Asia Pacific College of Business and Law ACT305 Corporate Accounting Assignment Semester 1, 2021 Page 1 of 5UNIT CODE: ACT305UNIT NAME: CORPORATE ACCOUNTINGAssignment InformationSemester 1 2021Assessment 20%Submission Requirements.This assignment is to be submitted before 23.59pm Sunday 23rd May in Week 11Assignments are to be submitted by one of the following means;DO NOT LODGE BY FAX nor EMAIL nor at LECTURER’SOFFICE KEEP A COPY The assignment must be lodged on or before the due date indicated in the assignment details.Only word docs and/or Excel converted to pdf will be acceptable. Handwritten answers will berejected. The assignment must conform to the requirements set out in this assignment The assignment must be lodged online via the ACT305 Learnline Assignment Lodgementlink on the ACT305 Learnline site. Ensure your file is named using a file naming convention thatallows the lecturer to identify to whom it belongs. Failure to use an acceptable file namingconvention may result in your assignment lodgement being rejected. 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 submittedassessment work electronically, please make sure you have a backup copy. Assignment lodgements will be acknowledged automatically on the Learnline site, on submission.DO NOT submit an assignment front sheet. ResubmissionAs a general rule resubmission of assessment items is NOT possible, however the Lecturer may ask forresubmission if it is deemed appropriate. Details for such resubmission will be made available by theLecturer if and when the situation occurs.University Plagiarism policyPlagiarism is the unacknowledged use of material written or produced by others or a rework of your ownmaterial. All sources of information and ideas used in assignments must be referenced. This applieswhether the information is from a book, journal article, the internet, or a previous essay you wrote or theassignment of a friend.Plagiarism policy is available at Student Breach of Academic Integrity Procedureshttp://www.cdu.edu.au/governance/doclibrary/pro-092.pdfAsia Pacific College of Business and Law ACT305 Corporate Accounting Assignment Semester 1, 2021 Page 2 of 5EXTENSIONS AND LATE LODGEMENTSLATE ASSIGNMENTS WILL GENERALLY NOT BE ACCEPTED UNLESS AN EXTENSION TO THEDUE DATE HAS BEEN GRANTED BY THE BUSINESS ADMINISTRATOR.Exceptions will only be made where assignments are late due to special circumstances that aresupported by documentary evidence and may be subject to a penalty of 5% of assignment marks perday. Partially completed assignments will be accepted with appropriate loss of marks for theincomplete portion.Should students foresee potential difficulties with submission of assessment items, they should contactthe lecturer immediately the difficulties come to notice, to discuss suitable arrangements etc. for thesubmission of those assessment times. An Application for Assignment Extension or SpecialConsideration should be completed and provided to business@cdu.edu.au.This application form, explanation and instructions is available on the ACT305 CDU Learnline coursesite or direct fromhttp://learnline.cdu.edu.au/units/lb_school_templates/deployed/assignment_extension.docxPlease note that it is now College policy that all extension requests must be approved by the BusinessAdministrator. The lecturer is no longer able to personally approve extension requests.Leaving a request for an extension, special assessment or special consideration until the last moment, basedon grounds that students could have reasonably been able to foresee, may result in the application beingrejected.ASSIGNMENT INFORMATIONThis Assignment is worth 20% of the total assessment for this unit. This assignment will be marked outof 100, and scaled down to being out of 20. The assignment has 5 questions. Q1.The accountant for Katherine Enterprises Ltd has the task of preparing the deferred tax entries in theyear-end financial statements at 30th June 2021. a. The accounts receivable account had a balance at 30th June 2020 of $84,630 with a balance at 30thJune 2021 of $81,900. Despite active monitoring by the credit department of the accounts receivablesit proved impossible to collect $13,650 and this was written off during the year. The allowance fordoubtful debts account had a balance at 30th June 2020 of $6,830 and $10,920 at 30th June 2021.b. On 1st July 2020 Katherine Enterprises Ltd bought an articulated dump truck for $485,000. The companyhas adopted an accounting straight-line depreciation rate of 10% each year for ten years. The Taxdepreciation rate applicable on a straight line basis for this class of asset is 25%.c. On the 1st April 2021 the company invested $850,000 in a term deposit which accrued interest at 5.6%per annum. Interest is paid half-yearly on 30th September and 31st March. At the start of the financialyear the company held no other interest bearing investments.d. Katherine Enterprises Ltd employs 20 staff, some of whom have worked for the company for 8 years.They are entitled, as part of their salary package, to long service leave when they have worked for thecompany for 10 years of continual employment. One of their managers, who has worked for 11 years,took long service leave during the year and was paid $27,500. The company provides for long serviceleave each year and the balance at 1st July 2020 was $201,000 with a closing balance at 30th June2021 of $192,000.e. Part of the assistance that you have provided to the company was an impairment test undertaken atthe start of the year as the value of the assets had not been reviewed for some time. Equipment whichoriginally had a carrying amount of $635,000 was revalued upwards to $785,000. The equipment hadan annual accounting depreciation rate of 15% and a tax depreciation rate of 8%.f. The company has been expensing research in a new product for a number of years. The directors arenow of the opinion that the product will have a viable market and that further expenditure can becapitalised as a development asset. With this in view $160,000 was expended on 1st July 2020. It isbelieved that this expenditure will be recovered over a five year period and is to be amortised on aAsia Pacific College of Business and Law ACT305 Corporate Accounting Assignment Semester 1, 2021 Page 3 of 5straight line basis at 20% per annum. The project does not qualify for any accelerated tax deductionsover and above the full cost incurred.RequiredAs the accountant has only recently been recruited you have been asked to complete the preparationof the journal entry adjustments for any temporary tax differences and to explain in each of the situationsgiven above the reasons for the adjustments, why the accounts have been chosen and the timing ofthe differences and any future reversals.(total 15 marks)Q2. You have been auditing the consolidated financial statements of Reynolds Ltd and its wholly ownedsubsidiary Fisher Ltd. You discover that Reynolds Ltd had bought inventory during the year for$33,750 which it subsequently sold to Fisher Ltd for $40,500. Later in the year one third of theinventory was sold by Fisher Ltd to a non-group company for $16,500.The accountant’s consolidation worksheet had recorded the following adjusting journal entries: SalesCost of SalesInventoriesDeferred Tax AssetIncome Tax ExpenseDrCrCrDrCr40,50075038,0002,500750 Requireda. Discuss whether the entries suggested by the chief accountant are correct, explaining on a lineby-line basis the adjustment entries.b. Determine the consolidation worksheet entries in the following year, assuming the inventoriesare on-sold, and explain the adjustments on a line-by-line basis.(total 18 marks) Q3Billy Ltd has a 100% interest in Goat Ltd. During the financial year to 30th June 2022 the followingexchanges of plant and machinery occurred between the group members: (a) Billy Ltd sold a machine to Goat Ltd for $29,000 on 1st February 2022. It had originally cost $116,000with an accumulated depreciation of $92,800. Goat Ltd traded in secondhand machinery and held themachine as unsold inventory when it reported its results at 30th June 2022.(b) On 1 July 2021, Goat Ltd bought a motor car for $18,300 from Billy Ltd. When the car was sold itstood at a carrying amount of $53,500 in Billy Ltd’s Statement of Financial Position with a cost of$65,000 and accumulated depreciation of $11,500. The common straight-line depreciation policyadopted by the companies was 10% p.a. on cost.(c) On 1 April 2019 Billy Ltd purchased a concrete pumping truck from Goat Ltd for $72,000. At that timeit appeared in Goat Ltd’s asset register at a cost of $59,000 with accumulated depreciation of $9,800.Billy Ltd depreciated heavy machinery on a straight-line basis at 10% p.a. on cost. Goat Ltd hademployed a diminishing balance depreciation method at a rate of 12.5% per year.RequiredPrepare the consolidation worksheet journal entries for 30th June 2022 assuming an income tax rate of30%.(total 26 marks)Asia Pacific College of Business and Law ACT305 Corporate Accounting Assignment Semester 1, 2021 Page 4 of 5Q4 On 1 July 2021, Oldfield Ltd acquired 23% of the shares of Shadow Ltd for $340,000. There is apresumption that, as the shareholding is greater than 20%, Oldfield Ltd exerts a significant influenceover the management of Shadow Ltd.At the date of the acquisition of the 23% shareholding the equity of Shadow Ltd was made up of: Share capitalRetained earnings$ 561,000374,000General reserve85,000Total equity$ 1,020,000 At 1 July 2021, with the exception of land and plant and machinery, all the identifiable assets andliabilities of Shadow Ltd were recorded at their fair values.Carrying amount Fair value $ 935,000650,000$ 1,275,000715,000 Plant and machinery(cost $780, 000)It was assessed that the plant and machinery would remain in operation for a further 5 years. With therevaluation of the land Shadow Ltd created an Asset Revaluation Surplus Account and measured thevalue of the land annually. The tax rate is 30%.The following is an extract from the financial statements of Shadow Ltd for 30 June 2023:Profit before tax $ 612,000 Income tax expenseProfit after tax(255,000)357,000Retained earnings at 1 July 2022697,0001,054,000(34,000)(42,500)(27,500)950,000Dividends paidDividends declaredTransfer to general reserveRetained earnings at 30 June 2023General reserve at 1 July 2022Transfer from retained earnings102,00027,500General reserve at 30 June 2023129,500Asset revaluation surplus at 1 July 2022Other comprehensive income — gains on revaluation284,00011,500Asset revaluation surplus at 30 June 2023295,500Share capital at 30 June 2023Total equity at 30 June 2023561,000$1,936,000 RequiredPrepare the Oldfield Ltd journal entries to include its equity investment in Shadow Ltd in theconsolidated financial statements at 30 June 2023.(total 23 marks)Asia Pacific College of Business and Law ACT305 Corporate Accounting Assignment Semester 1, 2021 Page 5 of 5Q5As a result of a creditors petition a court order was issued for the liquidation of Investor Danger Ltd.At a meeting of the creditors, debts were submitted and subsequently taken as proved by theliquidator.They consisted of $240,000 unsecured notes, and debentures issued with a circulating securityinterest which totalled $525,000.The land and buildings had been used as security to raise two mortgage loans. The first mortgagewas for $198,000, which included the outstanding mortgage loan and accrued interest to the date ofliquidation. The second subsequent mortgage was for $124,000.The short-term creditors consisted of trade accounts payable, $192,000, and outstanding employeeentitlements. These entitlements were made up of employees’ wages for the eight employees whowere each owed two weeks wages at $1,000 per week, a secretary’s salary, also owed two weeks at$750 per week, their accrued holiday pay of $15,000, and outstanding sales commissions earned bythe sales team totalling $8,000. PAYG instalment tax of $1,900, GST of $4,780 and Fringe BenefitsTax of $4,800 were also outstanding.The directors were owed fees of $12,000 and the managing director had a month’s salary unpaid of$17,000.The liquidator incurred expenses of $12,000 and had a remuneration of $35,000. The liquidator tookcontrol of the assets and realised $1,332,808 from their sale, which included $298,000 from the saleof the land and buildings.The share capital of the company comprised 120,000 fully paid $1 Ordinary shares.Required:Show the order of priority of payment of debts for Investor Danger Ltd and calculate the amountpayable to each of the creditors.(total 18 marks)
