Problem Questions Please answer all questions Consider the following Financial Statements for the year ended 30 June 2019: USB Pty Ltd Profit & Loss Statement For the year ended 30 June 2019 Income Interest received Rent received Total income $ 36,000 81,000 117,000 Expenses Accounting fees Bank charges Cleaning Council rates Depreciation Gardening Insurance Interest Land tax Property manager Pest control Repairs & maintenance 1,500 72 900 3,600 9 2,160 1,080 21,000 3,600 7,020 360 1,800 Total expenses 43, 101 Net profit before tax Less: Income tax expense 73,899 (22,170) Net profit after tax 51,729 USB Pty Ltd Balance Sheet As at 30 June 2019 420,000 1,680 Assets Cash at bank Trade debtors L&B - Kelvin Grove L&B - South Brisbane L&B - Norman Park Plant & equipment Less: Prov for deprec Prepayments 944,088 14,400 252,000 396,000 972,000 720 (9) 19,200 Liabilities Bank loan Trade creditors Accrued expenses Unearned income Prov for income tax 2,400 22,170 Total assets 2,598,399 Total liabilities 446,670 Net assets 2,151,729 Equity Share capital Retained earnings 2,100,000 51,729 Total equity 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 69.000 (60,192) 36,000 44,808 Cashflow from investing activities Purchase of land and buildings Purchase of plant and equipment (1,620,000) (720) (1,620,720) Cashflow from financing activities Issue of share capital Borrowings 2,100,000 420,000 2,520,000 Net increase/(decrease) in cash 944,088 Opening cash balance as at 1 July 2018 Net increase/(decrease) in cash 944,088 Closing cash balance as at 30 June 2019 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) 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) 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). (10 marks) 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): (i) What is the new Net profit before tax figure in the Profit & Loss Statement? What is the new Total assets figure in the Balance Sheet? (ii) (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. What is the revaluation increment to record in the Financial Statements to reflect the market value of the property (show all workings)? (ii) What will be the account balance of 'Land & buildings - Kelvin Grove' after the revaluation has been recorded in the Financial Statements? (iii) Did the revaluation increase or decrease the Total equity figure in the Balance Sheet? (5 marks) 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) Problem Questions Please answer all questions Consider the following Financial Statements for the year ended 30 June 2019: USB Pty Ltd Profit & Loss Statement For the year ended 30 June 2019 Income Interest received Rent received Total income $ 36,000 81,000 117,000 Expenses Accounting fees Bank charges Cleaning Council rates Depreciation Gardening Insurance Interest Land tax Property manager Pest control Repairs & maintenance 1,500 72 900 3,600 9 2,160 1,080 21,000 3,600 7,020 360 1,800 Total expenses 43, 101 Net profit before tax Less: Income tax expense 73,899 (22,170) Net profit after tax 51,729 USB Pty Ltd Balance Sheet As at 30 June 2019 420,000 1,680 Assets Cash at bank Trade debtors L&B - Kelvin Grove L&B - South Brisbane L&B - Norman Park Plant & equipment Less: Prov for deprec Prepayments 944,088 14,400 252,000 396,000 972,000 720 (9) 19,200 Liabilities Bank loan Trade creditors Accrued expenses Unearned income Prov for income tax 2,400 22,170 Total assets 2,598,399 Total liabilities 446,670 Net assets 2,151,729 Equity Share capital Retained earnings 2,100,000 51,729 Total equity 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 69.000 (60,192) 36,000 44,808 Cashflow from investing activities Purchase of land and buildings Purchase of plant and equipment (1,620,000) (720) (1,620,720) Cashflow from financing activities Issue of share capital Borrowings 2,100,000 420,000 2,520,000 Net increase/(decrease) in cash 944,088 Opening cash balance as at 1 July 2018 Net increase/(decrease) in cash 944,088 Closing cash balance as at 30 June 2019 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) 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) 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). (10 marks) 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): (i) What is the new Net profit before tax figure in the Profit & Loss Statement? What is the new Total assets figure in the Balance Sheet? (ii) (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. What is the revaluation increment to record in the Financial Statements to reflect the market value of the property (show all workings)? (ii) What will be the account balance of 'Land & buildings - Kelvin Grove' after the revaluation has been recorded in the Financial Statements? (iii) Did the revaluation increase or decrease the Total equity figure in the Balance Sheet? (5 marks) 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