Financial Accounting Issues Assignment
Question 1 -
The following segment information relates to Camping Capers Ltd.
|
External Revenues
|
Segment Revenue
|
Segment Result
|
Segment Assets
|
|
Camping
|
480 000
|
680 000
|
85 000
|
300 000
|
|
Fishing
|
160 000
|
160 000
|
20 000
|
100 000
|
|
Boating
|
140 000
|
140 000
|
15 000
|
120 000
|
|
Clothing
|
390 000
|
455 000
|
110 000
|
200 000
|
|
Tourism Services
|
470 000
|
470 000
|
(30 000)
|
600 000
|
|
Not attributable to operating segments
|
210 000
|
|
|
|
|
Total
|
1 850 000
|
1 905 000
|
200 000
|
1 320 000
|
Required:
a) Determine which segments are reportable according to the guidelines provided in AASB 8. Show all calculations and workings and refer to the appropriate paragraphs of AASB 8 being applied.
b) If the clothing segment had seen large growth in this reporting period and was not reportable in the previous period, how would this affect the segment disclosures? Refer to AASB 8 as appropriate.
Question 2 -
Tom Ltd has determining that its construction division is a cash-generating unit. The carrying amounts of the net assets as at 30 June 2017 are as follows:
|
Cash
|
$ 8 000
|
|
Accounts Receivable (net)
|
12 000
|
|
Inventory
|
22 000
|
|
Goodwill
|
30 000
|
|
Land
|
150 000
|
|
Plant
|
160 000
|
|
Equipment
|
90 000
|
|
Total
|
472 000
|
|
Liabilities
|
20 000
|
|
Net Assets
|
452 000
|
The land has fair value less costs to sell of $140 000.
It was determined on 30 June 2017 that the recoverable amount of the CGU was $390 000.
Required:
Provide the appropriate journal entry (including narration) for Tom Ltd in relation to the impairment testing on 30 June 2017. Show all calculations and workings.
Question 3 -
On 1 July 2017, Mining Ltd commenced operation of an oil rig site. At the end of the 10 year tenure period, they are required to restore the environmental damage done to the area. As at 1 July 2017, the best estimate to restore the environmental damage is $8 500 000. The pre- tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability is 8%. On 30 June 2018, the best estimate is still $8 500 000, and the appropriate discount rate is still 8%.
Required:
a) Provide the appropriate journal entries (including narrations) for Mining Ltd for the year ending 30 June 2018. Show all calculations and workings.
b) Explain your treatment of the provision by referring to the Accounting Standards.
c) Explain why the restoration costs are recognised as a provision rather than being disclosed as a contingent liability by referring to the Conceptual Framework and/or Accounting Standards.
Question 4 -
Prepare a short argument (maximum 350 words) providing reasons both FOR and AGAINST the recognition of internally generated goodwill in the financial statements of an entity. Refer to the Conceptual Framework and/or Accounting Standards where appropriate to support your argument.
Question 5
Woobits Ltd issues $10m in convertible bonds on 1 July 2017. They are issued at their face value for a term of five years. They pay an interest rate of 3% annually in arrears. The bonds may be converted to shares at any time in the next five years. Organisations similar to Woobits Ltd have recently issued similar debt instruments (without the conversion option) with an interest rate of 5%.
On 30 June 2020, all the holders of the convertible notes elect to convert the bonds to shares in Woobits Ltd.
Required:
Provide the appropriate journal entries (including narrations) for Woobits Ltd in relation to the convertible notes for the period 1 July 2017 to 30 June 2020. Show all calculations and workings.