REQUIRED Provide the journal entries to account for tax in accordance with AASB 112. (18 marks)
Q2.Dumpster Limited acquired an item of plant on 1 July 2012 for $3 660 000. When the plant was acquired, it wasinitially assessed as having a life of 10 000 hours. During the reporting period ending 30 June 2013 the plant wasoperated for 3 000 hours.
At 1 July 2013 the plant had a remaining useful life of 7 000 hours. On 1 July 2013 the plant underwent a majorupgrade costing $234 600. Management believes that this upgrade will add a further 2 000 hours of operatingtime to the plant's life. During the reporting period ended 30 June 2014 the plant was operated for 4 000 hours.
On 1 July 2014 the plant underwent a further major upgrade, the cost of which amounted to $344900, and thisadded a further 3100 hours' operating time to its life. During the reporting period ending 30 June 2015 the plant was operated for 3800 hours.
REQUIRED Prepare all the journal entries that Dumpster Limited would prepare for the years ending 30 June 2013, 30 June 2014 and 30 June 2015 to account for the acquisition, subsequent expenditure and depreciation on the asset. (8 marks)
Q3.Top End Delivery Solutions leased a truck from a truck dealer, Truck n' Go Ltd. Truck n' Go Ltd acquired the truck at a cost of $180 000. The truck will be painted with Top End Delivery Solutions' logo and advertising and the cost of repainting the truck to make it suitable for another owner four years later is estimated to be $400 000.
Top End Delivery Solutions plans to keep the truck after the lease but has not made any commitment to the lessor to purchase it. The terms of the lease are as follows:
Date of entering lease: 1 July 2015. Duration of lease: four years. Life of leased asset: five years, after which it will have no residual value. Lease payments: $100 000 at the end of each year. Interest rate implicit in the lease: 10 per cent. Unguaranteed residual: $50 000. Fair value of truck at inception of the lease: $351 140.
REQUIRED
(a) Demonstrate that the interest rate implicit in the lease is 10 per cent.
(b) Prepare the journal entries to account for the lease transaction in the books of the lessor, Truck n' Go Ltd, at 1 July 2015 and 30 June 2016.
(c) Prepare the journal entries to account for the lease transaction in the books of the lessee, Top End Delivery Solutions, at 1 July 2015 and 30 June 2016.
(d) On 30 June 2019 Top End Delivery Solutions pays the residual of $50 000 and purchases the truck. Prepare alI journal entries in the books of Top End Delivery Solutions for 30 June 2019 in relation to the termination of the lease and the purchase of the truck. (20 marks)
|
Q4.
|
Crock Limited acquired Buffalo Limited on 1 July 2014 for cash of $7 000 000. At that date, Buffalo Limited's
|
|
|
net identifiable assets had a fair value of $5 800 000. The fair value of the net identifiable assets of Buffalo
|
|
|
Limited are determined as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(000)'s
|
|
|
|
|
Customer List
|
$50
|
|
|
|
|
Machinery
|
1 450
|
|
|
|
|
Buildings
|
1 500
|
|
|
|
|
Land
|
3 000
|
|
|
|
|
|
6 000
|
|
|
|
|
Less: Bank Loan
|
200
|
|
|
|
|
Net assets
|
$5 800
|
|
At the end of the reporting period of 30 June 2015, the management of Crock Limited determines that the recoverable amount of the cash generating unit, which is considered to be Buffalo Limited, totals $6 200 000. The carrying amount of the net identifiable assets of Buffalo Limited, which excludes goodwill, has not changed since acquisition and is $5 800 000. REQUIRED
(a) Prepare the journal entry to account for any impairment of goodwill.
(b) Assume instead that at the end of the reporting period the management of Crock Limited determines that the recoverable amount of the cash generating unit, which is considered to be Crock Limited, totals $4 800 000. Prepare the journal entry to account for the impairment.
Q5. Diving Ltd acquires a four-wheel-drive bus on 1 July 2011 for $300 000. The bus is expected, to have a useful life to Diving Ltd of seven years, after which time it will be towed out to sea and sunk to make an artificial reef for marine life (after an oils and solvents have been removed). The straight-line method of depreciation is used.
On 1 July 2013 the bus revalued to $ 250 000 and its useful life is reassessed: it is expected, at that date, to have a remaining useful life of six years.
On 1 July 2014 it is unexpectedly sold for $220 000.
REQUIRED Provide the journal entries to record the revaluation on 1 July 2013 and the subsequent sale on 1 July 2014.