ACC 20013 Company Accounting

Published : 05-Sep,2021 | Views : 10

Question:

The following adjustments are required before preparation of Paradise Ltd’s financial statements for the year:
(i) Depreciation to be provided on a straight-line basis on buildings at 5% p.a. and on office furniture and equipment at 10% p.a. The sale of office furniture occurred at the beginning of the current financial year.
(ii) Goodwill is considered not to be impaired.
(iii) Management was informed that a particular debtor had become bankrupt and the full account of $12 000 needs to be written off.
(iv) The Allowance for Doubtful Debts account needs to be adjusted to 8% of accounts receivable,after considering the adjustment in item iii above.
(v) Current income tax expense (and tax liability) for the year is estimated to be $8000.
(vi) Accrued wages to staff: sales $1500, administrative $2000.
(vii) Vehicle rental paid in advance at 30 June 2017 amounted to $30 000.
(viii) Shares with calls in arrears are to be forfeited, any reserve being retained by the company.
(ix) A dividend of 3c per share is declared on shares remaining after considering item viii.
(x) Land is to be revalued upwards to its fair value of $250 000.
(xi) Transfer $10 000 from the general reserve to retained earnings.

Required
In preparing the financial statements for this assignment, you are advised to comply with AASB standards and the
requirements in the Australian Corporations Legislation when determining the structure and presentation requirements for the financial reports.
A. Prepare the journal entries required by items i to xi above.
B. Prepare the adjusted trial balance as at 30 June 2017.
C. Prepare the statement of profit or loss and other comprehensive income with expenses classified by function for the year ended 30 June 2017.
(Everything required to be presented on the face of the financial statements, no notes required)
D. Prepare the statement of change in equity for the year ended 30 June 2017.
E. Prepare the company’s statement of financial position as at 30 June 2017.

Answer:

Particulars	Amount
Depreciation - buildings	50,000
Depreciation - office furniture and equipment	12,700
Accumulated depreciation – office furniture and equipment	(12,700)
Accumulated depreciation – buildings	(50,000)
Allowance for doubtful debts	12,000
Accounts receivable	(12,000)
Bad debts	14,372
Allowance for doubtful debts	(14,372)
Income tax expense	8,000
Current tax liability	(8,000)
Salaries of sales staff	1,500
Administrative wages	2,000
Accrued salaries and wages	(3,500)
Prepaid Rent	30,000
Vehicle rental expenses	(30,000)
Share capital (called to $1 per share)	8,000
Calls in arrears (25c per share)	(2,000)
Shares forfeited	(6,000)
Shares forfeited	6,000
Capital reserve	(6,000)
Dividend declared	33,960
Dividend payable	(33,960)
Land	20,000
Gain on revaluation of land (OCI)	(20,000)
Gain on revaluation of land (OCI)	20,000
Revaluation Surplus	(20,000)
Income tax expense - OCI	6,000
Current tax liability	(6,000)
Revaluation Surplus	6,000
Income tax expense - OCI	(6,000)
General Reserve	10,000
Retained earnings	(10,000)
Accounts Receivable balance	2,25,400
Less: Debts written off	12,000
Net Accounts receivable remaining	2,13,400
Allowance for doutful debts balance	14,700
Less: Debts written off	12,000
Net provision to be created (8% of accounts receivable)	17,072
Less: Provision already created	2,700
Provision to be created	14,372
Total shares with the company	11,40,000
Less: shares forfeited	8,000
Remianing shares after forfeiture	11,32,000
Dividend payable @ 3c per share	33,960