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Semester Two
Marks: 100
If you create
worksheets in
excel, please
copy and paste
them into
Points are
given for the
quality of your
formats even if
your final
are not
Once you have
completed the
assignment, it needs to be lodged through Safe Assign in the Assessments section of Learnline with an
appropriate CDU cover sheet. Your assessments must be lodged using MSWord. Note: PDF, Excel or
paper copies will not be accepted.
 Make sure your entire assignment can be readily printed on A-4 paper in portrait (preferred) or
landscape format with appropriate page breaks. Do not have a portion of a “wide” worksheet
expand beyond 1 page.
 Make sure your name and student number are on every page of your submission.
ACT 503 Corporate Accounting
Due Date: 11.59 pm Friday 29th September in Study Week 10
Question 1: (Marks 15)
ShouldBeMyOwnWork Ltd had the following balances in their books showing Carrying Amount and
Tax Base amounts at 30 June 2018 which creates temporary differences:

Carrying Amount Tax Base

Asset or Liability ($’000) ($’000)

Computers at cost 300 300

Accumulated depreciation (60) (100)

Computers, net 240 200

Accounts receivable 100 100

Allowance for doubful debts (10) 0

Accounts receivable, net 90 100

Provision for warranty costs 30 0

Provision for employee benefits (LSL) 20 0

The following information is available for the following year, the year ending 30 June 2019.

Statement of profit or loss and other comprehensive income for

ShouldBeMyOwnWork Ltd for the year ending 30 June 2019 ($’000)

Revenue 4,000

Cost of goods sold expense (1,800

Depreciation expense (60)

Warranty expense (90)

Bad and doubtful debts expense (25)

Other expenses (1,375)

Profit before tax 650

Other comprehensive income

ShouldBeMyOwnWork Ltd depreciates computers over five years in its accounting records, but over
three years for tax purposes. The straight-line method is used. During the year, ShouldBeMyOwnWork
Ltd wrote off bad debts amounting to $15,000. Warranty costs of $70,000 were paid during the year. No
amounts were paid for long-service leave during the year.
The following information is extracted from the statement of financial position at 30 June 2019:


Accounts Receivable 120

Allowance for doubful debts (20)


Provision for warranty costs 50

Provision for employee benefits (LSL) 30

ACT 503 Corporate Accounting Assignment

Due Date: 11.59 pm Friday 29th September in Study Week 10
There was no acquisition of plant and equipment during the year.
The tax rate as at 30 June 2018 and 30 June 2019 was 30 per cent
1. Calculate the amount of each of ShouldBeMyOwnWork Ltd’s temporary differences, if Page | 3 any,
at 30 June 2018, and state whether it is deductible or taxable
1. What is the balance of the deferred tax liability and deferred tax asset, if any, as at 30 June 2018?
2019. Calculate ShouldBeMyOwnWork Ltd’s taxable income for the year ending 30 June 2019.
2019. Prepare journal entries to record current tax and deferred tax for the year ending 30 June 2019.
Question 2: (Marks 10)
In accounting for employee benefits wherein under their contract with employers, employees can receive
various forms of benefits in return for their services. Such benefits will usually result to recognition of
expenses by the employer, and if not paid as at the end of the reporting period, becomes liabilities from
the perspective of the employer.
If the services of the employees are used to generate items that are expected to provide future economic
benefits — for example, employees generate Inventories in the form of WIP (work in progress) — then
amounts paid or payable to employees may be considered to be part of the cost of the respective assets.
Required: Aside from the above-mentioned Inventories, illustrate or describe other scenarios you can
think of when would payments made to employees can be considered to be an Asset? Provide possible
journal entries, if needed. Maximum 200 words.
ACT 503 Corporate Accounting
Due Date: 11.59 pm Friday 29th September in Study Week 10

Question 3: (Marks 10)


State whether the following assets may be revalued, support your answer with a brief

explanation to your reason. (maximum 100 words in each scenario). Prepare journal entries
for any revaluations permitted by accounting standards. Assume that each item listed below

represents a separate class of assets

1. NT News OnTheGo Ltd has developed a masthead for its newspaper to the point where it is a very
valuable asset. Although the masthead is not currently recognised, management believes it could be
sold for at least $3 million.
1. John Wiley & Sons Australasia Ltd purchased a publishing title two years ago for $1.2 million
when another publisher went into liquidation. The book lhas been very successful and management
believes that it could probably sell $1.5 million if ever they put it on the market.
1. Booze Your Juice Ltd acquired a franchise for an ice-cream stand at a beach at a cost of $100 000.
There is great demand for this type of franchise as evidenced by recent sales of equivalent
franchises at other beaches. The current market price of such a franchise is $200 000.
1. DJB Ltd has deferred development costs of $520 000 and the estimated recoverable amount of
development project is $860 000.
Question 4 (Marks 15)
You own a financial accounting services called MyNextProblem Consultancy Ltd. You have been invited
to lecture at Darwin Charles Uni and provide advice to students of the requirements of AASB 10 in
respect of the control criterion.
Required: For each of the below independent situation, determine whether or not control exists and, if
so, by which party. Discuss the reasons for your answers. Where possible, support your answer with
excerpts from AASB 10.
You will be marked based on the explanation of your answer and not the Standard’s wordings itself.
Maximum 150 words per situation, excluding any words quoted from the standard.
The following are independent situations:
1. ACT503 Ltd, a supplier of sailing equipment, was incorporated 10 years ago and is 60 per cent
owned by ACT305 Group. ACT503 Ltd has been a very successful business, averaging annual
profits of $500 000. However, during the past two years the company has run into financial
difficulties and has defaulted on its loan with its bank. Consequently, the bank has used the powers
in the load agreement to monitor the company’s activities closely in order to obtain repayment of
its debt. The company must now obtain the bank’s authorisation for any expenditure over $5 000
and no changes in operations of the company are permitted without the bank’s approval.
ACT 503 Corporate Accounting
Due Date: 11.59 pm Friday 29th September in Study Week 10
1. GyK Pty Ltd is a family-run book publisher that has purposely refrained from using high-
technology equipment over the past five years as the directors (the G family) considered it to be a
‘fad’ and a waste of the company’s resources. As a result, the company’s antiquated equipment has
failed to produce quality material and has been
very inefficient compared with GyK’s competitors. During the current year, the company’s bankers
took possession of the company’s assets, converted all the debt Page | 5 into equity and two directors of the
bank were appointed to GyK’s board, which now
totals four people. The bank is undecided whether it should sell the company’s assets, which have little
recoverable value, or reject further equity into the company, purchase more advanced equipment and
attempt to trade on and sell the business as a going concern.
1. ACT502 Ltd is a 30 per cent shareholder of Investment Co. Pty Ltd. The other shareholders have
smaller shareholdings (approximately 8 to 12 per cent) and are always too busy to attend annual
general meetings. ACT502 has two non-executive seats on the board and the remaining three are
held by other shareholders – one chief executive officer who is a shareholder and two non-
executives –who do make an attempt to attend board meetings
1. S Ltd is owned 50 per cent by B1 Ltd and 50 per cent by B2 Ltd (the founding shareholders). Each
has two seats on the board, with no party having a casting vote, although B1 Ltd appoints the
managing director. Profits are split 50-50 after the provision of the managing director’s salary. B2
Ltd has agreed that it will pay a management fee to B1 Ltd, equivalent to 50 per cent of the results
for the year, in the event of a loss. B1 Ltd is a holder of 10 options, which are exercisable at any
time at a 10 per cent discount to the fair value of the shares as at the exercise date.
1. Boost Juice Ltd is a 51 per cent shareholder in Chatime Tea Ltd and currently has
two out of five board seats. Trampoline Ltd holds the remaining 49 per cent shares and currently has
the other three seats. Boost Juice Ltd is a passive shareholder as it is happy with the way Trampoline
Ltd has been running the company.
33. P Ltd, G Ltd and H Ltd are each 33.33 per cent shareholders of PGH Pty Ltd, a small proprietary
company that is involved in the music industry. P Ltd and H Ltd are passive shareholders with the
one board seat each out of a total of three. G Ltd has one board seat and is also involved in the day-
to-day running of the business.
ACT 503 Corporate Accounting
Due Date: 11.59 pm Friday 29th September in Study Week 10
Question 5 (Marks 50)
ChallengeMe Pty Ltd acquired 100 per cent of the issued capital of TakeItEasy Ltd on 30 June 2018 for
$900 000, when the statement of financial position of TakeItEasy Ltd was as follows:

Statement of financial position TakeItEasy Ltd as at 30 June 2018

$(‘000) $(‘000)

Assets Liabilities

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

1,000 1,000

Additional Information:
Tax rate is 30 per cent
As at the date of acquisition, all assets of TakeItEasy Ltd were at fair value, other than the property,
plant and equipment, which had a fair value of $530 000. TakeItEasy 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 TakeItEasy Ltd’s goodwill had a recoverable
amount of $60 000.
TakeItEasy Ltd declared a dividend of $40 000 on 10 July 2018, with the dividends being paid from pre-
acquisition retained earnings.
ACT 503 Corporate Accounting
Due Date: 11.59 pm Friday 29th September in Study Week 10
The statements of financial position and statements of
comprehensive income of
ChallengeMe Pty Ltd and TakeItEasy Ltd one year after acquisition are as follows:
Statement of financial position of ChallengeMe Pty Ltd and TakeItEasy LTd as at 30 June 2019

ChallengeMe Pty Ltd TakeItEasy Ltd

($000) ($000)


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 non-current assets 2,370 1,000


Accounts payable 100 10

Dividends payable 100 50

Loan 670 140

Shareholders’ equity

Share capital 1,000 500

Retained earnings 500 300

Total shareholders’ equity 2,370 1,000

Reconciliation of opening and closing retained earnings

Profit after tax 400 190

Retained earnings — 30 June 2018 300 200

Interim dividend (90) (40)

Final dividend (110) (50)

Retained earnings — 30 June 2019 500 300

Provide the consolidated accounts of ChallengeMe Pty Ltd and TakeItEasy Ltd as at 30 June 2019 with
the following:
Acquisition analysis show relevant calculations All relevant worksheet journal entries
 Fair Value of assets adjustment
 Pre-acquisition eliminating entries
Consolidated worksheet for ChallengeMe Pty Ltd and its controlled entity for the period ending 30 June
2019 showing columns of Eliminations and adjustments and consolidated amounts
Consolidated statement of financial position of ChallengeMe Group.

Hard work pays off. Good Lu

ACT 503 Corporate Accounting Assignment

Due Date: 11.59 pm Friday 29th September in Study Week 10