Question 1 [15 marks] Financial statement presentation You are a senior financial accountant at Thunder Ltd. One of the new graduate accountants has prepared the following statement of financial position as at 30 June 2016, after its first year of operations: Thunder Ltd Statement of financial position as at 30 June 2016 Assets $000 Cash at bank 124 Receivables and inventory 190 Raw materials 6 Work in progress 14 Prepaid rent 18 Shares in listed companies (at cost) 57 Share issue costs 12 Property, plant, equipment and intangibles (at cost) 597 Research costs 28 Cash management account Other assets Total assets 50 1 100 Liabilities Accounts payable and provisions 83 Allowance for doubtful debts 2 Accumulated depreciation - property, plant and equipment 59 Borrowings 56 Debentures 200 Current and deferred tax liabilities 36 Unsecured notes 100 Share capital - ordinary shares 400 Retained earnings Dividends payable Total liabilities 120 1 100 Net assets 2 200 Additional information: Share issue costs relate to the ordinary shares issued by Thunder Ltd. Research costs relate to a new research and development project being undertaken, and the directors strongly believe that the project will be successful. Where AASB 101 requires entities to disclose further sub-classifications of the minimum line items either on the face of the statement or in the notes, the directors of Thunder Ltd have advised you that they wish to disclose these sub-classifications in the notes and only report the minimum line items on the face of the statement. Required: Review the statement of financial position prepared by the graduate accountant. Discuss what corrections / changes need to be made to the statement of financial position, to ensure that it complies with the requirements of AASB 101. Provide references to relevant paragraphs in the accounting standards where appropriate to support your answers. Note: You are not required to discuss any note disclosures that are needed, or prepare a revised statement of financial position. Question 1 Max. marks awarded Discuss corrections / changes needed 12 References 3 Total 15

Question 2 [15 marks] Accounting for share issues and options Sunny Ltd is looking to expand its operations, and in order to do this, the company needs to increase equity. On 1 January 2016, Sunny Ltd offered 4,000,000 ordinary shares to the public at an issue price of $3.00 per share, with $2.00 payable on application, and $1.00 due within one month of allotment. The closing date for applications was 31 January 2016. Sunny Ltd offered an additional incentive to investors: shareholders who acquired more than 25,000 shares were allowed to purchase options at 50 cents each. These options allowed investors to acquire shares in Sunny Ltd at $3.10 each on or before 30 June 2016. By 31 January 2016, applications had been received for 4,500,000 shares and 40,000 options. On 12 February 2016, 4,000,000 shares and 40,000 options were allotted, and excess application money was refunded to unsuccessful applicants. All applicants who acquired options also received shares. All allotment money is received by 12 March 2016, except for holders of 5,000 shares who failed to meet the instalment. On 20 March 2016, the 5,000 shares were forfeited, and on 5 April 2016 they were auctioned as fully paid. An amount of $2.80 was received for each share sold. Share re-issue costs amounted to $1,400, and were paid. The constitution provided for any surplus on resale, after satisfaction of unpaid instalments and any costs, to be returned to shareholders whose shares were forfeited. By 30 June 2016, the price of each of Sunny Ltds shares was $3.40. Holders of 30,000 options exercised their options in June 2016, with the remaining options lapsing. Required: Prepare the journal entries to account for the above entries. Show all relevant dates, narrations and workings. Question 2 Max. marks awarded Journal entries 10 Dates 3 Workings 2 Total 15

Question 3 [15 marks] Intangible assets Groceries Online Ltd is an Australian supermarket that sells competitively priced groceries to customers across Australia. Groceries Online Ltd does not have any supermarket stores. Its focus is solely on making sales via online orders from customers, with grocery orders being packed at the closest warehouse and then either delivered to the customer, or picked up by the customer from the warehouse. The directors of Groceries Online Ltd believe that the company has done so well in recent years because its products are cheaper than at other supermarkets, and customers love the convenience and service. You are the financial accountant at Groceries Online Ltd and are currently preparing the financial reports for the year ended 30th June 2016. As you prepare these financial reports, the directors of Groceries Online Ltd have asked you to determine whether the following assets can be recognised in the companys financial statements: 1. Goodwill. The directors have worked tirelessly to build the company into the successful operation that consumers and investors know today. The directors have determined that the goodwill of the company amounts to $10,250,000. 2. The trademark name Groceries Online. Whilst there were not any costs incurred in developing this asset, the company has spent $850,000 on marketing and promotion costs over the past 2 years. As a result, the Groceries Online trademark name is known in millions of households across Australia. The directors estimate that the fair value of the trademark is $3,000,000, and it has an indefinite useful life. 3. Computer software. In 2016, the company purchased new computer software, costing $475,000. Groceries Online Ltd also paid a consultant $12,000 to install and test the software before the new system was made live. The software is used to manage and track all grocery orders/sales, from when the orders are received until they are delivered or picked up, as well as for inventory management. The directors estimate that the useful life of the computer software is 5 years. 4. Costs associated with a project aimed at developing a new high-tech warehousing system similar to a vending machine but on a factory-wide scale. Instead of having employees manually walking around the warehouse to fill each customer order, orders would be filled by the warehousing system at the press of a button. The selected products are dropped onto a conveyor belt, they move along the conveyor belt to the packaging area, and are boxed ready for the customer. The directors are confident that the project will be successful. In 2016, the directors spent $36,000 on research activities, $5,000 on design costs for the new warehousing system, and $2,000 on other general overhead expenses. Development activities will continue in 2016/17. Required: With reference to AASB 138, explain whether each of the above items/expenses can be recognised as an intangible asset in Online Groceries Ltds financial statements for the year ended 30th June 2016, and if so, the amount to be capitalised. Question 3 Max. marks awarded Discussion of appropriate accounting treatment for 13 each item/expense References to accounting standards 2 Total 15

Question 4 [15 marks] Revaluation of property, plant and equipment Storm Ltd acquired an item of equipment on 1 July 2013 at a cost of $500,000. On 30 June 2014, Storms directors decide to continue using the cost model for equipment. They elect to depreciate the equipment acquired on 1 July 2013 using the straight-line method, over its useful life of five years. The estimated residual value is $50,000. The directors then decide to adopt the revaluation model for equipment from 1 July 2014. They determine that the fair value of this item of equipment on this date is $465,000. The useful life is revised on this date estimated to be six years from 1 July 2014. The estimated residual value remains unchanged. On 30 June 2015, Storms directors estimate that the fair value of the item of equipment does not differ materially from its carrying amount. On 30 June 2016, Storms directors estimate that the fair value of the item of equipment is $220,000. The item of equipment is sold on 30 September 2016 for $210,000. Assume a tax rate of 30%. Required: Prepare journal entries to account for all transactions that took place during the period 1 July 2013 to 30 September 2016, including entries for the acquisition of the equipment, depreciation, revaluations and its disposal. Show all relevant dates, narrations and workings. Question 4 Max. marks awarded Journal entries 11 Workings 4 Total 15 Rationale This assessment task covers topics 3, 4, 5 and 6A. It has been designed to ensure that you are engaging with the subject content on a regular basis. More specifically it seeks to assess your ability to: demonstrate an understanding of the form and content of published financial reports; and apply generally accepted accounting principles and specific financial reporting standards relating to concepts of recognition, measurement, disclosure, revaluation and impairment of financial statement elements. Marking criteria The marking guide for this task is provided below. The detailed allocation of marks for each question has been provided above for your information. Criteria High distinction Distinction Credit

Pass Question 1: Determines all of the Determines many of corrections / changes the corrections / Determines some of the corrections / Determines some of the corrections / Prepare financial statements in accordance with the accounting standards. [15 needed without flaw/with minor flaws. References to changes needed with minor flaws. References to accounting standards changes needed accurately. References to accounting standards changes needed, with some errors. References to accounting standards marks] accounting standards are provided where are provided where are provided where are provided where necessary in almost all necessary in most necessary in some necessary all of the time. cases. cases. cases.

Question 2: All entries made are All entries made are Most of the entries are Most of the entries are Apply relevant accounting principles in accounting for share issue transactions. [15 marks] accurate. Dates shown are correct for the transactions. Appropriate workings are shown in all instances, and are accurate. accurate with some minor flaws. Dates shown are correct for almost all of the transactions. Appropriate workings are shown in almost all instances, and are accurate. made and are correct. Dates shown are mostly correct for the transactions. Appropriate workings are shown in most instances, and are accurate. made but contain some errors. Dates shown are correct for some of the transactions. Some workings are shown but lack detail or are unclear and/or contain errors.

Question 3: Apply relevant Determines expenditure to be expensed or Determines expenditure to be expensed or Determines expenditure to be expensed or Determines expenditure to be expensed or capitalised accounting capitalised without capitalised with minor capitalised accurately accurately with some principles in recognising and measuring intangible assets. [15 marks] flaw. Explanations shown are exemplary and clear. flaws. Explanations shown are complete and succinct. with some errors. Explanations shown are clear and succinct. Most of the key errors. Explanations shown are adequate. Some references to All key references to Almost all of the key accounting standards references to references to accounting standards accounting standards are provided. are provided. accounting standards are provided. are provided.

Question 4: Apply relevant accounting principles in accounting for assets using the revaluation model. [15 marks] All entries are made and are accurate. Appropriate workings are shown and are accurate. All entries are made, with minor flaws. Appropriate workings are shown in almost all instances, and are accurate. Almost all entries are made, with some errors. Appropriate workings are shown in most instances, and are accurate / contain minor errors.