Weighting: The assignment is worth 40% of the total unit weight.
1. Students are required to cover all stated requirements.
2. Your answer must be both uploaded to Moodle in word file and handed over a
printed copy.
3. You need to support your answers with appropriate Harvard style references where
necessary.
4. Only include information in your appendixes that has been directly referred to in
the body of your document.
5. Include a title/cover page containing the subject title and code and the name,
student id numbers.
6. Please save the document as ACC204AT2_first name_Surename_Student Number
Eg: ACC204AT2_John_Smith_NA20150000
Question 1: Accounting for Lease
Owing to low liquidity, Lisa Ltd decides on 1 July 2015 to sell its land and buildings to Anderson Ltd. The carrying
values of the land and buildings in the books of Lisa Ltd, at 1 July 2015, are:
The land and buildings are sold for $4334 700 (their fair value), with the amount being allocated equally as
follows:
Land $2167350
Buildings $2167350
Immediately following the sale, Lisa Ltd decides to lease back the land and buildings from Anderson Ltd. The
term of the lease is 20 years. The implicit interest rate in the lease is 12 per cent. It is expected that the
buildings will be demolished at the end of the lease term. The lease is non-cancellable, returns the land and
buildings to Anderson Ltd at the end of the lease, and requires the following lease payments:
Payment on inception of the lease on 1 July 2015 $600000
Payment on 30 June each year starting 30 June 2016 $500000
There is no residual payment required
REQUIRED
a) Provide the entries for the sale and leaseback in the books of Lisa Ltd as at 1 July 2015.
b) Provide the entries for the purchase and lease in the books of Anderson ltd as at 1 July 2015
c) Provide the entries in the books of Lisa Ltd as at 30 June 2025.
d) Provide the entries in the books of Anderson Ltd as at 30 June 2025.
Question 2: Accounting for Income Tax
MR Limited commences operations on 1 July 2014 and presents its first statement of comprehensive income
and first statement of financial position on 30 June 2015. The statements are prepared before considering
taxation. The following information is available:
Statement of comprehensive income for the year ended 30 June 2015
Gross profit
730000
Expenses
Administration expenses 80000
Salaries 200000
Long-service leave 20000
Warranty expenses 30000
Depreciation expense-plant 80000
Insurance 20000 430000
Accounting profit before tax 300000
Assets and liabilities as disclosed in the statement of financial position as at 30 June 2015
Buildings, at cost
Accumulated depreciation
3
Assets
Cash 20000
Inventory
100000
Accounts receivable
100000
Prepaid insurance
10000
Plant-cost 400000
less Accumulated depreciation 80000 320000
Total assets
550000
Liabilities
Accounts payable
80000
Provision for warranty expenses 20000
Loan payable
200000
Provision for long-service leave
expenses
-20000
Total liabilities
320000
Net assets 230000
Other information
All administration and salaries expenses incurred have been paid as at year end.
None of the long-service leave expense has actually been paid. It is not deductible until it is actually paid.
Warranty expenses were accrued and, at year end, actual payments of $10000 had been made (leaving an
accrued balance of $20000). Deductions are available only when the amounts are paid and not as they are
accrued.
Insurance was initially prepaid to the amount of $30 000. At year end, the unused component of the prepaid
insurance amounted to $10000. Actual amounts paid are allowed as a tax deduction.
Amounts received from sales, including those on credit terms, are taxed at the time the sale is made.
The plant is depreciated over five years for accounting purposes, but over four years for taxation purposes.
The tax rate is 30 per cent.
REQUIRED
Provide the journal entries to account for tax in accordance with AASB 112.
Question 3: Consolidation
Sandy Ltd acquired 100 per cent of the issued capital of Beach Ltd on 30 June 2014 for $900 000, when the
statement of financial position of Beach Ltd was as follows:
$000
$000
Assets
Accounts receivable 70
Loan 300
Inventory 100
Land 400
Shareholders' equity
Property, plant and equip. 700
Share capital 500
Accumulated depreciation -270
Retained earnings 200
1000 1000
4
Additional information
The tax rate is 30 per cent.
As at the date of acquisition, all assets of Beach Ltd were at fair value, other than the property, plant and
equipment, which had a fair value of $530000. Beach Ltd adopts the cost model for measuring its property,
plant and equipment. The property, plant and equipment is expected to have a remaining useful life of 10
years, and no residual value.
One year following acquisition it was considered that Beach Ltd's goodwill had a recoverable amount of
$60000.
Beach Ltd declared a dividend of $40000 on 10 July 2014, with the dividends being paid from pre-
acquisition retained earnings.
The statements of financial position and statements of comprehensive income of Sandy Ltd and Beach Ltd
one year after acquisition are as follows:
Statements of financial position of Sandy Ltd and Beach Ltd as at 30 June 2015
Sandy
Ltd
Beach
Ltd
$000 $000
Assets
Cash 80 40
Accounts receivable 50 50
Inventory 140 123
Land 600 400
Property, plant and equipment 900 700
Accumulated depreciation -300 -313
Investment in Beach Ltd 900
Total assets 2370 1000
Liabilities
Accounts payable 100 10
Dividends payable 100 50
Loan 670 140
Shareholders' equity
Share capital 1000 500
Retained earnings 500 300
2370 1000
Reconciliation of opening and closing retained earnings
Profit after tax 400 190
Retained earnings -30 June 2014 300 200
Interim dividend -90 -40
Final dividend -110 -50
Retained earnings -30 June 2015 500 300
REQUIRED
Prepare the consolidated statement of financial position for the above entities as at 30 June 2015.
