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AF314 Flexi 2019 - Assignment-print (1).pdf

AF314 Corporate Accounting
Flexi-School - 2019
Individual Assignment (20%)
1.
2.
3.
4. Due Date: Monday 6th January (by 4pm) at the SOAF office. Penalty at 10% per day.
Must be word-processed, not hand written, word size 12 with ‘Times new roman’ font type and
double-spacing.
Each answer must be clearly marked by the designated question to which it corresponds.
Please list any references (books, articles, web-based material) you use at the end of your assignment
in alphabetical order, using the referencing style seen in academic articles (i.e. with in text references
and bibliography, as in the Harvard referencing style). Requirements:
Question 1
The following data are taken from the trial balance of Bula Island Limited on 30 June 2018 with
selected comparative information provided for 30 June 2017. Sales revenue
Interest revenue
Royalties revenue
Dividend revenue
Depreciation-building
Depreciation-plant
Depreciation-equipment
Research and development expenditure
Cost of goods sold
Warranty expense
Wages and salaries expense
Long service leave expense
Interest expense
Rates and taxes on property
Doubtful debts expense
Accounts receivable
Estimated uncollectible debts
Interest receivable
Royalties receivable
Land (at cost)
Buildings
Accumulated depreciation-buildings 2018
9,245,000
850,000
1,450,000
150,000
147,500
262,500
75,000
1,650,000
4,005,000
195,000
3,475,000
235,000
305,000
145,500
142,500
675,000
182,000
300,000
920,000
2,500,000
3,200,000
442,500 2017 375,000
95,000
275,000
745,000
2,500,000
3,200,000
295,000 Plant
Accumulated depreciation-Plant
Equipment
Accumulated depreciation-equipment
Wages and salaries payable
Provision for long service leave
Provision for warranty claims
Interest payable 2,100,000
787,500
750,000
225,000
345,000
355,000
130,000
100,000 2,100,000
525,000
750,000
150,000
265,000
245,000
115,000
100,000 Additional Information
1. All depreciable assets were acquired on 1 July 2015. For financial reporting purposes,
depreciation is recognised on a straight line basis, over 20 years for buildings (estimated
residual value $250,000), eight years for plant and 10 years for equipment. For tax purposes,
straight line depreciation is applied over 40, 10 and eight years respectively.
2. After reviewing all relevant information, the directors determined that, at 30 June 2018, the
plant was impaired by $250,000 (this is not reflected in the amounts presented in the trial
balance).
3. On 30 June 2018, after careful consideration, the directors of Bula Island Ltd decided to adopt
the fair value model for land; the fair value of land on 1 July 2017 was $3,500,000 and on 30
June 2018 was $3,250,000.
4. The research and development expenditure qualifies for the additional 25% taxation
deduction.
5. The tax rate at 30 June 2017 was 30%. On 15 June 2018, legislation was enacted decreasing
the tax rate to 25% effective 1 July 2018. Required:
1. Calculate the amount of current tax expense. Use an appropriately labelled table for this task.
2. Prepare a deferred tax worksheet to calculate the amounts for deferred tax assets and deferred
tax liabilities for the reporting period 30 June 2018. Use an appropriately labelled table for
this task.
3. Prepare journal entries for the income tax expense related items for the reporting period 30
June 2018. Question 2
Viti Ltd has three divisions, Dairy, Yoghurt and Chocolate, which operate independently of each
other to produce milk products. The company has a headquarters and a research centre located in
Nausori, with the divisions located throughout Fiji. The research centre interacts with all the
divisions to assist in the improvement of the manufacturing process and the quality of the
products manufactured by the entity.
There is not as yet any basis on which to determine how the work of the research centre will be
allocated to each of the three divisions, as this will depend on priorities of the company overall
and issues that arise in each division. The company headquarters provides approximately equal
services to each of the divisions, but an immaterial amount to the research centre.
Neither the headquarters nor the research centre generates cash inflows.
On 30 June 2018, the net assets of Viti Ltd were as follows: Land
Plant and equipment
Accumulated depreciation
Inventories
Accounts receivable
Liabilities
Net Assets Dairy
Division
$ 440,000
840,000
(240,000)
240,000
120,000
1,400,000
120,000
1,280,000 Yoghurt
Division
$ 280,000
620,000
(200,000)
180,000
100,000
980,000
100,000
880,000 Chocolate
Head Office
Division
$ 160,000
$ 110,000
540,000
80,000
(160,000)
(10,000)
140,000
0
60,000
0
740,000
180,000
100,000
0
640,000
180,000 Research
Centre
$ 67,000
45,000
(12,000)
0
0
100,000
0
100,000 Management of Viti Ltd believes there are economic indicators to suggest that the company’s
assets may be impaired. Accordingly, they have had recoverable amount assessed for each of the
divisions:
Dairy Division
$ 1,550,000
Yoghurt Division
1,000,000
Chocolate Division
750,000
The land held by Dairy division was measured at fair value using the revaluation model because
of the specialised nature of the land. At 30 June 2018, the fair value was $440,000. The land held
by Yoghurt division was measured at cost, and had a fair value less cost to sell of $270,264 at 30
June 2018. Required:
Provide journal entries to account for the impairment of Viti Ltd as at 30 June 2018. Show all
relevant working where required.

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