ACC514 Financial Accounting Assignment 2: Problem Questions, 2019

This document presents a comprehensive solution to an ACC514 financial accounting assignment. The assignment consists of five problem questions that cover key areas of financial accounting. Question 1 focuses on financial statement disclosures, including accounting estimate changes, events after the reporting date, and error corrections, requiring the preparation of adjusting journal entries. Question 2 addresses share allotment adjustments and shareholder refunds. Question 3 involves calculating tax payable and preparing a deferred tax worksheet. Question 4 deals with the revaluation of equipment and the calculation of revaluation surplus or loss. Finally, Question 5 applies AASB 136 to determine impairment loss and revised carrying amounts of assets. The solutions include detailed workings, calculations, and references to relevant accounting standards, providing a complete and accurate response to the assignment requirements.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1FINANCIAL ACCOUNTING
Table of Contents
Question 1:.......................................................................................................................................2
Question 2:.......................................................................................................................................4
Question 3:.......................................................................................................................................5
Answer i:......................................................................................................................................5
Answer ii:.....................................................................................................................................6
Question 4:.......................................................................................................................................7
Question 5:.......................................................................................................................................9
References:....................................................................................................................................12

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Question 1:
Situation 1:
This is an accounting estimate change, which needs to be recognized in income statement
from the date of change, which would have impact on the future financials and 2017-2018
financials, as per “AASB 108, Para 36” (Aasb.gov.au, 2019). The adjusting journal entry would
be to debit warranty expense by $15,400 and credit provision for $15,400 in order to record
warranty expense.
Situation 2:
This situation denotes events after reporting date, which is related to adjusting event, as
per AASB 110 and thus, recording needs to be made (Aasb.gov.au, 2019). The impact would be
on the 2017-2018 financials where doubtful debt expense would be debited by $380,000 and the
same amount would be credited to provision for doubtful debt to record doubtful debt allowance.
Situation 3:
This situation denotes events after reporting date, which is related to non-adjusting event
and hence, no adjusting is needed, as per AASB 110 (Aasb.gov.au, 2019). However, there should
be a note disclosure stating the effect of the tax rate change on current tax amount.
Situation 4:

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This situation denotes error discovery of the prior period and “AASB 108, Para 42”
requires to correct material errors of the prior period in the first set of financial statements. The
impact would be on the financial statements of the years 2016, 2017 and 2018. There would be
two adjusting journal entries. Retained earnings and accumulated depreciation have to be debited
by $21,000 and $1,000 respectively, while asset account would be credited by $22,000 to correct
the error of the prior period. Secondly, debit would be made to income tax receivable by $6,300
and retained earnings would be credited by $6,300 for recording tax reversal.

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Question 2:
Workings:
1. Additional application money for allotment adjustment:

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2. Calculation of amount to be refunded to the shareholders:
Question 3:
Answer i:
Calculation of tax payable in June 2018:

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Deferred tax worksheet for June 2018:
Answer ii:

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Question 4:

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Working 1: Calculation of revaluation surplus or loss on equipment sale

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Question 5:
According to AASB 136, organisations are needed to use fair values for measuring their
assets and impairment loss (Aasb.gov.au, 2019). Hence, this standard has been applied in this
case.
Working 1:
Impairment loss and revised carrying amount:
Impairment loss allocation:

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Working 2: Impairment loss and revised carrying amount

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