Superstore Ltd Financial Accounting Homework - Year Ended June 2018

This assignment provides a comprehensive solution to a financial accounting problem centered on Superstore Ltd's financial statements for the year ended June 30, 2018. The solution addresses several key accounting concepts, including the recognition and disclosure of liabilities, specifically focusing on warranties, bad debts, and the impact of changing tax rates. It also covers depreciation calculations, journal entries related to share capital, and the handling of impairment losses on assets. Furthermore, the assignment delves into detailed calculations for share issuance, allotment, calls, and forfeitures, alongside relevant journal entries and working notes. The solution also includes the computation of current and deferred tax, with accompanying journal entries, and analyzes revaluation and disposal of assets. Finally, the assignment encompasses the preparation of impairment loss calculations and associated accounting treatments.

ACCOUNTING 1
ACCOUNTING

ACCOUNTING 2
Answer 1:
Part 1:
A liability is something which has some present obligation for the company and which also
entails an outflow of the resources. This are connected with the future economic benefits that
flow out of the company. A liability would be recorded in the books of accounts in case there
is a probability of an event to take place and it is more than probable that the event would
happen. In the case, wherein there is no existence of the present obligation, then the company
shall record that expense as a contingent liability. In the cases, wherein there are some similar
obligations of an outflow if the expenses such as the product warranties or such similar
obligations, then the company shall keep a provision for them. The company shall record the
expense as provision when there is a probability that there should be an outflow of the money
for the company in future (AASB, 2019).
Hence, in such a case the warranty expense shall be provided for in the financial statements.
The accounting entry for it would be credit profit and loss account and debit provision for
warranty with an amount of $34,400. The disclosure for this would be the provision for
warranty amount in the notes to the financial statements.
Part 2:
The company would always create a provision for the bad debts out of its total amount of the
accounts receivables. The provision for doubtful expense would be debited if there is any
actual bad debt expense which occurs. Hence, in such a case the entry would be debit
provision for doubtful debts and credit bad debt expense with an amount of $380,000. The
disclosure would be the fact of the actual bad debt loss that the company has suffered during
the year.
Part 3:

ACCOUNTING 3
If the government of the country in which the company operates goes inti change the rate at
which the taxes are paid, then there would be disclosure requirement for the company. This is
mainly due to the fact that the company would have the pay the taxes at the changed tax rate
and that would be done in the end of the year. The company could though reduce its
provision for taxes as per the amended tax rate. In the given case, the company would reduce
its provision as per the changed tax rate from 30 to 28%.
There is no requirement of any additional disclosure for the company.
Part 4:
Whenever any amount of expense is incurred for an asset, then it has to be determined if that
expense would go on to increase the productivity or the life of the asset. In case, as the result
of those repairs, the life of the asset or its productivity improves, then that would be
capitalised in the cost of the asset. This means that on that expense, the company shall charge
depreciation. But if that expense merely provides some minor changes in the machine, then
that would be charged as against the profit and loss in the current month. The expense shall
be considered as repairs. The relevant disclosure in this case shall be the amount charged as
an expense or the capitalised amount. The relevant journal entry shall be repairs expense
debit with profit and loss credit and in case of capitalisation, machine or asset account debit
with profit and cash credit (IAS plus, 2019).
Journal entries:
Repairs expense Dr 22,000
To Trailer 22,000
Income tax receivable Dr 6,300
To Income tax 6,300

ACCOUNTING 4
Accumulated depreciation Dr 1,000
To Depreciation expense 1,000
Answer 2:
The following are the relevant calculations:
Date
31-Mar-19 Bank A/c
D
r.
1
6,
00
,0
00
To Preference Share Application A/c
Cr
.
16,
00,
000
(Being share application money received
on 800,000 shares @ $2 per share)
31-Mar-19 Bank A/c
D
r.
8
8,
00
,0
00
To Ordinary Share Application A/c Cr
. 88,

ACCOUNTING 5
00,
000
(Being share application money received
on 2,200,000 shares @ $4 per share)
15-Apr-19 Preference Share Application A/c
D
r.
1
6,
00
,0
00
To Preference Share Capital A/c
Cr
.
16,
00,
000
(Being appropriation of application money
towards share capital)
15-Apr-19 Ordinary Share Application A/c
D
r.
8
8,
00
,0
00
To Ordinary Share Capital A/c Cr
. 80,
00,

ACCOUNTING 6
000
To Amount Due on allotment of Ordinary
Shares
Cr
.
8,0
0,0
00
(Being appropriation of application money
towards share capital on 2,000,000 shares
and excess money towards amount due on
allotment on 200,000 shares)
15-May-19 Ordinary Share Allotment A/c
D
r.
3
0,
00
,0
00
To Ordinary Share Capital A/c
Cr
.
30,
00,
000
(Being allotment money due on 2,000,000
shares @ $ 1.50 per share)
15-May-19 Bank A/c D
r.
2
2,
00

ACCOUNTING 7
,0
00
Amount Due on allotment of Ordinary
Shares
D
r.
8,
00
,0
00
To Ordinary Share Allotment A/c
Cr
.
30,
00,
000
(Being balance of allotment money
received and
01-Aug-19 Ordinary Share Call A/c
D
r.
1
0,
00
,0
00
To Ordinary Share Capital A/c
Cr
.
10,
00,
000
(Being share call made by the directors)
01-Sep-19 Bank A/c D

ACCOUNTING 8
r.
9,
80
,0
00
Call-in-Arrear A/c
D
r.
20
,0
00
To Ordinary Share Call A/c
Cr
.
10,
00,
000
(Being Call money received on 1,960,000
shares @ $ 0.50 per share and Call money
on 40,000 shares is transferred to call-in-
arrear a/c)
15-Sep-19 Ordinary Share Capital A/c
D
r.
2,
40
,0
00
To Call-in-Arrear A/c
Cr
.
20,
000

ACCOUNTING 9
To Ordinary Share Forfeiture A/c
Cr
.
2,2
0,0
00
(Being 40,000 shares forfeited for not
paying the call money)
xxxx Bank A/c
D
r.
2,
24
,0
00
Ordinary Share Forfeiture A/c
Cr
.
16
,0
00
To Ordinary Share Capital A/c
Cr
.
2,4
0,0
00
(Being 40,000 shares forfeited for not
paying the call money reissued as fully
paid @ $ 5.60 per share)
30-Sep-19 Ordinary Share Forfeiture & Reissue D

ACCOUNTING 10
Expenses r.
7,
00
0
To Bank A/c
Cr
.
7,0
00
(Being expenses incurred and paid on
forfeiture and reissue)
30-Sep-19 Ordinary Share Forfeiture A/c
D
r.
7,
00
0
To Ordinary Share Forfeiture & Reissue
Expenses
Cr
.
7,0
00
(Being expenses incurred on forfeiture and
reissue)
30-Sep-19 Ordinary Share Forfeiture A/c
D
r.
7,
00
0
To Ordinary Share Forfeiture & Reissue
Expenses
Cr
. 7,0

ACCOUNTING 11
00
(Being expenses incurred on forfeiture and
reissue)
30-Sep-19 Ordinary Share Forfeiture A/c
D
r.
1,
97
,0
00
To Refund to Ordinary Shareholders A/c
Cr
.
1,9
7,0
00
(Being excess amount is refundable to
shareholders as per constitution)
30-Sep-19 Refund to Ordinary Shareholders A/c
D
r.
1,
97
,0
00
To Bank A/c
Cr
.
1,9
7,0
00
(Being excess amount in forfeiture account

ACCOUNTING 12
refunded to shareholders)
Working Notes
Share Forfeiture A/c
D
r.
C
r.
15-Sep-19
40,000 shares paid-up @ $ 5.50 per share
forfeited
2,
20
,0
00
15-Sep-19
40,000 forfeited shares of $ 6 per share re-
issued @ $ 5.60 per share
16
,0
00
30-Sep-19 Share forfeiture and reissue expenses
7,
00
0
30-Sep-19
Excess amount refunded to shareholders
(balancing figure)
1,
97
,0
00
2,
20
,0
2,
20
,0

ACCOUNTING 13
00 00
Answer 3:
The following are the relevant calculations:
Computation of Current
tax
Workin
g Note
#
Accounting profit before
Tax
7,
14,00
0
Add:
- Annual leave Expense
(accrued)
13
,200
- Doubtful debt expense
22
,800
- Depreciation - Plant
48
,750
- Depreciation - Motor
Vehicle
30
,000
- Insurance Expense
(accrued)
23
,000
- Impairment Loss
(Goodwill)
14
,000
- Warranty expense 37

ACCOUNTING 14
(accrued) ,400
- Entertainment Expense
3
,500
- Interest (Received)
10
,100
2,
02,75
0 1
Less:
- Royalties
15
,000
- Interest Revenue
(accrued)
11
,000
- Bad Debts written-off
6
,000 2
- Insurance Paid
25
,000 3
- Annual leave Paid
5
,800 4
- Warranty Paid
18
,900 5
- Tax Depreciation on
Plant
65
,000
- Tax Depreciation on
Motor Vehicle
18
,750
1,
65,45
0
Taxable Profit 7,

ACCOUNTING 15
51,30
0
Current Tax 30%
2,
25,39
0
Computation of
Deferred Tax Asset and
Liability
Assets
Carryi
ng
Value
Tax
Base
Differe
nce
Deferred
Tax
Asset
Deferred
Tax
Liability
Cash
2,16
,000
2,
16,00
0 - - -
Accounts Receivable (net
of doubtful debts)
1,66
,000
1,
95,00
0 -29,000 8,700 -
Inventory
3,67
,100
3,
67,10
0 -
Interest Receivable
1
,900 - 1,900 - 570
Prepaid Insurance 6

ACCOUNTING 16
,000 - 6,000 - 1,800
Plant (net of
Depreciation)
2,43
,750
1,
95,00
0 48,750 - 14,625
Motor Vehicle (net of
Depreciation)
75
,000
1,
03,12
5 -28,125 8,438 -
Goodwill (net of
Impairment)
44
,000 NA NA NA NA
Accounts Payable
1,46
,900
1,
46,90
0 - - -
Provision for annual leave
21
,400 - 21,400 6,420 -
Provision for warranties
33
,100 - 33,100 9,930 -
Bank Loan
1,00
,000
1,
00,00
0 - - -
Closing balance of
DTA / DTL 33,488 16,995
Less: Opening Balances 17,302 11,250
To be Created 16,186 5,745

ACCOUNTING 17
Journal Entry
Income Tax Expense A/c
2,14
,949
Deferred Tax Asset A/c
16
,186
To Current Tax Payable
A/c
2,
25,39
0
To Deferred Tax Liability
A/c 5,745
(Being Tax expense
recognised)
Working Notes
1 Interest Received
Accrued during the year
11
,000
Add: Accrued in the
beginning
1
,000
Less: Accrued in the end
-
1,900
10,10
0
2 Bad-Debts written off

ACCOUNTING 18
Allowance for Doubtful
Debts
Expense during the year
22
,800
Add: Opeing balance of
Doubtful Debts
12
,200
Less: Closing balance of
Doubtful Debts
-
29,000 6,000
3 Insurance Paid
Expense during the year
23
,000
Add: Prepaid in the end
6
,000
Less: Prepaid in the
beginning
-
4,000
25,00
0
4 Annual Leave Paid
Expense during the year
13
,200
Add: Provision in the
beginning
14
,000
Less: Provision in the end -

ACCOUNTING 19
21,400 5,800
5 Warranty Paid
Expense during the year
37
,400
Add: Provision in the
beginning
14
,600
Less: Provision in the end
-
33,100
18,90
0
Answer 4:
The following are the relevant calculations:
Particulars
Debi
t
Cre
dit
01-
Jul-
16 Equipment
8,00
,000.
00
To Cash
8,00
,000.
00
(purchase of

ACCOUNTING 20
equipment)
30-
Jun-
17
Depreciation
expense
1,52
,000.
00
Carry
ing
value
64
80
00
To
Accumulated
depreciation-
equipment
1,52
,000.
00
(depreciation
expense)
01-
Jul-
17 Revaluation loss
38
,000.
00
Carry
ing
value
61
00
00
To Equipment
38
,000.
00
(being revaluation)
30-
Jun-
18
Depreciation
expense
2,07
,959.
45
Carry
ing
value
40
20
41
To
Accumulated
depreciation-
2,07
,959.

ACCOUNTING 21
equipment 45
(depreciation
expense)
1-6 square
root(50000/6
10000)
30-
Jun-
19
Depreciation
expense
1,37
,062.
51
Carry
ing
value
26
49
78
To
Accumulated
depreciation-
equipment
1,37
,062.
51
0.0
81
97
(depreciation
expense)
0.6
59
08
30-
Jun-
19 Equipment
2,85
,021.
96
Carry
ing
value
55
00
00
Depreciation
rate
34.
09
%
To
Revaluation profit
2,85
,021.
96
(revaluation profit)
31- Cash 4,90

ACCOUNTING 22
Dec
-19
,000.
00
Loss on sale
60
,000.
00
To
Equipment
5,50
,000.
00
(being sale of
equipment)
Answer 5:
The following are the relevant calculations:
2018
Particulars
Carrying
value
Impairment
loss Fair value
Cash 1,43,000.00 -
1,43,000.
00
Plant and equipment 5,00,000.00 21,000. 4,79,000.

ACCOUNTING 23
00 00
Land 3,00,000.00
30,000.
00 270000
Inventory 2,20,000.00 -
2,20,000.
00
Accounts receivable 1,63,000.00 -
1,63,000.
00
Patent 90,000.00
5,000.
00 85000
Goodwill 30,000.00
30,000.
00 0
Total 14,46,000.00
86,000.
00
13,60,000.
00
Fair value less costs to sell 1360000 1360000
Value in use 1270000
Impairment loss 86,000.00
To plant and
equipment
21,000.
00
To Land
30,000.
00
To Patent
5,000.
00
To Goodwill 30,000.

ACCOUNTING 24
00
( being impairment loss)
2019
Particulars Carrying
value
Impairment
loss
Fair value
Cash 1,43,000.00 -
1,43,000.
00
Plant and equipment 4,44,000.00 -65,000.00
5,09,000.
00
Land 3,00,000.00 30,000.00 270000
Inventory 2,20,000.00 -
2,20,000.
00
Accounts receivable 1,63,000.00 -
1,63,000.
00
Patent 90,000.00 5,000.00 85000
Goodwill 30,000.00 30,000.00 0
Total 13,90,000.00 -
13,90,000.
00
Fair value less costs to
sell 13,60,000.00 13,90,000.00

ACCOUNTING 25
Value in use 12,70,000.00
Plant and equipment 65,000.00
To Land 30,000.00
To Patent 5,000.00
To Goodwill 30,000.00
( being impairment)

ACCOUNTING 26
References
IAS 16 — Property, Plant and Equipment. (2019). Retrieved from
https://www.iasplus.com/en/standards/ias/ias16
Provisions, Contingent Liabilities and Contingent Assets. (2019). Retrieved from
https://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-04_COMPjun14_04-
14.pdf