Question 1. The development of conceptual frameworks is not only costly and time-consuming but also subject to
political interference. Some scholars (for example, Hines) argue that conceptual frameworks are no more than the residue of a political process.
Question 2 [15 marks] You are a senior financial accountant at Alex Ltd, a company that distributes school uniforms. One of the new graduate accountants has prepared the following statement for the year ended 30 June 2019 with the relevant notes provided below it:
1. Included in the cash and cash equivalents is a bank loan amounts to $15,000 which is payable by 31 December 2019.
2. This amount is before deducting any allowance for doubtful debts.
3. Financial assets can be segregated into current and non-current portion of $25,000 and $135,000 respectively.
4. This figure includes the property, plant, and equipment (before deducting any accumulated depreciation) of $1,263,000 and goodwill of $725,000.
5. The financial liabilities that are payable within the next twelve months amounts to $212,500.
6. Provisions are made up of provision for warranty (due within the next 6 months) of $106,000 and provision for long service leave (all due after 18 months) of $21,500.
7. Included in the tax payable are current tax payable of $15,000 and deferred tax of $50,000.
8. On 31 August 2019 when you review the statement, you discovered that an invoice amounts to $25,800 from one of the suppliers to purchase school uniforms during June 2019 had not been recorded in the books. The invoice is due for payment by 30 September 2019. The financial statements for the year ended 30 June 2019 are authorized on 20 September 2019. The amount involved is considered material
A. A corrected statement of financial position for Alex Ltd as at 30 June 2019, to ensure that it complies with the requirements of AASB 101 and other relevant accounting authorities, where relevant. Provide explanations and/workings for all the corrections you have made. Note: You are not required to discuss any note disclosures that are needed. (12 marks)
B. How should Alex Ltd account for the omitted purchase invoice that was discovered on 31 August 2019 in their financial statements for the period ending 30 June 2019? When would the appropriate accounting treatment in this case? Note: You should substantiate your answer by making references to AASB 110 Events after the Reporting Period. (3 marks)
• Ignore the requirement for prior period comparative figures in preparing the corrected statement of financial position.
• In preparing the corrected statement of financial position, you should use the captions that are generally used by a listed entity.
Question 3 [10 marks]
GS Pty Ltd has two pieces of equipment and their information extracted as of 30 June 2019 are provided below:
As the accountant for GS Pty Ltd, you are to account for the depreciation and revaluation exercises for the year ending 30 June 2020. Both pieces of equipment were measured using the revaluation model and depreciated on a straight-line basis. Array was revalued a number of times in prior years and it has accumulated revaluation decrements being previously recognized in the profit or loss by 30 June 2019 of $24,000. The directors have estimated the fair value for Array on 30 June 2020 to be $12,800. Big Beast was revalued for the first time on 30 June 2019, from $33,000 to $30,000, where the loss on revaluation has been recorded in the accounts for that year. It has been determined that Big Beast has an estimated fair value of $25,000 on 30 June 2020. Ignore any tax effect.
Required: Prepare the necessary journal entries for the year ending 30 June 2020 to record the depreciation and revaluations for the equipment in accordance with AASB 116 Property, Plant and Equipment. Show all relevant dates, workings, and narrations.
• Make sure you show all workings to support your answers.
• Show all journal entries in chronological order, with dates stated clearly.
• In preparing your journal entries, narrations are not required.
• Make sure all depreciation charges are up to date.
Question 4 [15 marks]
Part A: Tushita Milk Ltd has an operation that processes milk into milk-based products such as yogurt, butter, and custard, for domestic and export markets. Its production and packing facilities and head office are located in Wagga Wagga. In addition to buying milk for processing from various sources, the company operates 10 farms of its own, all located within 50 kilometers of Wagga Wagga. All milk produced by the livestock raised on the farms is used by Tushita in its milk-processing operations, that is, there are no external sales. The 10 farms provide Tushita with approximately 40% of its milk input. The 10 farms share a pool of four staff and equipment. Staff spend approximately 80% of their time working on the 10 farms and 20% at the central Wagga Wagga operations. One staff member acts as a supervisor but all decisions relating to the farms are made by a head office manager.
Required: Would the 10 farms represent ten separate cash-generating units or one? Explain your answer. (4 marks)
Part B: Naga Ltd has an operation that is regarded as a separate cash-generating unit (CGU). At 30 June 2019, the carrying amounts of the assets, valued pursuant to the cost model, are as follows:
The directors estimate that, as at 30 June 2019, the fair value less costs to sell of the CGU amounts to $405,000, while the value in use of the CGU is $422,500. The land had a fair value less costs to sell of $195,000.
Required: For the year ended 30 June 2019, determine how Naga Ltd should account for the results of the impairment test and prepare all necessary journal entries. Explain your answers where necessary. (11 marks)