Q1. The following details were extracted from the accounting records of Concord Limited as at 1/7/2008:
|
Items of Non- Current Assets
|
$
|
|
Land
|
8,000,000
|
|
10 storey Building
|
15,000,000
|
|
Vehicles
|
350,000
|
|
Accumulated Depreciation Building
|
1,800,000
|
|
Accumulated Depreciation Vehicles
|
80,000
|
|
Revaluation surplus
|
2,000,000
|
The revaluation surplus as at 1/7/2008 is related to revaluation of land in previous years. Building was re-valued for the first time in June 2007 and a revaluation loss of $400,000 was recorded for the financial year ended 30/6/2007. Depreciation of non-current assets is calculated using the following basis:
|
Land
|
No depreciation
|
|
10 Storey Building
|
2% straight-line
|
|
Vehicles
|
10% reducing balance
|
Vehicles are used for transporting goods from suppliers. An old vehicle with a book value of $30,000 (original historical cost) and accumulated depreciation of $15,000 as at 1/7/2008 was traded-in at a value of $10,000 for the purchase of a new vehicle on 1/7/2008. The purchase price of the new vehicle was $55,000. The balance of the purchase price was settled in cash. The following information relating to revaluation and impairment of the non-current assets was gathered on 30/6/2009:
|
|
Market value
|
Net sales value
|
Value in use
|
|
Land
|
12,000,000
|
-
|
-
|
|
10 Storey Building
|
13, 800,000
|
-
|
-
|
|
Vehicles
|
|
270,000
|
260,000
|
The financial year end of Concord Limited is 30th June.
Required - Prepare journal entries (without narrations) to record the following:
(a) Revaluation of land as at 30/6/2009
(b) Depreciation of the 10 Storey building for the year ended 30/6/2009
(c) Revaluation of 10 Storey Building as at 30/6/2009
(d) The purchase of the new vehicle and disposal of the old vehicle on 1/7/2008.
(e) Depreciation of vehicles for the year ended 30/6/ 2009
(f) Impairment of vehicles as at 30/6/2009.
Q2. (a) With reference to NZIAS 2, explain how the value of inventories is determined.
(b) Question 2 Page 241 Chapter 7 from Text Book (Deegan, C. & Samkin, G., (2013). New Zealand Financial Accounting, 6th Edition, McGraw-Hill, Auckland, New Zealand.)
Q3. On 1 July 2015 Kiwi Energy Limited issued $15,000,000, 10 years debentures that pay interest every six months at a coupon rate of 14 per cent per annum. At the time of issuing the debentures, the market required a rate of return of 16 per cent per annum. Any discount or premium on issue is amortised using the effective interest method.
Required:
(a) Calculate the issue price of the debentures as at 1 July 2015.
(b) Prepare general journal entries to record the issue of the debentures as at 1 July 2015.
(c) Prepare general journal entries to record the payment of interest and increase or decrease in debenture liability as at 31st December 2015.
Q4. Big Limited entered into a non-cancellable, seven-year lease agreement with Small Limited on 1st January 2013. The lease was for a factory equipment that is expected to have an economic life of eight years, after which time it will have no salvage value. There is a bargain option, which Small Limited will be able to exercise at the end of the seventh year, for $140,000. Big Limited manufactured the equipment at a cost of $3,200,000. There are to be seven annual instalments of $1,300,000 per annum to be paid at the end of each year. Included in the annual lease payment is an amount of $20,000 per annum representing payment to Big Limited for the insurance and maintenance of the equipment. The equipment is to be depreciated using straight-line method. The rate of interest implicit in the lease is 15 per cent.
Required
(a) Calculate the present value of the minimum lease payments.
(b) Prepare journal entries in the books of Big Limited to record the lease transaction on 1 January 2013.
(c) Prepare journal entries in the books of Big Limited to record the annual lease payments received as at 31 December 2013.
(d) Prepare journal entries in the books of Small Limited to record the lease transaction on 1 January 2013.
(e) Prepare journal entries in the books of Small Limited to record the annual lease payments paid for years ended 31 December 2013.