Reference no: EM13197070

Problem # 1                    

The Trial Balance of ABC Ltd at 30 June 2012 as follows:

	Debit	Credit
Share Capital (ordinary shares issued at $2 fully paid)		$200 000
General Reserve		25 000
Retained Earnings (1/7/11)		128 400
Revaluation Reserve		85 000
Mortgage Loan		250 000
Bank Overdraft (at Call)		69 200
7% Debenture		80 000
Interest Payable		2 800
Accounts Payable		69 500
Dividend Payable		10 000
Current Tax Liability		52 100
Provision for Employee benefits		34 200
Deferred Tax Liability		18 400
Allowance for Doubtful Debts		12 800
Accumulated Depreciation-Plant and Equipment		42 500
Accumulated Impairment-Goodwill		10 000
Cash	$     500
Accounts Receivable	58 000
Inventory	87 700
Prepaid Insurance	7 000
Plant & Equipment	222 500
Land	220 000
Buildings	380 000
Goodwill	105 000
Deferred Tax Asset	9 800
Sales Revenue		825 000
Cost of Sales	450 000
Administrative Expenses	265 000
Other Expenses	10 000
Interest Revenue		2 500
Dividends Revenue		3 500
Income Tax Expense	50 400
Dividend Paid	20 000
Dividends Declared	10 000
Transfer to General Reserve	25 000
Total	$1 920 900	$1 920 900

Additional Information:

a) Administrative expenses for the year include interest expense of $28 700.

b) All assets are carried at cost, except for land and buildings which are carried at valuation.

c) During the year, 50 000 shares were issued at issue price of $2 each, payable in full on application.

d) On 30 June 2012, the directors revalued land and buildings. The revaluation was based on an independent valuation received from FJ Holden, Registered Valuer. The valuation was based on fair values. The carrying amounts of land and buildings before the revaluation were $195 000 and $350 000 respectively.

e) The mortgage loan is repayable in annual instalments of $50 000 due on 1 March each year.

f) The 7% debentures are to be redeemed at 31 March 2013. There is no plan to refinance these debentures in future.

g) The provision for employee benefits consists of:

Annual Leave      $18 000

Long-service Leave      16 200

h) No employee is eligible for long-service leave until 2016.

i)   The company tax rate is 30%.

Required:

a. Prepare a statement of comprehensive income for ABC ltd for the year ended 30 June 2012, according to the requirements of AASB 101(classify expenses by function).

b. Prepare a statement of financial position for ABC ltd as at 30 June 2012 to comply with AASB 101.

c. Prepare a statement of changes in equity for ABC ltd for the year ended 30 June 2012, according to the requirements of AASB 101.

Problem # 2

C ltd has incurred expenditure, the treatment of which is not prescribed by any existing accounting standard. The board of directors has requested the financial accountant record the expenditure as an asset so as not to impact the current year's profit. The accountant is concerned with the request and requires your assistance in determining an accounting policy for this expenditure.Required:

a. Provide the accountant with two accounting policies or treatment that the company could adopt to account for this expenditure

b. What accountant should do?