Topic 3: Financial report presentation and disclosure You are the chief accountant of Wesley Ltd, a big accounting firm in town. Jennifer, the trainee accountant has presented you with the balance sheet of one of your clients, Dom Ltd. The balance sheet prepared by Jennifer is shown below. Charles Sturt University Subject Outline ACC222 201760 SM I-4 July 2017-Version 1 Page 16 of 26 Dom Ltd Statement of financial position for the year ending 30 June 2017 Assets $ Liabilities $ Cash and cash equivalents (24,000) Trade and other payables 110,000 Trade and other receivables 160,000 Allowance for inventory obsolescence 4,000 Inventories 40,000 Accumulated depreciation property, plant and equipment 60,000 Property, plant and equipment and intangible assets 764,000 Financial liabilities 600,000 Investment property 114,000 Provisions 48,000 Less: loan taken for investment property (34,000) Ordinary share capital 200,000 Other assets 46,000 Shareholders equity Retained profits 20,000 Reserves 24,000 1,066,000 1,066,000 Additional information related to Dom Ltd: (1) Cash and cash equivalents consists of $4,000 cash on hand and a bank overdraft of $28,000. (2) All receivables are expected to be received within 1 year. (3) The intangible assets included as part of the property, plant and equipment amounted to $94,000. (4) The investment property relates to a piece of land held for long-term capital appreciation purpose and all of the loans taken for the purpose of the investment property are repayable within 1 year. (5) Other assets includes $10,000 current and $36,000 non-current. (6) Included in the trade and other payables are $40,000 repayable within 1 year. (7) $100,000 included in the financial liabilities is repayable within 1 year. (8) Provisions consist of current tax liabilities of $8,000 and the balance is related to provision for a 6-month warranty on certain goods sold. Required: Write a memo to Jennifer: (a) Explain the key problems with the statement of financial position prepared by Jennifer. You should make references to requirements of AASB101, where appropriate. (b) Prepare the corrected version of the statement of financial position of Dom Ltd for the year ended 30 June 2017 and attach it to the end of the memo, for Jennifers review. Your corrected statement of financial position should be prepared in accordance with AASB101, showing only minimum line items on the face of the statement, when relevant. Notes to the accounts are not required. Question 1 Max. marks allocated Issues identified with the original statement of financial position [part (a)] 12 Preparation of corrected statement of financial position including references made to AASB101 [part (b)] 18 Overall presentation 2 Total 32 Charles Sturt University Subject Outline ACC222 201760 SM I-4 July 2017-Version 1 Page 17 of 26 Question 2 [20 marks] Topic 4: Accounting for equity On 1 July 2016, Ansett Ltd was incorporated and offered 5,000,000 ordinary shares to the public at an issue price of $2.00 per share, with $1.50 payable on application, and $0.30 due within one month of allotment and $0.20 payable on a call to be made at a later date. By 31 July 2016, applications had been received for 5,500,000 shares. On 12 August 2016, 5,000,000 shares were allotted, and excess application money refunded to unsuccessful applicants. All allotment money was received by 12 September 2016. On 20 March 2017, the call was made with money due by 30 April 2017. By 30 April 2017, all call money was received except for holders of 50,000 shares who failed to meet the call. On 31 May 2017, the shares on which call money was not received are forfeited, and on 5 June 2017, they were auctioned as fully paid. An amount of $1.70 was received for each share sold. Share re-issue costs amounted to $5,000 were paid. The constitution provided for any surplus on resale, after satisfaction of unpaid instalments and any costs, to be returned to shareholders whose shares were forfeited. Required: Provide the journal entries necessary to account for the above transactions and events for the year ended 30 June 2017 for Ansett Ltd. Show all narrations, dates and relevant workings. Question 2 Max. marks allocated Journal entries 12.5 Dates correctly stated 3.5 Narration 2 Overall presentation 2 Total 20 Question 3 [28 marks] Topic 6A: Accounting for revaluation of assets On 1 July 2015, Genesis Ltd acquired two items of machinery: Machine G at a cost of $400,000 and Machine Q at $300,000. At the date of acquisition, Genesiss directors determine to depreciate the machinery on a straight-line basis. Machine G has an estimated useful life of 10 years and an estimated residual value of $40,000. Machine Q has an estimated useful life of 5 years with no estimated residual value. On 30 June 2016, Genesis Ltd decided to adopt the revaluation model subsequent to acquisition. The fair values of Machine G and Q is $380,000 and $200,000 respectively. The useful life for Machine G at 30 June 2016 is estimated to be 8 years. Other than this, there is no change in the estimated useful life and residual value for the machinery. On 30 June 2017, the fair values of Machine G & Q are $300,000 and $160,000 respectively. Assume a tax rate of 30% Required: Prepare the journal entries for Genesis Ltd from 1 July 2015 to 30 June 2017 to record the transactions above. Show narrations and all relevant workings. Charles Sturt University Subject Outline ACC222 201760 SM I-4 July 2017-Version 1 Page 18 of 26 Question 3 Max. marks allocated Journal entries 19 Workings 4 Narration 3 Overall presentation 2 Total 28 Question 4 [20 marks] Topic 6B: Accounting for impairment of assets Big Friday Ltd conducted an impairment test on 30 June 2017. As a part of that exercise, it measured the fair value less costs to sell of the entity, considered to be a single cash-generating unit, to be $742,800, and the value in use of the entity to be $650,000. The carrying amounts of the assets of the entity at 30 June 2017 were: $ Machinery 840,000 Accumulated depreciation - machinery (240,000) Patent 150,000 Receivables 16,000 Inventory 87,000 Cash 20,000 Goodwill 15,000 The receivables were all considered to be collectible, and the inventory was measured at the lower of cost and net realisable value. Required: (i) Provide the journal entries to account for the impairment loss for Big Friday Ltd for the year ended 30 June 2017, assuming that the fair value less costs to sell for the patent is determined at $135,000. (ii) Now assume that the fair value less costs to sell for the patent is $120,000. Explain whether your answers would be any different from (i) above. Note: It is essential to show all your workings and explain your answers where necessary. Round all figures to the nearest dollar. Question 4 Max. marks allocated Part (i) including computation and allocation of impairment losses, supported by explanations 12 Part (i) Journal entries for impairment losses 4 Part (ii) explanation 2 Overall presentation 2 Total 20 Charles Sturt University Subject Outline ACC222 201760 SM I-4 July 2017-Version 1 Page 19 of 26 Criteria High distinction Distinction Credit Pass Question 1: Demonstrate an understanding of the form and content of published financial reports prepared by reporting entities. Apply the definition and recognition criteria in the Conceptual Framework to practical situations. Demonstrates a comprehensive understanding of the presentation requirements in AASB 101 Presentation of Financial Statements and the ability to apply these requirements to a range of practical situations, without flaw. Applies the definition and recognition criteria for assets, liabilities, income, expenses and equity in the Conceptual Framework to the preparation of financial reports for reporting entities, without flaw. Where required, workings, explanations and references are provided, and are accurate and complete. Demonstrates a thorough understanding of the presentation requirements in AASB 101 Presentation of Financial Statements and the ability to apply these requirements to a range of practical situations, with very few minor errors. Applies the definition and recognition criteria for assets, liabilities, income, expenses and equity in the Conceptual Framework to the preparation of financial reports for reporting entities, with very few minor errors. Where required, workings, explanations and references are provided, and are mostly accurate and complete. Demonstrates a good understanding of the presentation requirements in AASB 101 Presentation of Financial Statements and the ability to apply these requirements to a range of practical situations, with a number of minor errors. Applies the definition and recognition criteria for assets, liabilities, income, expenses and equity in the Conceptual Framework to the preparation of financial reports for reporting entities, with a number of minor errors. Where required, workings, explanations and references are mostly provided, and are accurate. Demonstrates a satisfactory understanding of the presentation requirements in AASB 101 Presentation of Financial Statements and the ability to apply these requirements to a range of practical situations, with a limited number of errors. Applies the definition and recognition criteria for assets, liabilities, income, expenses and equity in the Conceptual Framework to the preparation of financial reports for reporting entities, with a limited number of errors. Where required, workings, explanations and references are partially provided, and are satisfactory. Rationale This assessment task covers topics 3, 4, 6A and 6B. It has been designed to ensure that you are engaging with the subject content on a regular basis. More specifically it seeks to assess your ability to: explain the role of the financial reporting conceptual framework and apply its components to practical situations; demonstrate an understanding of the form and content of published financial reports; and apply generally accepted accounting principles and specific financial reporting standards relating to concepts of recognition, measurement, disclosure, revaluation and impairment of financial statement elements. Marking criteria The marking guide for this task is provided below. The detailed allocation of marks for each question has been provided above for your information.

Question 2: Apply generally accepted accounting principles and specific financial reporting standards to account for share capital in a reporting entitys general purpose financial reports. Apply the definition and recognition criteria in the Conceptual Framework to practical situations. Applies generally accepted accounting principles and specific financial reporting standards to account for share issues in a company's financial reports, without flaw. Applies the definition and recognition criteria for assets, liabilities, expenses and equity in the Conceptual Framework when accounting for share issues in a company's financial reports, without flaw. Where required, dates, narrations and workings are provided, and are accurate and complete. Applies generally accepted accounting principles and specific financial reporting standards to account for share issues in a company's financial reports, with very few minor errors. Applies the definition and recognition criteria for assets, liabilities, expenses and equity in the Conceptual Framework when accounting for share issues in a company's financial reports, with very few minor errors. Where required, dates, narrations and workings are provided, and are mostly accurate and complete. Applies generally accepted accounting principles and specific financial reporting standards to account for share issues in a company's financial reports, with a number of minor errors. Applies the definition and recognition criteria for assets, liabilities, expenses and equity in the Conceptual Framework when accounting for share issues in a company's financial reports, with a number of minor errors. Where required, dates, narrations and workings are mostly provided, and are accurate. Applies generally accepted accounting principles and specific financial reporting standards to account for share issues in a company's financial reports, with a limited number of errors and/or few missing entries. Applies the definition and recognition criteria for assets, liabilities, expenses and equity in the Conceptual Framework when accounting for share issues in a company's financial reports, with a limited number of errors. Where required, dates, narrations and workings are provided some of the time, and are satisfactory. Question 3: Apply specific financial reporting standards to recognise, measure and revalue property, plant and equipment in a reporting entitys general purpose financial reports. Applies the requirements in AASB 116 Property, Plant and Equipment to account for assets in a reporting entitys general purpose financial reports, without flaw. Where required, dates, narrations and workings are provided, and are accurate and complete. Applies the requirements in AASB 116 Property, Plant and Equipment to account for assets in a reporting entitys general purpose financial reports, with very few minor errors. Where required, dates, narrations and workings are provided, and are mostly accurate and complete. Applies the requirements in AASB 116 Property, Plant and Equipment to account for assets in a reporting entitys general purpose financial reports, with a number of minor errors. Where required, dates, narrations and workings are mostly provided, and are accurate. Applies the requirements in AASB 116 Property, Plant and Equipment to account for assets in a reporting entitys general purpose financial reports, with a limited number of errors made and/or missing entries. Where required, dates, narrations and workings are provided some of the time, and are satisfactory. Question 4: Apply specific financial reporting standards to recognise, measure and journalise the impairment losses of assets in a reporting Applies the requirements in AASB 136 Impairment of Assets to account for assets in a reporting entitys general purpose financial reports, without flaw. Applies the requirements in AASB 136 Impairment of Assets to account for assets in a reporting entitys general purpose financial reports, with very few minor errors. Applies the requirements in AASB 136 Impairment of Assets to account for assets in a reporting entitys general purpose financial reports, with a number of minor errors. Applies the requirements in AASB 136 Impairment of Assets to account for assets in a reporting entitys general purpose financial reports, with a limited number of errors made and/or a few missing entries.