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intermediate accounting

Questions and Answers of Intermediate Accounting

Royal Empire Ltd commenced trading many years ago. Equity at 30 June 2018 comprised:Share capital, 200 000 ordinary shares fully paid at $5General reserveRetained
The equity of Fiorente Ltd at 30 June 2018 was:Share capital500 000 5% cumulative preference shares issued at $1 each1 000 000 ordinary shares issued at $2
The following information relating to Mount Athos Ltd has been obtained from balance sheet as at 30 June 2018.Share capital$1 600 000General reserve492 000Retained
RUSCELLO LTDIncome Statement (Internal)for period ended 30 June 2019IncomeInterest on investmentsLess: Selling expensesAdvertisingSales salariesCommissionsLess: Administrative
The equity of Kenselmac Ltd at 14 February 2018 consisted of:Share capital:800 000 shares (fully paid for $2)600 000 shares (paid to $1, issued at $2)General reservePlant replacement
The following information relating to the year ending 30 June 2019 for Megathink Ltd has been obtained from the company’s records.General reserveGoodwillIncome tax expenseInterim dividends
The following was obtained from the ledger of Valediction Ltd as at 30 June 2018:Share capital100 000 ordinary shares paid to 75c, but issued for $160 000 10% preference shares fully
The equity of Instrumental Issues Ltd at 30 June 2018 is as follows:Equity10% preference shares, cumulative and participating, issued at $5170 000 ordinary shares, fully paidRevaluation
On 1 July 2018, the equity of Terravista Ltd was as follows:600 000 ordinary shares issued at $2.20General reserveRetained earnings$1 320 00050 000500 000During the year
The ledger of Elena’s Crystals Ltd at 30 June 2018 contained the following information:Sales revenueGain on revaluation of building (not sold)Interest revenueDonations receivedCost of salesSelling
The information relates to Treasure Cove Ltd for the year ended 30 June 2019.1.2.3.4.5.6.7.8.9.Profit before tax(This figure is before adjustments for points 4 and 5 are made.)Retained earnings 1
The following information was obtained for Lisa’s Fashionista Ltd for the year ended 30 June 2019:Administrative expensesCost of salesDividends declaredGain on asset revaluationGain on sale of
The summarised balance sheet of Magic Cadre Ltd at 30 June 2019 for presentation to management is: MAGIC CADRE LTDBalance Sheetas at 30 June 2019CURRENT ASSETSCash at bankAccounts receivable
The following information relates to Dunadeal Ltd at 30 June 2019:Share capital100 000 10% cumulative preference shares issued at $1 each200 000 ordinary shares issued at $1
Determine whether the following transactions would appear in the statement of profit or loss and other comprehensive income. If so explain how they would be disclosed.(a) A gain on foreign currency
Are there any circumstances in which borrowing costs are permitted to be excluded from the statement of profit or loss and other comprehensive income? Explain.
For each of the following items state which financial statement(s) it would appear in:(a) Property, plant and equipment(b) Retained earnings(c) Gains on
According to AASB 1039, in order to provide clear information to shareholders the concise financial report must disclose which of the following?(a) Gross profit(b) Dividends
Given that disclosing entities are required to comply with the accounting standards why are the figures in financial statements sometimes disputed? [Adapted from A Guide to Understanding Annual
Why do you think the AASB has introduced the reduced disclosure requirements for some entities?
What is the purpose of a statement of changes in equity? What is the connection between this statement and the other two financial statements discussed in this chapter?
Comment on why you think the accounting standards now require companies to separately disclose other comprehensive income.
What is meant by the all-inclusive concept of profit? Does IAS 1/AASB 101 Presentation of Financial Statements follow this concept in presenting a statement of profit or loss and comprehensive
A financial report must include ‘comparative figures’. What does this mean and can a company change these comparative figures in the following year? Discuss.
What items must be included in a company’s annual financial report?
Refer to the consolidated financial statements and notes in the latest financial report of JB Hi-Fi Limited on its website, www.jbhifi.com.au, and answer the following questions.1. Have the current
Sharon Rock, assistant accountant for Brady Industrial Products, was discussing the finalisation of the financial statements of the business as at 30 June 2018 with the accountant of the business,
In recent years a number of companies have gone into liquidation (been ‘wound up’) because they have not been able to meet their liabilities when they fell due. In Australia, there are some
It has been argued that many companies’ profits are overstated because they fail to take into account the full cost of their operating activities. This is particularly relevant when considering the
A. Would you support Laura in her approach to not providing for warranty costs on the 4D computers, and hence no provision at all for all products? Explain why or why not.B. Would you support Benji
Tactix Ltd wishes to raise $2 500 000 to carry out construction work as part of a major expansion of its shopping mall operations. The directors decide to issue 10 000 $100 8% debentures, fully
Barrett and Taylor Ltd completed the following selected transactions during 2018 and 2019. The financial year for the company ends on 31 December. (Ignore
Several potential investors have been studying the affairs of Pelican Corporation to decide whether to invest in the company by purchasing unsecured notes which the company was proposing to issue.
Maryburn Imports Ltd has decided to purchase a new office building. It purchased land and a building for $5 250 000 on 1 December 2018. Agreed financing arrangements included payment of an initial
Trend Promotion Ltd, which has been trading profitably for many years, is planning to expand the business to meet the increasing demand for its services. The issue price of all shares is $2.50. It
Euro Classics Ltd has been operating a successful business for many years specialising in servicing and reconditioning repairs for classic European automobiles. Servicing costs $750, while
The following accounts and balances appeared in the ledger of Chafezz Accountants Ltd on 30 April 2018:Annual Leave PayableSick Leave PayableProvision for Long-Service LeaveTaxation
The following information is used to calculate Cleaning Capers Ltd’s payroll for the week ending 30 June 2018.EmployeeGross paySalary sacrifice — donationsV. GribbenD. MitchellF. SpeightP.
Latte Services Ltd has three employees. Their employment contracts entitle them to 13 weeks leave after 10 years of service. Refer to the following information about each employee at 30 June
The following information is available for Mods Media Ltd.20182017Total assetsTotal liabilitiesShare capitalRetained earnings$1 630000900000365000365000$1 725000850000480000395000RequiredA.
The following information has been extracted from the financial statements of Blue Hills Ltd.20182017Cash at bankMarketable securitiesAccounts receivableInventoryPrepaid expensesPlant and
Ensign Plus Ltd have recently purchased new premises in order to expand their inventory space. The cost of the premises was $1 280 000 and on 1 November they financed the purchase with a 7% loan to
The following information relates to a debentures issue of Justice Ltd dated 1 January 2017:Date issuedNominal valueStated interest rateInterest payment datesTerm to maturityCash received from the
On 1 June, Sea Fare Enterprises received authorisation from its board of directors to issue $1 500 000 of 6% 10-year debentures dated 1 July. Interest is payable half-yearly on 31 December and 30
At 30 June 2018, Ting Sun Electronics adjusted its Provision for Warranties so that it would be equal to 5% of sales for the year ended on that date. Sales for the year ended 30 June 2018 were
On 21 November, the weekly payroll register of Python Ltd showed gross wages and salaries of $87000. The organisation withheld $20 880 for income tax, $1670 for life insurance, $2500 for medical
At 30 June 2018, the accountant for Braxton Brewery, Sue Robertson, is preparing the financial statements for the year ended on that date. To calculate the annual leave payable, the accountant had
The following were among transactions of Raven Industries Ltd during the financial years ending 30 June 2017 and 30 June 2018.2017MarchMayJuneJuly130131Raven Industries Ltd discounted its own 90-day
Aspire Services Ltd made the following transactions during July 2018.2018JulyJulyJulyJulyJuly1215263031Credit sales GST inclusive $4840.Cash sales GST inclusive $1320.Purchased supplies on account
Classify each of following items as a contingent liability, a provision or neither.An unresolved lawsuit against the entity for copyright infringement.Allowance for doubtful debts.An arrangement to
How would each of the following liabilities be classified (current, non-current, or both) at the end of the financial year?Unearned revenueAccrued expensesProvision for warranty repair costs10-year
What is leasing? Why might an organisation decided to lease an asset rather than purchase it?
The debt ratio is the inverse of the equity ratio. If the company increases its level of leveraging what will the effect be on the equity ratio?
‘GST Payable should be treated a revenue account for the entity.’ Discuss.
A company issues debentures at 10%, the market rate at that time. What effect would an interest rate rise have?
If a company is regarded as solvent, then it can be concluded that the company has no liquidity problems. Discuss.
A family company, which had been operating successfully for five generations, continues to maintain a policy of raising money only through equity finance and never through debt. Discuss the
With reference to the Conceptual Framework, explain why future warranty costs should be recognised as a liability in the statement of financial position in the current period.
Your accounting lecturer remarked: ‘The journal entries necessary to record the expense and liability in accounting for long service leave can be easily and logically derived. However, deciding
‘Employees often fail to appreciate the true cost of their employment‘. Discuss.
‘The accounting treatment for a provision and a contingent liability is the same.’ Discuss.
‘Classification of liabilities as current or non-current is not that important. The money is paid out eventually anyway, so what’s the big deal? Discuss.
‘Classification of liabilities is based on the same principles as the classification of assets.’ Do you agree with this? Why or why not?
Refer to the consolidated financial statements and their notes in the latest financial report of JB Hi-Fi Limited on its website, www.jbhifi.com.au, and answer the following questions.1.
GeneTech Ltd is a biological research company that is developing gene technology in the hope of finding a vaccine for skin cancer. During the last financial year, GeneTech Ltd spent $1.2 million on
On 1 January 2016, Good Ltd acquired a block of land for $100000 cash, and on the same day Better Ltd purchased the adjacent block, which was virtually identical to the block purchased by Good Ltd,
A. Calculate the selling price being asked by each business and the purchase price offered by Sharp Photographics. Should each business sell out to Sharp Photographics?B. The sale between Sharp
On 1 July 2016, Frewville Ltd acquired the assets and liabilities of Glenunga Ltd. The assets and liabilities of Glenunga Ltd consisted of:Carrying amountFair valuePlant A (cost $840000)Plant B (cost
Coomans Ltd, which started operations on 1 October 2013, prepared the following account balances as at 30 June 2016:Machinery (at cost)Accumulated Depreciation – MachineryVehicles (at cost;
Bittoto Ltd has four different intangible assets at the end of 2016. Facts concerning each are:1. Franchise. On 2 January 2016, Bittoto Ltd purchased a franchise to distribute a new
Adam Hamilton, who recently won a major prize in a lottery, left his coaching job to invest in a business of his own. He found what he believed was an ideal business for his background, Glenside Gym,
The following transactions and events affected the accounts of Heritage Ltd for the current year (ignore GST):1. On 3 January of the current year, Heritage Ltd paid $110000 in legal fees for the
On 1 January 2014, Nicolaidis Ltd purchased two identical new machines at a total cost of $700 000 plus GST. It was estimated that the machines would have a useful life of 10 years and a residual
Opposite are extracts from the financial reports of Wollowiec Traders Ltd for the years ended 30 June 2016 and 30 June 2017.WOLLOWIEC TRADERS ltdStatement of Financial Position (extract)as at 30 June
The following errors were discovered during the current year.1. A machine with a cost of $33500 and accumulated depreciation to the date of sale of $24000 was sold for $9000. The sale was
On 1 January 2014, Martini Ltd bought a machine for $109000 cash; its useful life was 12 years and its residual value was $13 000. It was decided to depreciate the machine by the straight-line
The beginning balance in the Machinery control account and Accumulated Depreciation account, and dates in the accounts for various machinery acquisitions and disposals during the year by Liu Ltd are
Khan Ltd entered into the following transactions during the year ended 31 December 2016. Ignore GST. Jan.Mar.AprilJulySept.Oct.Dec.4301113131Sold for $17600 a machine that had cost $35000 on 2
Jaensch Ltd reported the following non-current assets at 30 June 2016:LandBuildingsLess: Accumulated Depreciation – Buildings$42000000 19 400000$ 4
Hanxhari Ltd has a policy of revaluing its motor vehicles to fair value. The details at 30 June 2017 relating to Hanxhari Ltd’s motor vehicles, which had previously been revalued upwards by $7000,
On 2 January 2015, Gormly Ltd purchased a machine for $165 000. The machine had a useful life of 5 years and a residual value of $5000. Straight-line depreciation is used. The machine is to be
Deduhin Ltd acquired two new machines for cash on 1 January 2014. The cost of machine A was $400 000, and of machine B, $600 000. Each machine was expected to have a useful life of 10 years, and
The following information was obtained from the accounting records of Crothers Ltd.Vehicle AVehicle BVehicle CAcquisition dateCostResidual valueUseful life (in years)Depreciation method1 July
Zhang Ltd acquired the business of Azzam Ltd for a cash outlay of $5 000000 on 1 July 2016. The summarised balance sheet of Azzam Ltd on that date was as follows:AZZAM LTDSummarised Balance SheetAs
On 30 June 2016, Wong Ltd reported the following information for equipment in its statement of financial position:Equipment (at cost)Accumulated depreciation$1400000 520000$
On 1 July 2016, Weiland Pty Ltd owned several farming vehicles that had cost a total of $155 000. Accumulated depreciation on these vehicles to 1 July 2016 amounted to $73 000.On 30 September 2016,
During 2016, Truong Ltd disposed of four different non-current assets. On 1 January 2016 the accounts showed the following:AssetCostResidual valueUseful lifeAccumulated depreciationMotor vehicle No.
Sage Ltd is considering the purchase of Rosemary Ltd, which produces a product that Sage Ltd uses in its manufacturing process. Relevant data for Rosemary Ltd are:Fair value of identifiable
Reipl Ltd uses the composite-rate method to record depreciation of its store equipment. On 1January 2016, the company owned the following store equipment (ignore GST):ItemCostResidual valueUseful
Miyazono Ltd, which operated a silver, lead and zinc mine, was purchased by Pagnozzi Ltd for $112000000 (residual value $10000000). It is estimated that the mine will produce 25million tonnes of ore.
On 1 January 2013, Leibhardt Ltd acquired two identical pieces of equipment for a total cost of $540000 plus GST. It was estimated that each item would have a useful life of 8 years and a residual
Kapor Ltd exchanged machinery with a cost of $350 000 and accumulated depreciation of $180 000 for a parcel of land. There were no other assets given in exchange. Ignore GST.RequiredPrepare general
On 3 January 2016, Greskowiak Ltd exchanged a machine with a cost of $430 000 and accumulated depreciation of $150 000 for a new similar machine with a cash price of $460 000. Ignore GST.RequiredA.
Cosenza Ltd acquired a truck with a cost of $250 000, an estimated useful life of 6 years and a residual value of $30 000. Sum-of-years-digits depreciation was used. Ignore GST.RequiredPrepare the
On 3 January 2014, Bennetti Ltd paid $33000 for a machine with a useful life of 10 years and a residual value of $3000. On 31 December 2018, accumulated depreciation on the machine was $15000. The
Amorico Pty Ltd scrapped the following machines as worthless:MachineCostAccumulated depreciation 2 Jan. 2016Removal expense paidDate of purchaseDate of
Surguy Ltd has disclosed the following non-current asset classes as at 30 June 2016:MachineryLess: Accumulated depreciation$420000 180000$240000BuildingsLess: Accumulated
Outline the treatment of exploration, evaluation and development costs on a mineral reserve in accordance with the latest accounting standards.
What are biological assets? How should they be accounted for in a company’s accounting records?
Several years ago, Baxter Ltd acquired for $160 000 a patent for the manufacture of special ‘seal-tight’ plastic containers. After 5 years, the manufacture of these containers was discontinued

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