Assignment
A company has an opening balance in its allowance for doubtful debts account of $516 and a closing balance of $708. During the year it recorded bad debt expense of $3265. How much of its accounts receivable did it write-off as bad during the year?
1. The parent sold an item of equipment to its subsidiary on 1st July 2010. On the date of sale the equipment had a carrying amount of $43170 and was sold to the subsidiary for $62202. At the date of sale the equipment had a remaining useful life of five years and its estimated residual value was zero. In the consolidation adjusting entries on 30th June 2013, by what amount will accumulated depreciation be debited if straight line depreciation is used?
2. Parent Ltd purchased all of the issued shares of Subsidiary Ltd for $119471 on 1st July 2013. On that date, Subsidiarly Ltd's shareholders' equity comprised share capital of $38980 and retained earnings of $20271. All of Subsidiary Ltd's assets and liabilities were recorded at fair value except for inventory and equipment. The inventory had a carrying amout of $10000 and a fair value of $13859. The equipment has a carrying amout of $30000 and a fair value of $38382. The tax rate is 30%.
How much goodwill will be recorded in the consolidated financial statements for Parent Ltd at the date of acquisition?
3. Parent Ltd own all of the issued shares of Subsidiary Ltd. During the current year, Parent sold inventory to Subsidiary Ltd for $4043. That inventory had cost Parent $3000. Subsidiary Ltd has sold 60% of that inventory to outside entities during the current year for $8000. The tax rate is 30%.
What is the unrealised profit in inventory at the end of the current year? (This is the same as asking by how much will inventory be credited in the consolidation elimination journal entries).
Do not include dollar signs or thousands' separators (eg 7563 rather than 7,563) in your answer.
4. A firm leases a car using a finance lease. The rental payments comprise 5 annual payments of $4,000 with the first rental payment paid at the commencement of the lease. The fair value of the car at the commencement of the lease is $25,000 and the estimated fair value of the car at the end of the lease is $9,550. To the nearest whole per cent, what is the interest rate implicit in this lease.
5. A company has a taxable temporary difference at the end of the year of $10,000 for an item. The taxable temporary difference for that item was $6,000 at the beginning of the year. The tax rate is 30%. The journal entry to record the tax effect for that item for the year includes:
6. A company purchases a car on 1st July 2012 for $34340. It is depreciated at 20% straight line for financial reporting purposes and 30% straight line for tax purposes. The tax rate is 30%. The company has no other temporary differences. By how much is the DTL account credited in the year ended 30th June 2014.
7. A company sold a depreciable asset for $69316 excluding GST. The asset had cost $58497 excluding GST and had accumulated depreciation at the time of sale of $11808. How much is the gain on sale?
Do not include dollar signs or thousands' seperators (eg 7563 rather than 7,563) in your answer.
8. A company purchased a 12-month insurance 1st October 2012 for $3465. It renewed the insurance on 1st October 2013 for $4002. How much was the company's insurance expense for the year 30th June 2014?
9. A company purchases a car on 1st July 2012 for $29928. It is depreciated at 20% straight line for financial reporting purposes and 30% straight line for tax purposes. The tax rate is 30%. The company has no other temporary differences. By how much is the DTL account credited in the year ended 30th June 2014.
Question A
Should AASB 13 be modified to require the use of depreciated replacement cost as the only valuation method to determine the fair value for intangibles and property, plant and equipment when valuations using level 1 or level 2 inputs cannot be determined? Give reasons to support your answer.
Question B
Value in use is too subjective to be used as a basis for measurement in accounting and its use should not be allowed when applying AASB 138. Do you agree this argument that value in use should not be used when applying AASB 138? Give reasons to support your answer.