Question 1 27 marks Protek Ltd, a masks distributor company, provides the following trial balance for the year ended 30 June 2020 Protek Ltd Trial balance as at 30 June 2020 Debit ($) Credit ($) Sales of N97 surgical masks 2,151,670 Sales of 4 ply masks 3,120,850 Sales of masks filters 3,288,426 Cost of goods sold 4,688,000 Rental expenses 375,950 Salaries and wages 1,980,000 Administration expenses 128,450 Annual leave expense 98,510 Doubtful debts expense 158,000 Depreciation expense 376,000 Amortisation expense patent 56,900 Interest expense 22,500 Interest income 8,200 Selling expenses 66,800 Income tax expense 228,600 Cash on hand 53,000 Cash management account 230,000 Trade debtors 478,600 Allowance for doubtful debts 19,144 Inventories 455,040 Land 760,000 Motor vehicles 630,000 Accumulated depreciation motor vehicles 252,000 Office equipment 620,000 Accumulated depreciation office equipment 124,000 Patent (5 years) 569,000 Accumulated amortisation patent 56,900 Deferred tax asset 28,500 Deferred tax liability 125,000 Bank loan 450,000 Trade creditors 182,560 Provision for annual leave 43,000 Current tax liability 132,100 Retained earnings, 1 July 2019 70,000 Dividends paid 20,000 Share capital 2,000,000 12,023,850 12,023,850 Additional information Protek Ltd is a reporting entity in accordance with the requirements of Australian's Conceptual Framework The bank loan is repayable in 3 years The depreciation expense of $376,000 relates to motor vehicles and office equipment amounted to $252,000 and $124,000 respectively 60 of the provision for annual leave are expected to be payable within 1 year and the remaining is payable after 1 year The patent was acquired on 1 January 2020 It represents fees paid to Teknova Group, a manufacturer company based in China Protek Ltd is given the sole distributorship in Australia to sell the new high quality mask, N97, designed for first line workers in the health industry The patent lasts for 5 years There was no new shares issued during the financial year ending 30 June 2020 Protek Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and presents an analysis of expenses by function on the statement The following expenses are allocated to administrative expenses and distribution costs for the purposes of preparation of the statement of profit or loss and other comprehensive income Administrative expenses Distribution costs Rental expenses 40 60 Salaries and wages 50 50 Administration expenses 100 Annual leave expense 50 50 Doubtful debts expense 100 Depreciation expense motor vehicles 10 90 Depreciation expense office equipment 80 20 Amortisation expense patent 100 Selling expenses 100 In relation to the statement of financial position, where AASB 101 requires entities to disclose further sub classifications of the minimum line items on the face of the statement or in the notes, the directors of Protek Ltd want to report only the minimum line items on the face of the statement, and leave the sub classifications to be disclosed in the notes Part A As the accountant for the entity, prepare the following statements of Protek Ltd the year ended 30 June 2020 in accordance with AASB101 Statement of profit or loss and other comprehensive income Statement of financial position and Statement of changes in equity In preparing the above statements, you should use the line items that a listed company is likely to use and refer to paragraphs 54, 82, 82A and 106 of AASB 101 in determining the line items to be presented Show all workings to support your figures presented in the statements Disclosure notes and comparative figures are not required Note In preparing the statements for Part A, you should consider only information given in this part and ignore information given in Part B below Part B The following events occurred after the preparation of statements was completed in Part A above Event 1 The directors have asked you to review the doubtful debts allowance due to the high level of bad debts expense that occurred during the year The allowance is currently measured based on 4 of trade debtors' balances following the advice of Jane, who is one of the directors After reviewing industry averages, you have advised the directors that the allowances should be revised to 8 of the trade debtors' balances and the directors agreed to your proposal and adopt the new basis from 1 July 2019 This change is considered material in Protek Ltd's case Required State if the above situation would constitute a change in accounting policy or a change in accounting estimate Explain and support your answers by making reference to relevant paragraphs in AASB108 Prepare necessary adjusting entries and or notes disclosures required to account for the change in the doubtful debt allowance for the year ended 30 June 2020 Event 2 Protek Ltd stored its masks in rented warehouses located in several locations One of the warehouses in Orange was destroyed by bushfires on 29 July 2020 From the accounting records, there were 8,000 boxes of N95 masks stored in that warehouse, with cost of inventories valued at $120,000 Unfortunately, there was no insurance policy acquired to cover this loss and the loss is considered material for Protek Ltd The financial statements for the year ended 30 June 2020 were authorised for issue by the directors on 28 August 2020 Required Classify the above event as either an adjusting or non adjusting event after the end of the reporting period Justify your answer by making reference to AASB110 Consistent with your answer to (i) above, any journal entries and or note disclosures required to comply with the requirements of AASB110 Question 1 Max marks allocated Part A Statement of Profit or Loss and Other Comprehensive Income 4 Statement of Financial Position 7 5 Statement of Changes in Equity 2 5 Workings 6 Part B Event 1 4 Event 2 3 Total 27 Question 2 17 marks Graze Ltd iswas incorporated on 1 July 2019 The following transactions and events occurred during the year ended 30 June 2020 1 August A prospectus is issued inviting applications for 1,500,000 ordinary shares at an issue price of $5 00 each, with $3 00 payable on application, $1 00 within one month of allotment, and $1 00 on a call to be made at a later date The issue is underwritten at a commission of $8,500 31 August Applications close with the share applications received for 1,650,000 shares 15 September Shares are allottedon a pro rata basis The surplus application money is offset against the amount payable on allotment The underwriter is paid their commission 15 October All allotment money is received 9 February The call is made, with money due by 8 April 2020 8 April All call money is received except for holders of 80,000 shares who fail to meet the call 2 May The directors forfeit the shares on which call monies are unpaid 5 June The forfeited shares are reissued as fully paid for consideration of $4 60 per share Costs of forfeiture and reissue amounted to $3,900, and are paid The balance in the forfeited shares account is returned to the former shareholders on this date Required Prepare the journal entries necessary to account for the above transactions and events Show all relevant dates Question 2 Max marks allocated Journal entries 13 5 Dates 3 5 Total 17 Question 3 16 marks The asset schedule extract of Bilby Ltd shows the following details for its machinery as at 30 June 2019 The machinery has been accounted for using the revaluation model Machine A (Alvino) Machine B (Bing) $ $ Revalued amount 90,000 30,000 Accumulated depreciation Carrying amount 90,000 30,000 As an accountant of Bilby Ltd, you are asked for account for the subsequent measurement of the machinery for the years ended 30 June 2020 and 2021 More information about these machines is provided below Machine A Alvino This machine was revalued for the first time on 30 June 2019, from $100,000 to $90,000 The directors determined that as at 30 June 2019, this machine had an estimated remaining useful life of 4 years, and an estimated residual value of $15,000 The directors have determined that the fair value of this equipment on 30 June 2020 is $82,500 At 30 June 2020, this machine had an estimated remaining useful life of 3 years, and the residual value remains unchanged at $15,000 The directors have determined that the fair value of this machine on 30 June 2021 is $66,000 Machine B Bing This machine has been revalued a number of times, with revaluation decrements amounting to $1,500 being previously recognised in profit or loss The directors determined that as at 30 June 2019, this machine was valued at $30,000 with an estimated remaining useful life of 4 years, and an estimated residual value of $6,000 The directors have determined that the fair value of this machine on 30 June 2020 is $27,000 At 30 June 2020, this machine had an estimated remaining useful life of 3 years, and the residual value has been revised to $9,000 This machine is sold on 31 December 2020 for $19,500 Required Prepare the necessary journal entries for the years ending 30 June 2020 and 30 June 2021 to record the depreciation, revaluations and disposal for the machinery in accordance with AASB 116 Property, Plant and Equipment Show all relevant workings Ignore any tax effect

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Question 1 [27 marks] Protek Ltd, a masks distributor company, provides the following trial balance for the year ended 30 June 2020: Protek Ltd Trial

Question 1 [27 marks]

Protek Ltd, a masks distributor company, provides the following trial balance for the year ended 30 June 2020:

Protek Ltd

Trial balance as at 30 June 2020

Debit ($)

Credit ($)

Sales of N97 surgical masks

2,151,670

Sales of 4-ply masks

3,120,850

Sales of masks filters

3,288,426

Cost of goods sold

4,688,000

Rental expenses

375,950

Salaries and wages

1,980,000

Administration expenses

128,450

Annual leave expense

98,510

Doubtful debts expense

158,000

Depreciation expense

376,000

Amortisation expense - patent

56,900

Interest expense

22,500

Interest income

8,200

Selling expenses

66,800

Income tax expense

228,600

Cash on hand

53,000

Cash management account

230,000

Trade debtors

478,600

Allowance for doubtful debts

19,144

Inventories

455,040

Land

760,000

Motor vehicles

630,000

Accumulated depreciation - motor vehicles

252,000

Office equipment

620,000

Accumulated depreciation - office equipment

124,000

Patent (5 years)

569,000

Accumulated amortisation - patent

56,900

Deferred tax asset

28,500

Deferred tax liability

125,000

Bank loan

450,000

Trade creditors

182,560

Provision for annual leave

43,000

Current tax liability

132,100

Retained earnings, 1 July 2019

70,000

Dividends paid

20,000

Share capital

2,000,000

12,023,850

Additional information:

Protek Ltd is a reporting entity in accordance with the requirements of Australian's Conceptual Framework.
The bank loan is repayable in 3 years.
The depreciation expense of $376,000 relates to motor vehicles and office equipment amounted to $252,000 and $124,000 respectively.
60% of the provision for annual leave are expected to be payable within 1 year and the remaining is payable after 1 year.
The patent was acquired on 1 January 2020. It represents fees paid to Teknova Group, a manufacturer company based in China. Protek Ltd is given the sole distributorship in Australia to sell the new high quality mask, N97, designed for first line workers in the health industry. The patent lasts for 5 years.
There was no new shares issued during the financial year ending 30 June 2020.
Protek Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and presents an analysis of expenses by function on the statement.
The following expenses are allocated to administrative expenses and distribution costs for the purposes of preparation of the statement of profit or loss and other comprehensive income:

Administrative expenses

Distribution costs

Rental expenses

40%

60%

Salaries and wages

50%

Administration expenses

100%

Annual leave expense

50%

Doubtful debts expense

100%

Depreciation expense - motor vehicles

10%

90%

Depreciation expense - office equipment

80%

20%

Amortisation expense - patent

100%

Selling expenses

100%

In relation to the statement of financial position, where AASB 101 requires entities to disclose further sub-classifications of the minimum line items on the face of the statement or in the notes, the directors of Protek Ltd want to report only the minimum line items on the face of the statement, and leave the sub-classifications to be disclosed in the notes.

Part A

As the accountant for the entity, prepare the following statements of Protek Ltd the year ended 30 June 2020 in accordance with AASB101:

Statement of profit or loss and other comprehensive income;
Statement of financial position; and
Statement of changes in equity.

In preparing the above statements, you should use the line items that a listed company is likely to use and refer to paragraphs 54, 82, 82A and 106 of AASB 101 in determining the line items to be presented. Show all workings to support your figures presented in the statements. Disclosure notes and comparative figures are not required.

Note: In preparing the statements for Part A, you should consider only information given in this part and ignore information given in Part B below.

Part B

The following events occurred after the preparation of statements was completed in Part A above.

Event 1

The directors have asked you to review the doubtful debts allowance due to the high level of bad debts expense that occurred during the year. The allowance is currently measured based on 4% of trade debtors' balances following the advice of Jane, who is one of the directors. After reviewing industry averages, you have advised the directors that the allowances should be revised to 8% of the trade debtors' balances and the directors agreed to your proposal and adopt the new basis from 1 July 2019. This change is considered material in Protek Ltd's case.

Required:

State if the above situation would constitute a change in accounting policy or a change in accounting estimate. Explain and support your answers by making reference to relevant paragraphs in AASB108.
Prepare necessary adjusting entries and/or notes disclosures required to account for the change in the doubtful debt allowance for the year ended 30 June 2020.

Event 2

Protek Ltd stored its masks in rented warehouses located in several locations. One of the warehouses in Orange was destroyed by bushfires on 29 July 2020. From the accounting records, there were 8,000 boxes of N95 masks stored in that warehouse, with cost of inventories valued at $120,000. Unfortunately, there was no insurance policy acquired to cover this loss and the loss is considered material for Protek Ltd.

The financial statements for the year ended 30 June 2020 were authorised for issue by the directors on 28 August 2020.

Required:

Classify the above event as either an adjusting or non-adjusting event after the end of the reporting period. Justify your answer by making reference to AASB110.
Consistent with your answer to (i) above, any journal entries and/or note disclosures required to comply with the requirements of AASB110.

Question 1

Max. marks allocated

Part A

Statement of Profit or Loss and Other Comprehensive Income

Statement of Financial Position

7.5

Statement of Changes in Equity

2.5

Workings

Part B

Event 1

Event 2

Total

Question 2 [17 marks]

Graze Ltd iswas incorporated on 1 July 2019. The following transactions and events occurred during the year ended 30 June 2020:

1 August

A prospectus is issued inviting applications for 1,500,000 ordinary shares at an issue price of $5.00 each, with $3.00 payable on application, $1.00 within one month of allotment, and $1.00 on a call to be made at a later date. The issue is underwritten at a commission of $8,500.

31 August

Applications close with the share applications received for 1,650,000 shares.

15 September

Shares are allottedon a pro-rata basis. The surplus application money is offset against the amount payable on allotment.The underwriter is paid their commission.

15 October

All allotment money is received.

9 February

The call is made, with money due by 8 April 2020.

8 April

All call money is received except for holders of 80,000 shares who fail to meet the call.

2 May

The directors forfeit the shares on which call monies are unpaid.

5 June

The forfeited shares are reissued as fully paid for consideration of $4.60 per share. Costs of forfeiture and reissue amounted to $3,900, and are paid. The balance in the forfeited shares account is returned to the former shareholders on this date.

Required:

Prepare the journal entries necessary to account for the above transactions and events. Show all relevant dates.

Question 2

Max. marks allocated

Journal entries

13.5

Dates

3.5

Total

Question 3 [16 marks]

The asset schedule extract of Bilby Ltd shows the following details for its machinery as at 30 June 2019. The machinery has been accounted for using the revaluation model.

Machine A (Alvino)

Machine B (Bing)

Revalued amount

90,000

30,000

Accumulated depreciation

Carrying amount

90,000

30,000

As an accountant of Bilby Ltd, you are asked for account for the subsequent measurement of the machinery for the years ended 30 June 2020 and 2021. More information about these machines is provided below.

Machine A - Alvino

This machine was revalued for the first time on 30 June 2019, from $100,000 to $90,000. The directors determined that as at 30 June 2019, this machine had an estimated remaining useful life of 4 years, and an estimated residual value of $15,000.

The directors have determined that the fair value of this equipment on 30 June 2020 is $82,500.At 30 June 2020, this machine had an estimated remaining useful life of 3 years, and the residual value remains unchanged at $15,000.

The directors have determined that the fair value of this machine on 30 June 2021 is $66,000.

Machine B - Bing

This machine has been revalued a number of times, with revaluation decrements amounting to $1,500 being previously recognised in profit or loss.The directors determined that as at 30 June 2019, this machine was valued at $30,000 with an estimated remaining useful life of 4 years, and an estimated residual value of $6,000.

The directors have determined that the fair value of this machine on 30 June 2020 is $27,000.At 30 June 2020, this machine had an estimated remaining useful life of 3 years, and the residual value has been revised to $9,000.

This machine is sold on 31 December 2020 for $19,500

Required:

Prepare the necessary journal entries for the years ending 30 June 2020 and 30 June 2021 to record the depreciation, revaluations and disposal for the machinery in accordance with AASB 116Property, Plant and Equipment. Show all relevant workings. Ignore any tax effect.