Question
(Include all workings) Prepare separate schedules, one for the Ordinary A share issue and one for the Ordinary B share issue that shows the break-up
(Include all workings)
Prepare separate schedules, one for the Ordinary A share issue and one for the Ordinary B share issue that shows the break-up of:
number of shares applied for;
number of shares allotted;
total cash received;
cash received that relates to application;
cash received that relates to allotment;
cash received that relates to calls (in advance); and
cash refunded. (4 marks)
Prepare journal entries for the above transactions. Note: each class of ordinary shares should have separate application, allotment and share capital accounts and the entries should be in strict date order of the underlying event. (Narrations required) (6 marks)
Question 2 (10 marks)
Phoenix Rising Ltd began operations on 1st July 2017 by purchasing an existing business for $350,000. The fair values of the assets of the purchased business were as follows:
Asset | Fair value $ |
Vehicles | 44,000 |
Equipment | 190,000 |
Computers | 96,000 |
The excess of the purchase consideration over the fair value of the assets acquired was recorded as goodwill.
The depreciation schedules for the financial reports and the company income tax return respectively are listed below. The company income tax rate is 30%.
Depreciation Schedules | Vehicles | Equipment | Computers |
Depreciation rate: |
|
|
|
Accounting | 25% | 25% | 25% |
Tax | 40% | 30% | 50% |
Method: |
|
|
|
Accounting | Straight-line | Straight-line | Straight-line |
Tax | Reducing Balance | Reducing Balance | Reducing Balance |
Residual: | $4,000 | $10,000 | $6,000 |
During the first year of operations, the company recognised the following transactions which are treated differently for tax and accounting purposes:
Insurance of $19,000 was paid for during the year. Of this amount, $13,200 is prepaid for next year.
Rent is paid for in arrears. $13000 is owing at the end of the current year and $4,600 has been paid in cash.
Employee Entitlements (Annual, Sick and Long Service Leave) totalling $8,000 were provided for during the year. No payments were made.
Allowance for Impairment for Accounts Receivable was $2,000.
Items in the income statement which were treated the same for accounting and tax purposes were:
Sales $450,000
Cost of Goods Sold $228,000
Salaries and Wages $42,000
Other expenses $9,600
Other items in the statement of financial position as at 30th June 2018 are:
Year end balances | $ |
Inventory on hand | 156,000 |
Accounts receivable | 43,000 |
Goodwill (net) | 17,500 |
Accounts payable | 21,000 |
Cash at Bank | 19,000 |
Additional information:
No debts were written off as bad during the year.
For year ended 30th June 2018 the profit before income tax of Phoenix Rising Ltd was $57,000.
Provide journal entries to record the current tax liability, deferred tax assets (if any) and deferred tax liabilities (if any). Offset is optional. Exclude journal narrations. (2.5 marks)
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