Questions -
Q1. Determine why you would expect the accounting or the finance/investment sector to have an interest in climate change. Identify how ethical investments can affect corporate decision making regarding sustainable business operations.
Q2. Assume that you are the chief financial officer of a company that provides printing services. The company supplies the customer with a choice of recycled or non-recycled paper for use in printing jobs. Chemicals used in the production printing process are disposed of in compliance with environmental regulations, but a low level of land, air and noise pollution is incurred. The company provides regional employment in a large country town. The chief executive officer has asked you to make a recommendation on the nature and extent of social and environmental reporting, if any, that the company should undertake.
In your reply, consider the costs and benefits to the company and various stakeholders. If recommending social or environmental reporting, suggest the form it should take and how, and to whom, the report should be disseminated.
Q3. Energy Ltd is involved in the research and development of a new type of three-finned surfboard. For this R & D it has incurred the following expenditure:
- $50 000 obtaining a general understanding of water-flow dynamics
- $30 000 on understanding what local surfers expect from a surfboard
- $90 000 on testing and refining a certain type of fin
- $190 000 on developing and testing a full prototype of the three-finned board, to be called the 'thruster'.
There is expected to be a very large market for the product, which will generate many millions of dollars in revenue.
REQUIRED - Determine how the above expenditure would be treated for accounting purposes.
Q4. IP Ltd reports the following intangible assets:
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$m
|
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Patents at directors' valuation
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160
|
|
less Accumulated amortisation
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(40)
|
|
|
120
|
|
Trademarks, at cost
|
15
|
|
Goodwill, at cost
|
50
|
|
less Accumulated amortisation
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(10)
|
|
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40
|
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Brand name
|
100
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Licence at cost
|
10
|
|
less Accumulated amortisation
|
(1)
|
|
|
9
|
Patents were acquired at a cost of $80 million and were revalued soon afterwards. They have an estimated life of 16 years, of which 12 years remain.
The trademark can be renewed indefinitely, subject to continued use. The cost represents registration fees, which were initially expensed but recognised five years later after the trademark had started to become recognised by consumers.
Goodwill has been purchased and amortised on the straight-line basis.
The brand name is stated at fair value and is internally generated.
The licence has a 10-year life of which nine years remain. The licence can be traded in an active market and has a fair value of $17 million.
REQUIRED -
(a) State how each asset, or class of assets, should be reported in accordance with AASB 138.
(b) Apply AASB 138 and state the carrying amount and whether each asset/asset class should be amortised. Specify any choice of methods permitted for IP Ltd.
Q5. Assume that for a particular company the only temporary difference for tax-effect accounting purposes relates to the depreciation of a newly acquired machine. The machine is acquired on 1 July 2015 at a cost of $250,000, its useful life is considered to be five years, after which time it is expected to have no residual value. For tax purposes it can be fully written off over two years. The tax rate is assumed to be 30 per cent.
Required -
(a) Determine whether the depreciation of the machine will lead to a deferred tax asset, or a deferred tax liability.
(b) What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2018?
Q6. MR Ltd commences operations on 1 July 2018 and presents its first statement of profit or loss and other comprehensive income and first statement of financial position on 30 June 2019. The statements are prepared before considering taxation. The following information is available:
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Statement of profit or loss and other comprehensive income for the year ended 30 June 2019
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Gross profit
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730,000
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Expenses
|
|
|
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Administrative expenses
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80,000
|
|
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Salaries
|
200,000
|
|
|
Long-services leave
|
20,000
|
|
|
Warranty expenses
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30,000
|
|
|
Depreciation expense-plant
|
80,000
|
|
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Insurance
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20,000
|
430,000
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|
Accounting profit before tax
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30,000
|
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Other comprehensive income
|
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Nil
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Assets and liabilities as disclosed in the statement of financial position as at 30 June 2019
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Assets
|
|
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Cash
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20,000
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Inventory
|
|
100,000
|
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Accounts receivable
|
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100,000
|
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Prepaid insurance
|
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10,000
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Plant-cost
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400,000
|
|
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Less Accumulated depreciation
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80,000
|
320,000
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Total assets
|
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550,000
|
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Liabilities
|
|
|
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Accounts payable
|
|
80,000
|
|
Provision for warranty expenses
|
|
20,000
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|
Loan payable
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200,000
|
|
Provision for long-service leave expenses
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20,000
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Total liabilities
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320,000
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Net assets
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230,000
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Other information -
- All administration and salaries expense incurred have been paid as art year end.
- None of the long-services leave expense has actually been paid. It is not deductible until actually paid.
- Warranty expenses were accrued and, at year end, actual payments of $10,000 had been made (leaving an accrued balance of $20,000). Deductions are available only when the amounts are paid and not as they are accrued.
- Insurance was initially prepaid to the amount of $30,000. AT year end, the unused component of the prepaid insurance amounted to $10,000. Actual amounts paid are allowed as a tax deduction.
- Amounts received from sales, including those on credit terms, are taxed at the time the sale is made.
- The plant is depreciated cover five years for accounting purposes, but over four years for taxation purposes.
- The tax rate is 30 percent.
Required - Provide the journal entries to account for tax in accordance with AASB 112.
Q7. How would you value a biological asset used within, or generated by, agricultural activities, and how are changes in valuation to be treated for the purposes of an entity's profit or loss?
Q8. In 2012, Nambour Ltd established and commenced operation of a mango farm. The trees were planted in 2012 and began producing saleable mangoes in 2018. On 30 June 2019, 90 per cent of the mangoes are sold, one week after they were picked, for a sales price of $210 000. Selling prices were $3000. The remaining 10 per cent of the picked mangoes are recognised as inventories at the end of the reporting period, this being 30 June 2019.
The fair value of the mango trees at 30 June 2018 (the end of the previous reporting period) was $480 000 and, at 30 June 2019, $550 000. During the reporting period ending 30 June 2019, employee expenses, fertilisers, lease expenses and other expenses amounted to $50 000. The fair value less costs to sell of the mangoes immediately after picking and packing amounted to $220 000. Picking and packing costs amounted to $15 000.
REQUIRED - Prepare the journal entries to record:
(a) the costs incurred to maintain the biological assets
(b) the harvesting of the agricultural produce from the biological asset
(c) the sale of the agricultural produce
(d) the changes in the fair value of the biological assets between the ends of the two reporting periods.
Q9. What are the disclosure implications for an operating segment that passed the quantitative tests provided in paragraph 13 of AASB 8 in one year but fails to pass the tests the subsequent year?
Q10. Petersen Ltd operates solely within Queensland. It is involved in four operating segments, namely entertainment, clothing, food and agriculture. Information pertaining to these segments is provided below.
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Sales to outside customers ($000)
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Inter-segment sales ($000)
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Total sales ($000)
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Entertainment
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600
|
|
650
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Clothing
|
80
|
50
|
80
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Food
|
200
|
|
200
|
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Agriculture
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40
|
10
|
50
|
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Total
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920
|
60
|
980
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Profit (loss) before income tax by operation
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$000
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Entertainment
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100
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Clothing
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20
|
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Food
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(10)
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Agriculture
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20
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General corporate expenses
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(10)
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Total
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120
|
|
Identifiable assets by operating segment
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$000
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Entertainment
|
800
|
|
Clothing
|
300
|
|
Food
|
100
|
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Agriculture
|
110
|
|
General corporate expenses
|
50
|
|
Total
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1,360
|
|
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Depreciation ($000)
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Other non-cash expenses ($000)
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Liabilities ($000)
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Capital acquisitions ($000)
|
|
Entertainment
|
20
|
10
|
200
|
50
|
|
Clothing
|
10
|
5
|
100
|
10
|
|
Food
|
15
|
10
|
150
|
20
|
|
Agriculture
|
25
|
15
|
100
|
10
|
|
General corporate expenses
|
20
|
20
|
250
|
-
|
|
Total
|
90
|
60
|
800
|
90
|
Additional information
- Income tax expense for the year is $40 000.
- There are no investments in associates.
- Across the entire entity there was only one customer that accounted for 10 per cent or more of the entity's total revenues. This customer accounted for revenue totalling $100 000 and made its purchases from the entertainment operating segment.
REQUIRED - Determine the reportable segments of Petersen Ltd, and prepare the appropriate segment disclosure note in accordance with AASB 8.
Textbook - Financial Accounting Theory 8th edition by CRAIG DEEGAN.
Attachment:- Solution Manual.rar