation so amount of
$3570000 is mentioned in balance sheet.
2. Bad debts: 500000 * 30% = $150000
3. Prepaid long service leave payable = 12000
2. Preparation of notes according to Australian accounting standard Board
AASB 101 has followed by the accountant of business unit while preparing the final
accounts or statement of financial position. Such standard contains rules and information
regarding the preparation and publishing aspect of final accounts.
QUESTION 3
a.
Cash Flow Statements of Turner Ltd for the year ended 30th June 2016
Cash flow from operating activities
Receipts from customers (see. Working note1) $873,040.00
Commission received $15,120.00
Interest income $7,952.00 $896,112.00
Less: payments
Salaries & wages $604,800.00
Taxes paid $124,320.00

Petty cash payments $1,000.00
Other operational payments $228,480.00 $958,600.00
-$62,488.00
Less: decrease In accounts payable $243,600.00
Less: Increase in inventory $95,200.00
Less: Decrease in provision for annual leave $23,640.00
Net Cash Outflow from operating activities
[A] -$424,928.00
Cash flow from investing activities
Furniture sold $44,000.00
Furniture purchased $50,400.00
Motor vehicle sold $45,600.00
Net Cash Inflow Frm investing activities [B] $39,200.00
Cash flow from financing activities
Issue of share capital $448,000.00
Dividend paid -$67,200.00
deposits at call $67,200.00 $448,000.00
Net Cash Inflow From Financing Activities
[C] $448,000.00
Net Cash flow (A+B+C) $62,272.00
Reconciliation of cash & its equivalents

Reconciliation of cash & its equivalents
Net cash flow from operating activities -$424,928.00
Net cash flow from investing activities $39,200.00
Net cash flow from financing activities $448,000.00
Net cash flow $62,272.00
Add: Opening balance of cash & its equivalents
Cash $48,048.00
Petty cash $1,000.00
Deposits at call $127,200.00
$176,248.00
Ending balance $238,520.00
Working note: 1.
calculation of receipts from customers
Receipts from receivables $755,440.00
Cash sales $117,600.00
Total receipts from customers $873,040.00
b.
Cash flows from operating
activities for the year ended
30 June 2016
Items Amount
Net profit for the year $863,520.00

Add: non-cash expenditures
Depreciation $146,160.00
Loss on sale of motor vehicles $13,440.00 $159,600.00
Total $1,023,120.00
Add: Increase in current liabilities/Decrease in current assets
Accounts payable $13,440.00
Provisions for dividend $8,400.00
Accounts receivables $23,520.00 $45,360.00
Less: decrease in current liabilities/Increase in current assets
Inventory $6,720.00
Provisions for taxation $15,120.00
Provisions for annual leave $3,360.00 $25,200.00
Net cash flow from operating activities $1,043,280.00
QUESTION 4
A & B.
Consolidated
worksheet Leonardo Davicini Eliminations
Dr. Cr. Consolidated
Retained profits $178,125.00 $43,200.00 $43,200.00 20000 $198,125.00
Share capital
$1,125,000.
00 $540,000.00 $540,000.00 $1,125,000.00
reserves $140,625.00 $54,000.00 $54,000.00 $160,625.00
Capital reserves $0.00
provision for
proposed dividend $56,250.00 $18,000.00 $74,250.00

Other current
liabilties $93,750.00 $117,000.00 $210,750.00
Non-current
liabilities $271,875.00 $162,000.00 $433,875.00
Total assets
$1,865,625.
00 $934,200.00 $2,182,625.00
Shares in Davinici
Ltd $630,000.00 $630,000.00 $0.00
Other non-current
assets $981,562.00 $579,600.00 $1,561,162.00
Inventory $75,938.00 $129,600.00 $205,538.00
Accounts
receivables $105,000.00 $176,400.00 $281,400.00
Cash at Bank $73,125.00 $48,600.00 $121,725.00
Goodwill $12,800.00 $12,800.00
$1,865,625.
00 $934,200.00 $2,182,625.00
Calculation of Goodwill
Acquisition value $650,000.00
Total assets $934,200.00
Current liabilities $135,000.00
Non-current liabilities $162,000.00
Total liabilities $297,000.00
Net assets $637,200.00
Goodwill (acquisition value - net assets) $12,800.00

Journal entries
Common stock a/c
Dr. $540,000.00
Retained profits a/c Dr. $43,200.00
Reserves a/c
Dr. $54,000.00
Goodwill a/c (B/F)
Dr. $12,800.00
To business purchase a/c 650000
Business purchase a/c Dr. $650,000.00
To shares in Davinici ltd a/c 630000
To cash (B/F) $20,000.00
c.
Yes, Myob Software can be used for making financial reports and integrated annual reports to
measure their financial performance. It is extremely helpful to make and prepare consolidated
financial reports and accounts of subsidiary and holding company through using an Add-on
consolidated system on the software. It helps to integrate and compile data from number of files
and generate automatically consolidated financial reports including both the profit and loss
account and balance sheet.
QUESTION 5
Consolidation
Worksheet 30
June 2016
Gauguin
Ltd
Degas Ltd Combine Eliminations C
Dr Cr
Sales 1,517,85
0
663,750
2,181,600
30375 2,151,225
Less Cost of
Sales
0
Inventory
1.7.2015
81,000 34,875
115,875
12375 103,500
Purchases 586,125 315,000
901,125
901,125

667,125 349,875 1,017,000 1,004,625
Inventory
30.6.2016
76,500 39,375
115,875
8325 124,200
Cost of Goods
Sold
590,625 310,500
901,125
880,425
Gross Profit 927,225 353,250
1,280,475
1,270,800
Administratio
n fees received
— 67,500
67,500
67500 Nil
Gain on sale
of equipment
— 4,500
4,500
4500 Nil
Dividends
received
67,500 —
67,500
67,50
0
Nil
Interest
received from
Degas Ltd
4,500 —
4,500
4500 9000
999,225 425,250 1,424,475 1,279,800
Less:
Expenses -
selling
expenses
95,625 33,750
129,375
129,375
- Admin
expenses
556,875 194,625
751,500
900 750,600
- Financial
expenses
103,725 28,125
131,850
131,850
dividend paid 45,000
45,000
45,000
756,225 301,500 1,057,725 1,056,825

Operating
profit before
tax
243,000 168,750
411,750
222,975
Less tax
expense
70,875 56,250
127,125
127,125
Profit after tax 172,125 112,500
284,625
95,850
Retained
earnings
1.7.2015
428,625 245,250 673,875 673,875
0
Available for
appropriation
600,750 357,750
958,500
958,500
Appropriation
s 0
Interim
dividend paid
56,250 22,500
78,750
78,750
Final dividend
declared
67,500 39,375
106,875
106,875
Total
appropriations
123,750 61,875
185,625
Retained
earnings
30.6.2016
477,000 295,875
772,875
772,875
Share capital 1,125,00
0
843,750
1,968,750
1,968,750
General
reserve
112,500 56,250
168,750
135000 303,750
9%
Debentures
— 45,000
45,000
45,000
Accounts
payable
87,750 32,625
120,375
120,375
Dividends
payable
67,500 39,375
106,875
106,875

Final
dividend paid
45,000
45,000
45,000
Taxation
Payable
32,625 23,625
56,250
56,250
1,902,37
5
1,336,500
3,238,875
office
equipments
Property, plant
& equipment
(net)
436,500 877,500
1,314,000
4500 1,309,500
Shares in
Degas Ltd
1,102,50
0
—
1,102,500
1,102,500
9%
Debentures in
Degas Ltd
45,000 —
45,000
45,000
Other non-
current assets
151,875 349,875
501,750
501,750
Inventory 76,500 39,375 115,875 8325 107,550
Other current
assets
90,000 69,750
159,750
159,750
Goodwill on
consolidation
—
#VALUE!
67500 24750 42750
1,902,37
5
1,336,500
3,238,875