A. Problem Questions

Please answer all questions

Consider the following Financial Statements for the year ended 30 June 2019:

Income

Interest received Rent received Total income

Expenses

Accounting fees Bank charges Cleaning Council rates Depreciation Gardening Insurance Interest

Land tax Property manager Pest control Repairs & maintenance

Total expenses

Net profit before tax Less: Income tax expense

USB Pty Ltd Profit & Loss Statement For the year ended 30 June 2019

$

36,000

81,000

117,000

1,500 72 900 3,600 9 2,160 1,080 21,000 3,600 7,020 360 1,800

43,101

73,899 (22,170)

Net profit after tax 51,729

Assets $

Cash at bank 944,088 T rade debtors 14,400 L&B Kelvin Grove 252,000 L&B South Brisbane 396,000 L&B Norman Park 972,000 Plant & equipment 720 Less: Prov for deprec (9) Prepayments 19,200

T otal assets 2,598,399

Net assets 2,151,729

Equity

Share capital Retained earnings

Total equity

USB Pty Ltd Balance Sheet As at 30 June 2019

Liabilities $

Bank loan T rade creditors Accrued expenses Unearned income Prov for income tax

T otal liabilities

420,000 1,680 420 2,400 22,170

446,670

2,100,000 51,729

2,151,729

USB Pty Ltd Cash Flow Statement

For the year ended 30 June 2019

Cashflow from operating activities

Cash receipts from tenants Cash payments to suppliers Interest received

Cashflow from investing activities

Purchase of land and buildings Purchase of plant and equipment

Cashflow from financing activities

Issue of share capital Borrowings

Net increase/(decrease) in cash

Opening cash balance as at 1 July 2018 Net increase/(decrease) in cash

Closing cash balance as at 30 June 2019

$

69,000 (60,192) 36,000 44,808

(1,620,000) (720) (1,620,720)

2,100,000 420,000 2,520,000

944,088

0 944,088

944,088

a) The Rent received amount can be dissected between the three properties as follows:

Kelvin Grove South Brisbane Norman Park

$10,800 $19,900 $50,300 $81,000

Assuming that the value of the properties in the accounts represents the cost of the properties, which has not increased or decreased in value, what is the gross (ie, ignoring all expenses and outgoings) return on investment for each property for the year (show all workings and round to 2 decimal places)?

Note: No mark if not round to 2 decimal places

(9 marks)

2. b) Based on the Financial Statements, what is the value of each share now if the total number of shares originally issued was 1,050,000 shares at $2 per share (show all workings and round to 4 decimal points)?

   (3 marks)

3. c) USB Pty Ltd bought a new computer system costing $10,000 on 1

   January 2019. The diminishing value depreciation rate for the computer is 50%.

   Calculate the depreciation of the computer under the diminishing value method for the income year ended 30 June 2019 and income years ending 30 June 2020 and 30 June 2021 (round to nearest dollar).

d) Assuming that the depreciation expense in the above Financial Statements does not include the amount you calculated in (c) above and you are now recording the acquisition of the new computer and depreciation on this computer in the Financial Statements for the year ended 30 June 2019 (show all workings):

1. (i) What is the new Net profit before tax figure in the Profit & Loss Statement?

2. (ii) What is the new Total assets figure in the Balance Sheet?

3. (iii) What is the new value per share? (round to 4 decimal points)

   (10 marks)

e) It has been decided by the directors of USB Pty Ltd that the Kelvin Grove property is undervalued. A formal valuation indicates that the property is actually worth $300,000.

1. (i) What is the revaluation increment to record in the Financial Statements to reflect the market value of the property (show all workings)?

2. (ii) What will be the account balance of Land & buildings Kelvin Grove after the revaluation has been recorded in the Financial Statements?

3. (iii) Did the revaluation increase or decrease the Total equity figure in the Balance Sheet?

   (5 marks)

f) It is found that the Insurance amount of $1,080 in the Profit & Loss Statement for the year ended 30 June 2019 relates to insurance premium for the period from 1 April 2019 to 1 April 2020.

How much of this insurance premium relates to the year ended 30 June 2019?

(3 marks)