Question 1
Preparation of a statement of profit or loss and comprehensive income and a statement of financial position
The summarised trial balance of Amanah Ltd, a manufacturing company, for the year ended 31 December 2013 is provided below:
DR ($) CR ($)
Sales of goods 4,469,000
Interest income 6,000
Cost of sales 2,987,000
Distribution expenses 86,000
Sales and marketing expenses 820,000
Administration expenses 252,000
Interest expense 44,000
Other borrowing expenses 4,000
Income tax expense 85,000
Cash on hand 4,000
Cash on deposit, at call 100,000
Trade debtors 450,000
Allowance for doubtful debts 14,000
Other debtors 93,000
Raw material inventory 188,000
Finished goods inventory 714,000
Land and buildings 257,000
Accumulated depreciation - buildings 36,000
Plant and equipment 1,260,000
Accumulated depreciation - plant and equipment 564,000
Patents 48,000
Amortisation of patents 3,000
Goodwill 870,000
Bank loans 66,000
Other loans 570,000
Trade creditors 510,000
Provision for employee benefits 93,000
Warranty provision 37,000
Current tax payable 25,000
Deferred tax payable 135,000
Retained earnings, 31 December 2012 326,000
Dividends paid 150,000
Land revaluation surplus 50,000
Share capital 1,508,000
8,412,000 8,412,000 Page 2 of 6
Additional information:
(a) Shares were issued during 2013 for $120,000.
(b) Share capital was $1,358,000 at 31 December 2012.
(c) Of the $150,000 dividend, $30,000 was reinvested as part of a dividend reinvestment plan.
(d) The balance of land revaluation surplus at 31 December 2012 was $15,000 credit.
(e) During the year ended 31 December 2013, land was revalued upward by $50,000, with related tax of $15,000.
(f) $30,000 of bank loans is repayable within 1 year.
(g) $110,000 of other loans is repayable within 1 year.
(h) The provision for employee benefits includes $62,000 payable within 1 year.
(i) The warranty provision is in respect of a 12-month warranty given on certain goods sold.
(j) Amanah Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and classifies expenses by function within the statement.
Required:
Prepare the statement of financial position, statement of profit or loss and other comprehensive income and statement of changes in equity of Amanah Ltd for the year ended 31 December 2013 in accordance with the requirements of AASB101.
In preparing the above statements, use captions that a listed company is likely to use and provide any relevant workings and/or explanations where appropriate. Notes to the accounts are not required.
Question 1
SPLOCI
Line items provided on face of statement and title 4.5
Explanation 1
SFP
Line items provided on face of statement and title 9
Explanation/workings 6
SCE
Items provided on statement and title 4.5
Total 25
Question 2
Company formation - Issue by instalments, oversubscription, forfeiture and reissue In 2013, City Ltd offered 10,000,000 shares to the public at an issue price of $2 per share, payable as follows:
$1 on application (application close 15 July)
$1 on allotment (payable within one month of allotment)
By 15 July, applications had been received for 11,000,000 shares. The directors decided to allot shares on a pro-rata basis, with any excess paid on application to be offset against the amount due on allotment. The shares were allotted on 20 July.
By 20 August, all money was received except for the holder of 1,000,000 shares who failed to make the payment. On 31 August, as provided for in the constitution, the directors decided to forfeit these shares. The forfeited shares were auctioned on 15 September as fully paid. An amount of $1.50 is received for each share sold. The constitution states that any balance in the forfeited shares account is to be returned to the former shareholder.
Required:
Provide the journal entries to account for the above events. Show all relevant dates and narrations.
Question 2 Max. marks awarded
Journal entries 10
Dates 4
Narrations 1
Total 15
Question 3
Recognition and measurement for intangible assets
Science Ltd incurred expenditure researching and developing a cure for a common disease in beet root. At the end of 2013, the management decided that the project was unlikely to succeed because trials of the prototype had failed.
During 2014, a breakthrough in agricultural science improved changes of the product succeeding and development resumed. The project was completed in 2014. At the end of that year, costs incurred on the project were expected to be recoverable. Science Ltd estimated the following pattern of returns for the project:
Year Returns
2015 10%
2016 20%
2017 30%
2018 30%
2019 10%
At the end of 2019, the product will be at the end of its useful life because the disease found in beet root would have been eradicated. Cost incurred were summarised below:
Research Development
$'000 $'000
2013 40,000 10,000
2014 12,000 60,000
Required:
(1) How much research and development expenditure should be recognised as an expense in 2013 and 2014? Explain your answer.
(2) How much expenditure should be carried forward (deferred) and reported in the statement of financial position at the end of 2013 and 2014?
(3) Prepare journal entries for the amortisation of deferred costs in 2015 and 2016, assuming that actual revenues are as expected. State the amount of deferred expenditure carried forward in the statement of financial position in relation to the deferred costs.
Question 3
Part (1) 4
Part (2) 2
Part (3) 4
Total 10
Question 4
Revaluation and de-recognition of depreciable assets
Sasimi Ltd acquired a machine on 1 July 2011 at a cost of $300,000. At the date of acquisition, Sasimi Ltd's directors determine to depreciate the machine on a straight-line basis over a period of six (6) years, with no residual value. The company elects to adopt the revaluation model subsequent to acquisition.
On 1 July 2013, the directors estimated the fair value for the machine is $250,000. At that date, it is determined that the machine will have remaining useful life of five (5) years. On 1 July 2014, the machine is unexpectedly sold for $220,000.
Assume a tax rate of 30%.
Required:
Prepare journal entries to record the revaluation on 1 July 2013 and the subsequent sale on 1 July 2014.