Assignment requirements

Assignment Help Accounting Basics
Reference no: EM131402455

Parts 1-3 are a team requirement. Part 4 is an individual requirement.

Part 1 - 4 marks

From the trial balance and transaction data below, prepare an income statement and balance sheet for the year ended 30th June 2015. Notes to the financial statements are not required.

Part 2 - 4 marks

From the trial balance and transaction data below, prepare an income statement and balance sheet for the year ended 30th June 2020. Notes to the financial statements are not required. 

Parts 1 and 2 will be assessed based on the accuracy of the financial statements. Working papers, journal entries and explanations of why you have recorded something the way you have are not required. However, you may include them for both parts 1 and 2 if you wish and they will be considered and used to award partial marks if a section of your answer is incorrect.

Part 3 - 22 Marks

Write an essay addressing one of the following two topics:

  • The new requirements for leases in AASB 16 will make financial reports more useful for users of financial reports than would the old requirements for leases under AASB 117.
  • The new requirements for leases in AASB 16 will make financial reports less useful for users of financial reports than would the old requirements for leases under AASB 117.
  • You should use evidence from your answers to parts 1 and 2 to support your argument.
  • The essay will be assessed on the quality of the argument in the essay (18 marks) which includes the
  • evidence used to support the argument and on the effectiveness of the communication (4 marks).

Other information

Your essay is to be properly referenced use the University’s version of the Harvard referencing method. Students are encouraged to use referencing software such as Endnote or Refworks to 1 Students at the Chadstone (Holmsglen) campus in  Melbourne have slightly different team rules. Students at Chadstone are to apply the rules specified in their unit outline. If in doubt, please ask Andrew Read or Paula DeLange.

manage their references. Details of the Harvard referencing method are available from the University Library’s website. Your argument is to be supported by appropriate theory and research.

Your essay is to be written for someone who has an undergraduate degree in accounting and you may assume that the reader has the background knowledge and comprehension level typical for that type of reader. The maximum length of the essay is 1,500 words.

Part 4

Each student is to submit 3 reflections on the assignment process. The topics of the reflections are:

1. What I have learned about cross-cultural communication during this assignment and why this is important to my studies and career (300 words – 4 marks).

2. What I have learned about working in teams during this assignment and why this is important to my studies and career (250 words – 3 marks).

3. What I have learned about research during this assignment and why this is important to my studies and career (250 words – 3 marks).

It is permitted to give a negative response in the reflections. That is you can state that you did not learn anything about cross-cultural communication, working in teams or research or that what you have learned is not important to your studies or career but you have to reflect on why this is the case.

Data for assignment

Williams Delivery Ltd is a transport business operating a local franchise for one of the large international transport companies. It is an Australian reporting entity and, hence, is required to follow all Australian accounting standards. For simplicity, you may ignore all taxes in this assignment.

Williams depreciates all depreciable assets using the straight-line method.

Williams has elected to separate non-lease components from lease components for all classes of assets (see AASB 16 para 15 & 16).

Williams’ incremental borrowing rate is 10%. Williams uses this rate for discounting all future obligations where there is insufficient data to determine a more accurate discount rate. Where there is sufficient data to enable the calculation of the interest rate implicit in a lease, the interest rate implicit is used for discounting the lease cash flows.

Williams has not elected to apply the revaluation model for the measurement of lease right-of-use assets.

The bookkeeper for Williams has not known how to account for leases and has recorded all payments associated with leases using the following pro-forma journal entry:

Dr Lease payment expense xxx

Cr Cash xxx

The bookkeeper has not recorded any other journal entries for things associated with the lease or leased assets. If this recording of lease payments has caused errors in prior period financial statements you do not need to amend those prior period statements but you do need to amend opening retained earnings.

The details of the leases are provided below.

Data relevant for part 1

Trucks

Williams leased a fleet of trucks of from a company that specialises in leasing trucks. The trucks have no special features and there are thousands of similar trucks sold each year in Australia. The lease is for 5 years and commenced on 1st July 2014. The annual rentals are $62,000 and are made on 1st July each year with the first rental being paid on 1st July 2014. The lessor is responsible for all maintenance, insurance, and registration for the trucks and Williams estimates that the value of those services is $16,000 per year. At the end of the lease term the trucks will be returned to the lessor.

The trucks would have cost $279,000 if Williams had purchased the trucks. Williams estimates that the fair value of the trucks at the end of the lease term will be $160,000. Trucks similar to the ones that Williams has leased have a useful of 20 years. Williams incurred direct initial costs of $1,000 in arranging the lease contract which it paid on 1st July 2014. Either party can cancel the lease at any time by providing 3 months written notice but Williams is reasonably certain that it will not cancel the lease.

Cars

Williams Ltd leased a fleet of cars from a finance company. The lease is for 4 years, is noncancellable and commenced on 1st January 2015. The annual rentals are $21,000 and are made on 1st January each year with the first rental being paid on 1st January 2015. The lessor is responsible for all maintenance, insurance, and registration for the cars and Williams estimates that the value of those services is $6,000 per year. Williams expects to purchase the fleet of cars at the end of the lease as it has an option to do so at $10,000 which is substantially below its expected fair value of $30,000 at that date. Williams plans to use the fleet for 5 years and the current market price of a similar 5-year-old fleet is $20,000. The fleet would have cost Williams $70,000 if it had purchased the fleet on 1st January 2015.

Tablet computer

Williams Ltd leased an iPad from a finance company. The lease is for 3 years, is non-cancellable and commenced on 1st July 2014. The annual rentals are $380 and are made on 1st July each year with the first rental being paid on 1st July 2014. Williams is responsible for maintaining and insuring the iPad. Williams expects to return the iPad to the leasing company at the end of the lease which is also the end of the iPad’s useful life. The current market price of 3-year-old iPad’s is $0. The iPad would have cost Williams $1,000 if it had purchased it on 1st July 2014.

Warehouse

Williams Ltd has leased a warehouse in an industrial section of the city. The lease is for 5 years and can only be cancelled by Williams if Williams reimburses the landlord for the costs of re-letting the warehouse including any costs of finding a new tenant, any lost rent and any difference between the rent paid by the new tenant and the rent which would have been paid by Williams if the new tenant pays a lower rent than Williams did. The landlord maintains responsibility for rates and other taxes, maintenance of the building and carries the risk if the building is damaged. Williams is responsible for all utilities. The lease commenced on 1st January 2014 and requires quarterly rental payments of $15,000 to be paid on the 1st of January, April, July and October each year with the first payment on 1st January 2014. Williams fitted out the warehouse for its needs at the start of the lease and paid $10,000 for the fitout on 1st January 2014. Williams is required under the lease to pay to remove all its fittings from the warehouse at the end of the lease. Williams expects that will cost $5,000.

Shop

Williams Ltd has leased a shop in a major retail district. The lease commenced on 1st July 2014 and is for 12 months. The lease payments are quarterly payments of $3,000 paid on 1st July, October, January and April with the first payment on 1st July 2014. The landlord maintains responsibility for rates and other taxes, maintenance of the building and carries the risk if the building is damaged.

Williams is responsible for all utilities. Williams expects to renew the lease for another 12 months when the lease expires at the market rental applicable at renewal date.

Trial balance

Williams Delivery Ltd’s trial balance at 30th June 2015 is:

Dr Cr

Cash at bank $21,000

Accounts receivable $83,333.33

Allowance for doubtful

debts

$1,250

Computers $60,000

Accumulated depreciation

$12,000

Equipment $20,000

Accumulated depreciation

$4,000

Fittings $6,000

Accumulated depreciation

$1,200

Accounts payable

$10,000

Leave liability

$55,000

Bank loan

$40,000

Capital

$30,000

Opening retained earnings

$23,263

Sales revenue

$1,000,000

Lease payment expense $156,380

Wages expense $550,000

Fuel expense $120,000

Interest expense $4,000

Insurance expense $10,000

Franchise fee expense $100,000

Bad debt expense $5,000

Depreciation expense $6,000

Other expenses $10,000

Dividends $25,000

Total $1,176,713 $1,176,713

Data relevant for part 2

Trucks

Williams leased a fleet of trucks of from a company that specialises in leasing trucks. The trucks have no special features and there are thousands of similar trucks sold each year in Australia. The lease is for 5 years and commenced on 1st July 2019. The annual rentals are $62,000 and are made on 1st July each year with the first rental being paid on 1st July 2019. The lessor is responsible for all maintenance, insurance, and registration for the trucks and Williams estimates that the value of those services is $16,000 per year. At the end of the lease term the trucks will be returned to the lessor.

 

The trucks would have cost $279,000 if Williams had purchased the trucks. Williams estimates that the fair value of the trucks at the end of the lease term will be $160,000. Trucks similar to the ones that Williams has leased have a useful of 20 years. Williams incurred direct initial costs of $1,000 in arranging the lease contract which it paid on 1st July 2019. Either party can cancel the lease at any time by providing 3 months written notice but Williams is reasonably certain that it will not cancel the lease.

Cars

Williams Ltd leased a fleet of cars from a finance company. The lease is for 4 years, is noncancellable

and commenced on 1st January 2020. The annual rentals are $21,000 and are made on

1st January each year with the first rental being paid on 1st January 2020. The lessor is responsible

for all maintenance, insurance, and registration for the cars and Williams estimates that the value of

those services is $6,000 per year. Williams expects to purchase the fleet of cars at the end of the

lease as it has an option to do so at $10,000 which is substantially below its expected fair value of

$30,000 at that date. Williams plans to use the fleet for 5 years and the current market price of a

similar 5-year-old fleet is $20,000. The fleet would have cost Williams $70,000 if it had purchased the

fleet on 1st January 2020.

Tablet computer

Williams Ltd leased an iPad from a finance company. The lease is for 3 years, is non-cancellable and

commenced on 1st July 2019. The annual rentals are $380 and are made on 1st July each year with

the first rental being paid on 1st July 2019. Williams is responsible for maintaining and insuring the

iPad. Williams expects to return the iPad to the leasing company at the end of the lease which is also

the end of the iPad’s useful life. The current market price of 3-year-old iPad’s is $0. The iPad would

have cost Williams $1,000 if it had purchased it on 1st July 2019.

Warehouse

Williams Ltd has leased a warehouse in an industrial section of the city. The lease is for 5 years and

can only be cancelled by Williams if Williams reimburses the landlord for the costs of re-letting the

warehouse including any costs of finding a new tenant, any lost rent and any difference between the

rent paid by the new tenant and the rent which would have been paid by Williams if the new tenant

pays a lower rent than Williams did. The landlord maintains responsibility for rates and other taxes,

maintenance of the building and carries the risk if the building is damaged. Williams is responsible for

all utilities. The lease commenced on 1st January 2019 and requires quarterly rental payments of

$15,000 to be paid on the 1st of January, April, July and October each year with the first payment on

1st January 2019. Williams fitted out the warehouse for its needs at the start of the lease and paid

$10,000 for the fitout on 1st January 2019. Williams is required under the lease to pay to remove all

its fittings from the warehouse at the end of the lease. Williams expects that will cost $5,000.

Shop

Williams Ltd has leased a shop in a major retail district. The lease commenced on 1st July 2019 and

is for 12 months. The lease payments are quarterly payments of $3,000 paid on 1st July, October,

Company Accounting 6391 Semester 2 2016 Assignment

Page 10 of 10 pages

January and April with the first payment on 1st July 2019. The landlord maintains responsibility for

rates and other taxes, maintenance of the building and carries the risk if the building is damaged.

Williams is responsible for all utilities. Williams expects to renew the lease for another 12 months

when the lease expires at the market rental applicable at renewal date.

Trial balance

Williams Delivery Ltd’s trial balance at 30th June 2020 is:

Account Dr Cr

Cash at bank $21,000

Accounts receivable $83,333.33

Allowance for doubtful

debts

$1,250

Computers $60,000

Accumulated depreciation

$12,000

Equipment $20,000

Accumulated depreciation

$4,000

Fittings $6,000

Accumulated depreciation

$1,200

Accounts payable

$10,000

Leave liability

$55,000

Bank loan

$40,000

Capital

$30,000

Opening retained earnings

$23,263

Sales revenue

$1,000,000

Lease payment expense $156,380

Wages expense $550,000

Fuel expense $120,000

Interest expense $4,000

Insurance expense $10,000

Franchise fee expense $100,000

Bad debt expense $5,000

Depreciation expense $6,000

Other expenses $10,000

Dividends $25,000

Total $1,176,713 $1,176,713

Reference no: EM131402455

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