Contemporary Financial Accounting

BUS356 Contemporary Financial Accounting

TJA 2019

Weekend Assignment – 25%

Requirements:

1) Read the case study facts 2) Complete your written notes and workings (these are not to be submitted) 3) Input your answers in Tab 1 – 3 of the Excel file template (available on LMS) 4) Submit in a single file:

i) The journal entry to account for current taxes (Tab 1) (5 marks) ii) The deferred tax worksheet (Tab 2) (15 marks) iii) Completion of the Statement of Comprehensive Income for the year

ended 30 June 2019 (Tab 3) (5 marks)

Note –

1) When you save your worksheet on your desktop, save it as: UnitNumber_StudentName_StudentIDName.

2) This is an individual assignment, you are not to work with your peers.

3) Only input into the worksheet in the sections highlighted yellow.

4) References are not necessary.

Assignment Facts

V Ltd was established on 1 July 2018 with share capital of $132 000. One year later the

statement of comprehensive income and statement of financial position were as follows:

Statement of comprehensive income for the year ended 30 June 2019

Sales revenue 650 000

Interest revenue 500

Dividend revenue 300

Exempt income 400

Capital profit on sale of land 700

651 900

Cost of sales 175 000

Depreciation on machinery 5 900

Depreciation on vehicles 100

Goodwill impairment loss 300

Salaries and wages 120 000

Annual leave 1 800

Rent of premises 72 000

Insurance 1 200

Entertainment 400

Fines and penalties 100

Fringe benefits tax 200

Warranty expense 600

Doubtful debts expense 200

Other expenses 194 100 571 900

Profit before income tax 80 000

Statement of Financial Position as at 30June 2019

Assets

Cash 24 000

Accounts Receivable 37 500

Less: Allowance for doubtful debts 200 37 300

Interest receivable 100

Inventory 20 000

Prepaid insurance 300

Machinery (cost) 79 000

Less: Accumulated depreciation 5 900 73 100

Vehicles 11 000

Less: Accumulated depreciation 100 10 900

Goodwill 45 000

Less: Accumulated impairment loss 300 44 700

Investments 25 000

Total assets 235 400

Liabilities

Accounts payable 15 000

Rent payable 6 000

Provision for annual leave 1 800

Provision for services warranties 600

Total liabilities 23 400

Net Assets 212 000

Shareholders’ equity

Share capital 132 000

Retained earnings 80 000

212 000

Other information:

 For tax purposes, depreciation on machinery is $14 000 and for vehicles $300, for the year ended 30 June 2019.

 Doubtful debts, annual leave and service warranties are expensed in the year ending 30 June 2019 but are not deductible for tax purposes until paid.

 V Ltd has accrued annual leave entitlements of $1 800 in calculating net profit for the year ended 30 June 2019.

 Service warranty expense is only deductible as a tax deduction when claimed by customers.

 The company accrues doubtful debts expense as soon as it appears on a customer’s account as uncollectible. However, the bad debt is not allowable as a tax deduction

until all avenues to collect the account have been exhausted.

 The tax rate is 30 per cent.

Required:

1) Complete the journal entry to account for current taxes (5 marks) 2) Complete the deferred tax worksheet (15 marks) 3) Completion of the Statement of Comprehensive Income for the year ended 30 June 2019

(5 marks)