Financial Accounting Quiz Question

REVISION QUESTIONS - Solution Question 1.a)

Sport’s Field Ltd General Journal

Date Account name (narration) Debit

$ Credit $

2019 Jan 10 No entry Mar 1 Cash Trust 21,000 Application 21,000 (Being application monies received (35,000 X $0.60)) Mar 2

Application

21,000

Share Capital 21,000 (Being allotment of shares (35,000 X $0.60)) Mar 2

Cash at bank

21,000

Cash Trust 21,000 (Being the transfer of funds from trust a/c to coy bank a/c) Mar 2

Allotment

10,500

Share Capital 10,500 (Being allotment monies due (35,000 X $0.30)) Mar 31

Cash at Bank

10,500

Allotment 10,500 (Being receipt of allotment monies) Nov 1

Call

3,500

Share Capital 3,500 (Being call monies due (35,000 X $0.10)) Nov 30

Cash at Bank

3,500

Call 3,500 (Being receipt of call monies (35,000 X $0.10))

(b) Sport’s Field Ltd Share capital: $35,000

Question 2

GENERAL JOURNAL

Details Dr Cr

Impairment loss Account 100,000

Accumulated impairment loss Account – goodwill 100,000

Recognition of impairment loss for Blue Ltd CGU

Impairment loss Account 150,000

Accumulated impairment loss Account - goodwill 50,000

Goodwill Account 200,000

Write-off of goodwill for Box CGU

Impairment loss Account – CGU Box PPE 20,000

Property, plant and equipment Account 20,000

(to recognise the impairment of PPE)

IF the CGU Box provides the following – Property, plant and equipment includes

these assets

Carrying amount

Buildings 360,000

Equipment 225,000

Land 180,000

Fitting 135,000

900,000

Then the following allocation process has to be performed before the journal entries.

Allocate any balance of impairment to the other assets

Carrying amount

Proportion Allocation of impairment loss

Net carrying amount

Buildings 360,000 360/900 8,000 352,000

Equipment 225,000 225/900 5,000 220,000

Land 180,000 180/900 4,000 176,000

Fitting 135,000 135/900 3,000 132,000

900,000 20,000 880,000

GENERAL JOURNAL

Date Details Dr $ Cr $

Impairment loss Account 20,000

Accumulated impairment losses Account - Buildings 8,000

Accumulated impairment losses Account - Equipment 5,000

Accumulated impairment losses Account - Land 4,000

Accumulated impairment losses Account – Fittings 3,000

Being impairment loss on goodwill allocated to other assets

Question 3 Machinery Carrying amount + Future amount deductible - Future taxable = Tax base for tax purposes economic benefits $110,000 + $90,000 - $110,000 = $90,000 Interest receivable Carrying amount + Future amount deductible - Future taxable = Tax base for tax purposes economic benefits $15,000 + $0 - $15,000 = $0 Provision for warranty Carrying amount - Future amount deductible + -Future taxable = Tax base for tax purposes economic benefits $100,000 - $100,000 + $0 = $0

GENERAL JOURNAL

Date Details Dr Cr

Income tax expense Account 6,000

Deferred tax liability Account 6,000

Being $20,000 x 30% for machinery

Income tax expense Account 4,500

Deferred tax liability Account 4,500

Being $15,000 x 30% for interest receivable

Deferred tax asset Account 30,000

Income tax expense Account 30,000

Being $100,000 x 30% for warranty expense

Question 4

Carrying Amount Fair Value Value in Use 1,000,000 650,000 180,000 x 4.1002 (200,000) (20,000) $800,000 $630,000 $738,036

GENERAL JOURNAL

Date Details Dr $ Cr $

Impairment loss Account - Machinery 61,964

Accumulated impairment losses Account- Machinery

61,964

Being impairment loss on Machinery