ACT 503 Assignment S2 2024

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UNIT CODE: ACT503

UNIT NAME: CORPORATE ACCOUNTING


Individual Assignment Information
Semester 2 2024
Assessment 30%
Submission Requirements.
This assignment is to be submitted before 23.59pm 06th Oct 2024 (Sunday) in Week 10.

Assignments are to be submitted by one of the following means.

 The assignment must be lodged on or before the due date indicated in the assignment details.
Only word docs will be acceptable. Question 1 and question 2 must be answered by creating a table (row
and column) in Microsoft word. Table must be editable. Handwritten answers will be rejected.
 The assignment must be lodged online via the ACT503 Learnline Assignment Lodgement link on
the ACT503 Learnline site.
 Ensure your file is named using a file naming convention that allows the lecturer to identify to whom it
belongs. Failure to use an acceptable file naming convention may result in your assignment lodgment
being rejected. Student name. ACT503Assignment.docx.
 DO NOT LODGE VIA EMAIL or FAX - assignments lodged by email or fax will not be accepted.
 KEEP A COPY - Ensure you have a copy of the assignment lodged. If you have submitted assessment
work electronically, please make sure you have a backup copy.
 Assignment lodgements will be acknowledged automatically on the Learnline site, on submission.
Resubmission
As a general rule, resubmission of assessment items is NOT possible, however, the Lecturer may ask for
resubmission if it is deemed appropriate. Details for such resubmission will be made available by the
Lecturer if and when the situation occurs.

University Plagiarism policy


Plagiarism is the unacknowledged use of material written or produced by others or a rework of your
material. All sources of information and ideas used in assignments must be referenced. This applies whether
the information is from a book, journal article, the internet, a previous essay you wrote, or a friend's
assignment.
Plagiarism policy is available at Student Breach of Academic Integrity Procedures
https://policies.cdu.edu.au/view-current.php?id=50

Faculty of Arts and Society ACT503 Corporate Accounting Assignment Semester 2, 2024 Page 1 of 7
EXTENSIONS AND LATE LODGEMENTS

LATE ASSIGNMENTS WILL GENERALLY NOT BE ACCEPTED UNLESS AN EXTENSION TO


THE DUE DATE HAS BEEN GRANTED.

Exceptions will only be made where assignments are late due to special circumstances that are
supported by documentary evidence and may be subject to a penalty of 5% of assignment marks per
day. Partially completed assignments will be accepted with appropriate loss of marks for the
incomplete portion.

Should students foresee potential difficulties with submission of assessment items, they should contact the
lecturer immediately the difficulties come to notice, to discuss suitable arrangements etc. for the submission
of those assessment times. An Application for Assignment Extension or Special Consideration can be found
under Unit Content, Assessments, Assignment Extension.

Leaving a request for an extension, special assessment, or special consideration until the last moment, based
because students could have reasonably been able to foresee, may result in the application being rejected.

ASSIGNMENT INFORMATION

1. ACT503 assignment is individual work.


2. This Assignment is worth 30% of the total assessment for this unit. This assignment will be marked
out of 100 and scaled down to being out of 30 marks.
3. The assignment has THREE questions comprising Question 1 (24%), Question 2 (56%), and
Question 3 (20%).
4. Assignment must be submitted without pdf.

If you have any general questions about the assignment, you can contact the teaching staff.

If you have any specific questions or seek clarifications about the assignment, please contact

Dr Nilima Paul, nilima.paul@cdu.edu.au Mobile: 0414 931 292

Faculty of Arts and Society ACT503 Corporate Accounting Assignment Semester 2, 2024 Page 2 of 7
QUESTION 1 [24 Marks]

You have been asked by the management of Biden Ltd to assist with the preparation of the
income tax entries for the year ended 30 June 2023. The company reported a profit before
tax for the year to 30 June 2023 of $900 000. The company’s statements of financial position
include assets and liabilities as follows:

2023 ($) 2022 ($)


Accounts receivable 245 000 200 000
Allowance for doubtful debts (20 000) (10 000)
Plant – at cost 600 000 600 000
Accumulated depreciation (190 000) (120 000)
Development asset – at cost 360 000 200 000
Accumulated amortisation (130 000) (80 000)
Interest receivable 10 000 20 000
Provision for long-service leave 48 000 62 000
Deferred tax asset ? 21 600
Deferred tax liability ? 60 000

Additional information:

(a) The company is entitled to claim a tax deduction of 125% on development costs when
incurred.

(b) Interest revenue of $10 000 is included in the profit for the year to 30 June 2023.

(c) Expenses included in profit for the year to 30 June 2023 are as follows:

 parking and other fines $10 000


 depreciation expense for plant $70 000
 doubtful debts expense $25 000
 amortisation of development asset $50 000
 long-service leave expense $36 000.

(d) Accumulated depreciation on plant for tax purposes is $280 000 on 30 June 2023 and
$180 000 on 30 June 2022. There have been no acquisitions or disposals of plant
during the current year.

(e) The corporate tax rate is 30%.

REQUIRED

(A) Complete the current tax worksheets of Biden Ltd and prepare the tax entries for 30 June
2023. Note: all necessary workings must need to show. [11 Marks]

(B) Complete the deferred tax worksheets of Biden Ltd and prepare the tax entries for 30
June 2023. Note: all necessary workings must need to show. [13 Marks]

Faculty of Arts and Society ACT503 Corporate Accounting Assignment Semester 2, 2024 Page 3 of 7
QUESTION 2 [56 Marks]

On 1st July 20X0, Chief Ltd acquired 100% of the issued shares of Sub Ltd for $30000. At the
date of acquisition, the shareholder’s equity of Sub ltd considered of:

Share capital $16000

General reserve $6000

Retained earning $4000

Total $26000

At 30 June 20X5, five years after acquisition, the accounts of the two companies appear as
follows:

Accounts Name Chief Ltd ($) Sub Ltd ($)


Sales 35000 20000
Cost of sales:
Opening inventory 1/07/20X4 5000 2000
Purchases 23000 12000
Goods available for sale 28000 28000
Closing inventory 30/06/20X5 4000 2000
Cost of Sales 24000 14000
Gross profit 11000 8000
Depreciation expense 1000 700
Financial expenses 600 800
Other expenses 640 1000
Total expenses 2240 2500
8760 5500
Other income:
Interest revenue 240 -
Dividend income 2000 -
Total other income 2240 -
Operating profit before tax 11000 5500
Income tax expense 4000 2000
Operating profit after tax 7000 3500
Retain earnings 1/07/20X4 3000 4000
Available for appropriation 10000 7500
Interim dividend paid 1000 800
Final dividend proposed 2000 1200
Dividends paid and provided 3000 2000
Retained profit 30/06/20X5 7000 5500
Share capital 30000 16000
General reserve 2000 6000
12% debentures (due 30/06/20X7) - 5000
Dividend payable 2000 1200
Other liabilities 4000 2000
Faculty of Arts and Society ACT503 Corporate Accounting Assignment Semester 2, 2024 Page 4 of 7
Total Liabilities 45000 35700
Assets
Dividend receivable 1200 -
inventory 4000 2000
Non-current assets (depreciable) 10000 8000
Accumulated depreciation (5000) (1000)
land 5000 15000
Investment in Sub Ltd 26000 -
Debentures in Sub Ltd 2000 -
Other assets 1800 11700
Total Assets 45000 35700

Additional information:

(i) The identifiable net assets of Sub Ltd were recorded at fair value at the date of
acquisition.

(ii) The directors apply the impairment test of goodwill annually and have determined the
goodwill should be completely written off in the year ended 30/06/20X5. The
cumulative impairment write-downs for prior years totaled $2000.

(iii) Immediately after acquisition, Sub Ltd declared and paid a dividend of $4000 from
preacquisition profits. All other dividends have been from post-acquisition profits.

(iv) A non-current asset owned by Chief Ltd (cost $1000 and accumulated depreciation
$500) was sold to Sub Ltd for $1000 on 1/07/20X3. Chief has depreciated this asset
at 10% per annum straight line on original cost (i.e., $100 per annum), Sub Ltd has
applied a depreciation rate of 20% straight line (i.e., $200 per annum) from the date of
transfer of the asset.

(v) The opening inventory of Chief Ltd includes unrealized profit of $1000 on inventory
transferred from Sub Ltd during the prior financial year. All of this inventory had been
sold to external parties to the group by Chief Ltd during the year ended 30/06/20X5.

(vi) During the current year, Chief Ltd purchase inventory from Sub Ltd for $4000. This
inventory had previously cost Sub Ltd $3000. One-half of the inventory had been sold
to outsiders by Chief Ltd during the year.

(vii) Chief Ltd holds debentures in Sub Ltd amounting to $2000. Sub Ltd paid the 12%
annual interest on debentures on 30/6/20X5.

(viii) Chief Ltd holds no investments in shares except for those held in Sub Ltd. Accordingly,
examination of the Dividend Revenue and Dividend Receivable accounts in Chief Ltd’s
financial statements indicates that Chief Ltd has recognized dividend revenue prior to
receipt.

(ix) The tax rate is 30%.

Faculty of Arts and Society ACT503 Corporate Accounting Assignment Semester 2, 2024 Page 5 of 7
REQUIRED

(A) Prepare acquisition analysis showing goodwill or gain on bargain purchase. [4 Marks]

(B) Prepare the consolidation elimination journal entries necessary to prepare consolidated
accounts for the year ending 30 June 20X5 for the group comprising Chief Ltd and Sub
Ltd. [20 Marks]

(C) Prepare a detailed consolidation worksheet for the year ending 30 June 20X5. [18 Marks]

(D) Prepare statement of profit and loss and other comprehensive income of Chief Ltd and
its subsidiaries for the year ended 30 June 20X5. [5 Marks]

(E) Prepare Consolidated statement of financial position of Chief Ltd and its subsidiaries as
at 30 June 20X5. [5 Marks]

(F) Prepare Consolidated statement of changes in equity for the year ended 30 June 20X5.
[4 Marks]

QUESTION 3 [20 Marks]

Brian Pty Ltd (Gum) is a private company with many strategic investments. The finance
director Tom Adam is concerned that he might be required to consolidate some of these
investments, pursuant to AASB 10. Details of the investment relationships are as follows:

Case 01:

Greg Ltd has acquired, during the current year, the following investments in the shares issued
by other companies:

Wayne Ltd $120 000 (40% of issued capital)


Tom Ltd $117 000 (35% of issued capital)

Greg Ltd is unsure how to account for these investments and has asked you, as the auditor,
for some professional advice.

Specifically, Greg Ltd is concerned that it may need to prepare consolidated financial
statements under AASB 10. To help you, the company has provided the following information
about the two investee companies.

Wayne Ltd

• The remaining shares in Wayne Ltd are owned by a diverse group of investors who each
hold a small parcel of shares.

• Historically, only a small number of the shareholders attend the general meetings or
question the actions of the directors.

Faculty of Arts and Society ACT503 Corporate Accounting Assignment Semester 2, 2024 Page 6 of 7
• Greg Ltd has nominated three new directors and expects that they will be appointed at the
next annual general meeting. The current board of directors has five members.

Tom Ltd

• The remaining shares in Tom Ltd are owned by a small group of investors who each own
approximately 15% of the issued shares. One of these shareholders is Wayne Ltd, which
owns 17%.

• The shareholders take a keen interest in the running of the company and attend all
meetings.

• Two of the shareholders, including Wayne Ltd, already have representatives on the board
of directors who have indicated their intention of nominating for re-election.

Case 02:

On 1 March 2024, Monika Ltd acquired 40% of the voting shares of Senika Ltd. Under the
company’s constitution, each share is entitled to one vote. On the basis of past experience,
only 65% of the eligible votes are typically cast at the annual general meetings of Senika Ltd.
No other shareholder holds a major block of shares in Senika Ltd.

The financial year of Senika Ltd ends on 30 June each year. The directors of Monika Ltd
argue that they are not required under AASB 10 to include Senika Ltd as a subsidiary in
Monika Ltd’s consolidated financial statements at 30 June 2024 as there is no conclusive
evidence that Senika Ltd can control the financial and operating policies of Senika Ltd. The
auditors of Monika Ltd disagree, referring specifically to past years voting figures.

REQUIRED

Write a report to Tom Adam, advising him how the control requirements of AASB 10 apply
in each of the above investments. State, for each investment, where the control rests, citing
and explaining how the relevant paragraphs of AASB10 apply, and whether Tom Adam
should include the results of the investments within the consolidated accounts explaining
the reasons for your decision. [14 marks]

The report should take the format of a formal business report, written by your firm with
yourself as lead author. Marks will be awarded for presentation style and an appropriate
business format. A formal business report format includes Title (To whom is the report
addressed), Executive Summary / Introduction, each situation dealt with, Business English
and Conclusion. [6 marks]

Marking Guide: 2 cases x 7 marks = 14 marks


Report Structure: 6 marks: Title (To whom is the report addressed): 1-mark, Executive
Summary / Introduction: 1 mark, each situation dealt with: 2 marks, Business English: 1
mark and Conclusion: 1 mark.

End of Assignment
Faculty of Arts and Society ACT503 Corporate Accounting Assignment Semester 2, 2024 Page 7 of 7

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