ACC204 – Advanced Financial Accounting
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Individual Assignment
ACC204 – Advanced Financial Accounting
The assignment is worth 20% of the total unit weight.
Practical Questions – Case Studies: (20 marks)
Question One: Accounting for Non-current assets (10 marks)
Sunshine Pty Ltd is an Australian based Manufacturer. On 1 July 2016, Sunshine purchased a machine from ABC Pty Ltd for $50 000 and the freight cost is $1 000. It is expected to be used in 10 years with no residual value. Sunshine Pty Ltd adopts straight-line depreciation method and uses cost model in accounting for the machine.
In the financial year ending 30 June 2019, due to financial crisis the fair value of the machine falls to $22 000 on 30 June 2019.
Due to the widespread of COVID-19, Sunshine has been experiencing sharp decrease in sales volume. After being reviewed, the machine is estimated to have fair value of $5 000 and value in use is $6 000 on 30 June 2021.
Required:
1. Calculate the depreciation expense for years ending 30 June 2017 and 30 June 2018 using straight-line method and record the journal entries accordingly. (2 marks)
2. Record transactions for the financial years ending 30 June 2019, 30 June 2020, and 30 June 2021 (5 marks)
3. Discuss indicators for impairment tests in accordance with AASB136 (3 marks)
Question Two: Accounting for Intangible Assets (10 Marks)
Nathan Ltd purchases a 100 per cent interest in Angila Ltd. The cost of the acquisition is $1 400 000 plus associated legal costs of $70 000. As at the date of acquisition, the statement of financial position of Angila Ltd shows:
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Assets |
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Current assets |
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Cash |
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20 000 |
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Accounts receivable |
80 000 |
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Allowance for doubtful debts |
(10 000) |
70 000 |
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Inventory |
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100 000 |
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Total current assets |
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190 000 |
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Non-current assets |
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Land and buildings, at cost |
850 000 |
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Accumulated depreciation—land and buildings |
(150 000) |
700 000 |
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Plant and equipment |
510 000 |
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Accumulated depreciation—plant and equipment |
(100 000) |
410 000 |
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Total non-current assets |
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1 110 000 |
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Total assets |
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1 300 000 |
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Liabilities |
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Current liabilities |
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Accounts payable |
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90 000 |
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Bank overdraft |
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20 000 |
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Total current liabilities |
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110 000 |
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Non-current liabilities |
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Bank loan |
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190 000 |
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Total liabilities |
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300 000 |
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Net assets |
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1 000 000 |
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Additional information
a. The assets and liabilities of Angila Ltd are fairly stated except for land and buildings, which have a fair value of $800 000.
b. Angila Ltd has a brand name that is not recognised on the statement of financial position and that has a fair value of $50 000.
c. There are no contingent liabilities.
Required:
1. Calculate the amount of goodwill. Show all workings. (6 marks)
2. Discuss the initial and subsequent measurement of goodwill by referring to AABS 138 and AASB 3. (4 marks)
2023-12-01