Student Number: (enter on the line below) Student Name: (enter on the line below) HA3011Advanced financial accounting Trimester 2, 2021 Assessment Weight: 50 total marks Instructions: All Six (6) questions must be answered by using the answer boxes provided in this paper.Completed answers must be submitted to Blackboard by the published due date and time. Submission instructions are at the end of this paper. Purpose:This assessment consists of six (6) questions and is designed to assess your level of knowledge of the key topics covered in this unit Question 1 ( 7 marks) Fabric Ltd acquired a Machine from Box Ltd for the following consideration: Cash $110 000, Land in the books of Fabric Ltd the land is recorded at its cost of $950 000. It has a fair value of $1000 000. Fabric Ltd also agreed to assume the liability of Box Ltd bank loan of $85 000 as part of the Machine acquisition. Required: In your own words, explain when should an impairment loss be recognised (3 marks) ANSWER: ** Answer box will enlarge as you type Question 2 (7 marks) ABC Ltd acquired some machinery at a cost of $200 000 on 1 July 2017. On 30 June 2018, the machinery, which has an accumulated depreciation balance of $30 000, is assessed as having a fair value equal to $150 000. ABC Ltd measures machinery at fair value. Required: Provide the journal entries to reflect the revaluation decrement ( 7 marks) ANSWER: Question 3 (7 marks) On 1 July 2018 Foreign Security Incorporation(FSI) Ltd issues $3 million in 10-year debentures that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 14 per cent. Interest expense is determined using the effective-interest method. Formula for PV of $1 in n periods =1/(1+k)n Formula for present value of annuity of $1 per period for n periods = where, k is the discount rate expressed in decimal Required: Determine the issue price of the debenture. (3 Marks)Provide the journal entries at 1 July 2018 and 30 June 2019 (4 Marks) ANSWER: Question 4 (11 marks) FABS Ltd acquired an item of equipment and entered into a non-cancellable lease agreement with MBC Equipment Ltd on 1 January 2019. The lease consists of the following: Date of inception: 1/1/19Duration of lease: 5 yearsLife of leased asset: 6 yearsLease payments (annual): $250,000 (annual) which includes $30,000 for maintenance and insurance costs per annum. Guaranteed residual value (Added to final payment): $70,000 Interest rate: 14% Required: Determine the present value of minimum lease rental payment. (2 Marks)Prepare the journal entries for FABS (the Lessee) using the Net Method for the following (6 marks) Transfer of controlPayment of annual payments for 2019 and 2020. In your own words, explain how do we account for service costs that are included within a contract to lease an asset? (3 marks) ANSWER: Question 5 (11 marks) Phoenix Arrumax (PAX) Ltd has the following deferred tax balances as at 30 June 2019: Deferred tax asset: $1 500 000 Deferred tax liability: $1 000 000 The above balances were calculated when the tax rate was 20 per cent. On 1 December 2019 the government raised the corporate tax rate to 25 per cent. Required: a) Provide the journal entries to adjust the carry-forward balances of the deferred tax asset and deferred tax liability. ( 6 marks) b) In your own words, explain the rationale and the argument for recognizing a deferred tax asset and a deferred tax liability (5 marks) ANSWER: Question 6 (7 marks) On 1 July 2019 Bassy Ltd enters into an agreement to borrow £3 million from London plc (UK). London plc sends the loan money to Bassy Ltd’s Australian bank account. The loan is for four years and requires the payment of interest at the rate of 9 per cent on 30 June each year. Bassy Ltd’s reporting date is 30 June. The relevant exchange rates are: 1 July 2019 A$1.00 = UK£0.50 30 June 2020 A$1.00 = UK£0.54 Required: Provide the necessary journal entries that would be made in the books of Bassy Ltd to account for the above transaction for the year ending 30 June 2020. (7 marks) ANSWER: END OF FINAL ASSESSMENT Submission instructions: Save submission with your STUDENT ID NUMBER and UNIT CODE e.g. EMV54897 HA3011Submission must be in MICROSOFT WORD FORMAT ONLYUpload your submission to the appropriate link on Blackboard Only one submission is accepted. Please ensure your submission is the correct document.All submissions are automatically passed through SafeAssign to assess academic integrity.
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