QUESTION 2: EQUITY AND REVENUE (18 Marks)

PART 1 EQUITY At 30 June 2020, the share capital of Delta Ltd comprised: 900,000 ordinary shares were issued and fully paid to $4.30 per share. 1,700,000 ordinary shares were issued to $5.50 and paid to $4.00. During the year ending 30 June 2021 the following transactions and events occurred: 1. A dividend of $0.15 per share was paid following the Annual General Meeting (AGM) on 12 August 2020. This dividend had been recommended on 24 June 2020 by the Directors from retained earnings and had required approval at the AGM. 2. On 2 February 2021, the Directors declared and paid an interim dividend of $130,000 from the general reserve. 3. On 1 June 2021, the directors made a final call of $1.50 per share in relation to the shares not fully paid. All call money except for 12,000 shares was received by 31 July 2021. 4. On 29 June 2021, the Directors recommended a dividend of $0.12 per share from retained earnings. This was subject to approval at the AGM to be held in August 2021. REQUIRED (a) Prepare the general journal entries required to account for the above transactions and events for the year ending 30 June 2021 (i.e., from 1 July 2020 till 30 June 2021). Narrations are NOT required.

[6 marks]

(b) Prepare any note disclosure required for the dividend recommended on the 29 June 2021 in compliance with the accounting standard requiring any related note. Also, identify the accounting standard and paragraph number which is relevant to the preparation of note.

[3 marks]

PART 2 REVENUE

(a) The 5 criteria are required to be met for there to be a contract with a customer. The details of requirements are outlined in AASB 15 para 9 (provided at Appendix B).

REQUIRED Explain if and why the following would meet the 5 criteria and hence be a contract with a customer required to be accounted for according to AASSB 15 paragraph 9.

On 1 May 2021, Scott went into a store of Harvey Newman Ltd to purchase computers. He ordered computers costing $22,000 and paid 40% as deposit on the same day. The remaining amount is due on delivery.

[5 marks]

(b) On 1 July 2021, Gamora purchased $4,000 of outdoor furniture from Queen Ltd for cash. As part of the sale, Queen Ltd gave Gamora a $200 gift card that she can use on any future purchases within the next 6 months from the date of sale. The standalone price of the outdoor furniture purchased on the 1 July 2021 was $3,800. Assume Queen Ltd is certain that Gamora will use the gift card (i.e. there is no breakage). Gamora used the gift card on 1 October 2021 to purchase a lamp for $250. Gamora paid $50 cash in addition to redeeming the gift card.

REQUIRED Prepare the journal entries required to account for the above transactions on 1 July 2021 and 1 October 2021. Narrations are not required. Note: You do NOT need to prepare entries in relation to cost of sales.

[4 marks]

TOTAL MARKS FOR QUESTION 2 = 6 + 3 + 5 + 4 = 18 MARKS