Top Ltd owns and occupies a large building which is used for warehousing, office and retailing...

  

Transcribed Image Text:

Top Ltd owns and occupies a large building which is used for warehousing, office and retailing purposes. The land and building were purchased in June 2015. The building was initially recognised at cost of $3 000 000, and depreciated over a period of 25 years, assuming nil residual value. During 2022 the roof of the building was damaged by severe storms and hail stones. During June 2022 Top Ltd engaged Roof Specialists Pty Ltd to repair the roof and install solar panels. Roof Specialists Pty Ltd's invoice identified the following cost: Remove and dispose of existing roof tiles 80 000 Repairs to guttering and drainpipes 50 000 Roof tiles 300 000 Solar panels 600 000 Electrician - installation of solar panels 100 000 Roof spraying (to protect the roof form sun damage) includes 5-year 10 000 warranty 1140 000 Top Ltd's chief accountant is on holidays on Kangaroo Island and is unable to be contacted. The graduate accountant has been left in charge but is unsure about how to record the invoice. The graduate accountant seeks your advice and asks the following questions. REQUIRED All questions should be answered from the perspective of Top Ltd. The word lengths are a suggestion only, i.e., they are NOT strict word limits for each part. 1) What is the main accounting policy issue(s) that must be resolved in relation the transaction described in the case? (approximately 15 - 40 words) (1.5 marks) 2) Identify one principle that is relevant to the accounting policy issue(s) that you identified in part (1) by providing a reference for that principle (e.g., AASB XXX, para. zz; or Conceptual Framework, Chapter X, para, x.xx) AND explain why you chose that principle. (approximately 15 - 40 words) (1.5 marks) 3) Identify another principle that is relevant to the accounting policy issue(s) that you identified in part (1) by providing a reference for that principle. e.g., AASB XXX, para. zz; or Conceptual Framework, Chapter X, para, x.xx (1 mark) 4) Describe an accounting policy to account for the transaction with Roof Specialists Pty Ltd's, including the subsequent accounting treatment of any asset affected by the transaction. Do not justify your policy. Just describe it. (20 - 80 words) (3 marks) 5) Prepare a journal entry to record the invoice on 30 June 2022 to illustrate the application of your policy at (4). (1 mark) Top Ltd owns and occupies a large building which is used for warehousing, office and retailing purposes. The land and building were purchased in June 2015. The building was initially recognised at cost of $3 000 000, and depreciated over a period of 25 years, assuming nil residual value. During 2022 the roof of the building was damaged by severe storms and hail stones. During June 2022 Top Ltd engaged Roof Specialists Pty Ltd to repair the roof and install solar panels. Roof Specialists Pty Ltd's invoice identified the following cost: Remove and dispose of existing roof tiles 80 000 Repairs to guttering and drainpipes 50 000 Roof tiles 300 000 Solar panels 600 000 Electrician - installation of solar panels 100 000 Roof spraying (to protect the roof form sun damage) includes 5-year 10 000 warranty 1140 000 Top Ltd's chief accountant is on holidays on Kangaroo Island and is unable to be contacted. The graduate accountant has been left in charge but is unsure about how to record the invoice. The graduate accountant seeks your advice and asks the following questions. REQUIRED All questions should be answered from the perspective of Top Ltd. The word lengths are a suggestion only, i.e., they are NOT strict word limits for each part. 1) What is the main accounting policy issue(s) that must be resolved in relation the transaction described in the case? (approximately 15 - 40 words) (1.5 marks) 2) Identify one principle that is relevant to the accounting policy issue(s) that you identified in part (1) by providing a reference for that principle (e.g., AASB XXX, para. zz; or Conceptual Framework, Chapter X, para, x.xx) AND explain why you chose that principle. (approximately 15 - 40 words) (1.5 marks) 3) Identify another principle that is relevant to the accounting policy issue(s) that you identified in part (1) by providing a reference for that principle. e.g., AASB XXX, para. zz; or Conceptual Framework, Chapter X, para, x.xx (1 mark) 4) Describe an accounting policy to account for the transaction with Roof Specialists Pty Ltd's, including the subsequent accounting treatment of any asset affected by the transaction. Do not justify your policy. Just describe it. (20 - 80 words) (3 marks) 5) Prepare a journal entry to record the invoice on 30 June 2022 to illustrate the application of your policy at (4). (1 mark)

Answer rating: 100% (QA)

1 IAS 16 Property plant and Equipment outlines the accounting treatment for most types of property p... View the full answer