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HI5020 Corporate Accounting Final Assessment

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FINAL ASSESSMENT

HI5020 Corporate Accounting Final Assessment
Trimester 2, 2022
TIME ALLOWED: 24 hours
Assessment Weight: 50 total marks


Instructions:

· All questions must be answered in the answer area under each question in this paper.
· Completed answers must be submitted to Blackboard by the published due date and time.
Please ensure you follow the submission instructions at the end of this paper.


Purpose:
HI5020 Corporate Accounting assessment consists of six (6) questions and is designed to assess your level of knowledge of the key topics covered in this unit.

HI5020 Final Assessment T2 2022


Question 1(8 marks)


Based on the knowledge that you have learned from this unit and the relevant accounting standards, answer the following questions. Your answers must demonstrate your own understandings and applications of relevant accounting standards, but not a direct quote of the standards.
a) Use an example to explain what are included in the original cost of property, plant, and equipment when they are initially acquired. (3 marks)
ANSWER a): ** Answer box will enlarge as you type
b) What is the basic principle for valuing property, plant, and equipment acquired in exchange for other non-monetary assets?(2 marks)
ANSWER b):
c) Use an example to illustrate how gain or loss on disposal is calculated and recorded when an item of property, plant, and equipment is disposed of. (3 marks)
ANSWER c):


Question 2(10 marks)


The accounting records of JasonJohnson Company provided the data below for years ending 30 June 2022 and 30 June 2021:

2022
2021

$
$
Sales (all on credit) for the year
950,000

Cost of goods sold for the year
380,000

Discount provided to customers for early payment
3,500

Bad debts expense for the year
2,500

Depreciation expense
55,000

Net profit
509,000

30 June 2022
30 June 2021

$
$
Accounts receivable
160,000
140,000
Less: Allowance for doubtful debts
4,500
4,200

155,500
135,800
Inventory
88,360
62,200
Accounts payable
55,500
47,700
Required:
a) Based on the information given, prepare the section of cash flows statement for “net cash flows from operating activities” for the year ended 30 June 2022 for JasonJohnson company. Show your calculations for each item included in the section of the statement. (5 marks)
ANSWER a):
b) Prepare a reconciliation of net profit to net cash flows from operating activities. (5 marks)
ANSWER b):


Question 3(7 marks)


At the end of the year, a deductible temporary difference of $40 million has been recognised due to the difference between the carrying amount of a liability account for estimated expenses and its tax base. Taxable income is $50 million. No temporary differences existed at the beginning of the year, and the tax rate is 35%.
Required:
a) Prepare the journal entry(s) to record income taxes during the period. (4 marks)
ANSWER a):
b) How much will income tax expense be shown in the income statement? (1 mark)
ANSWER b):
c) What will be the balance sheet disclosure during the period regarding taxes? (2 marks)
ANSWER c):


Question 4(8 marks)


Padre Ltd. holds 90 percent of the outstanding shares of Sonora Ltd. On January 1, 2019, Padre Ltd. transferred equipment to Sonora for $95,000. The equipment had cost $130,000 originally but had a $50,000 carrying value and five-year remaining life at the date of transfer. Depreciation expense is computed according to the straight-line method with no residual value.
Required:
What would be the consolidation worksheet entries in relation to this asset when preparing the consolidated financial statements for the following accounting periods ending at (Ignore the tax effect):
a) 31 December 2019
b) 31 December 2020
c) 31 December 2021
ANSWER:


Question 5 (8 marks)


On 1 July 2020, Big Ltd acquired all the issued share capital of Small Ltd for cash for an amount of $1,050,000. On the date of the acquisition, the statements of the financial position of both entities are as follows:

Big Ltd ($)
Small Ltd ($)
Assets

Cash
21,000
10,500
Accounts receivable
315,000
115,500
Land
420,000
210,000
Plant
1,680,000
1,050,000
Investment in Small Ltd
1,050,000

3,486,000
1,386,000
Liabilities

Accounts payable
126,000
63,000
Loans payable
840,000
315,000
Shareholders’ equity

Share capital
2,100,000
420,000
Retained earnings
420,000
588,000

3,486,000
1,386,000
Required:
a) Calculate the goodwill on acquisition assuming all net assets of small Ltd are recorded in fair value. (5 marks)
ANSWER a):
b) Prepare consolidation journal entries. (2 marks)
ANSWER b):
c) What journal entry would the parent company Big Ltd record in its own accounting record for the acquisition of Small Ltd at the acquisition date?(1 mark)
ANSWER c):


Question 6(9 marks)


On January 1, 2018, Harrison Ltd acquired 90 percent of Starr Company in exchange for $1,125,000 fair-value consideration. The fair value of the total net assets of Starr Company was assessed at $1,200,000.
Starr Company reported a net profit of $70,000 in 2018 and $90,000 in 2019, with dividend declarations of $30,000 each year. Apart from its investment in Starr Company, Harrison had a net profit of $220,000 in 2018 and $260,000 in 2019 and declared dividends of $40,000 each year.
During the year ending 31 December 2019, Harrison sold inventory to Starr for a price of $90,000. The inventory costs Harrison Ltd $50,000 to produce. 40% of the inventory is still on hand of Starr Company as at 31 December 2019.
The management of Harrison Ltd measures non-controlling interest at fair value.
Required:
Based on the information given, what should be the total balance of the non-controlling interests reported in the consolidated financial statement as at December 31 2019 (Ignore the tax effect)? Show your calculations of NCI at each of the 3 stages.
ANSWER:

END OF FINAL ASSESSMENT


Submission instructions:

Before you submit your assessment, please check all of the following:
· You have named your file with your Student Number and Unit Code e.g. AMG12345 HI5020
It is critical you follow this file name instruction to ensure the file belongs to you.
· You have saved your file in MICROSOFT WORD format only. No other format is accepted.
· You have checked you are submitting the correct document as special consideration is not granted if you make a mistake.
Once you have checked the above:
Upload your file to the appropriate link on Blackboard.
You have two attempts to submit your assessment with only the final submission being marked.


** Note: All submissions are automatically passed through Safe Assign to assess academic integrity.