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You are required to finish each of these questions, total 30 marks.

Please give the


solutions in detail, show calculations and submit the solutions to Moodle using a single
file, it can be Excel format, Word format or PDF format, no requirement on word
limits. If any reference was used, please refer to Harvard style. Question 1 (10 marks),
Question 2 (10 Marks), Question 3 (10 Marks)) Question 4 (10 Marks).

1. During the reporting period ending 30 June 2018, Midnight Boil Ltd constructed a nuclear
power generator just outside of Melbourne. The cost of the power generator and associated
technology amounted to $12 550 000. Other costs associated with the construction amounted
to:
Costs incurred in obtaining access to the site $2 500 500
Power Permits 400 500
Engineers’ Fees 1 100 500
4 001 500
The plant was ready to start generating power on 1 July 2018, with actual generation starting
on 1 October 2018. At the end of the power plant’s useful life, which is expected to be 10
years, Midnight Boil Ltd is required by the government to dismantle the plant, remove it, and
return the site to its original condition. After consulting its own engineers and
environmentalists, Midnight Boil Ltd estimates these costs to be:
Dismantling the plant $750 500
Environmental remediation costs 1 249 500
Replacement of flora and fauna 100 000
2 100 000
 Midnight Boil Ltd uses a discount rate of 10 per cent.
Required
Prepare the journal entries necessary to account for the power plant for the years ended 30
June 2018, 30 June 2019 and 30 June 2024. Ignore depreciation.

2. Sun City Limited commences construction of a multi-purpose water park on 1 July 2014
for Pretoria Limited. Sun City Limited signs a fixed-price contract for total revenues of $50
million. The project is expected to be completed by the end of 2017 and Pretoria Limited
controls the asset throughout the period of construction. The expected cost as at the
commencement of construction is $38 million. The estimated costs of a construction project
might change throughout the project—in this example, they do change. The following data
relates to the project (the financial years end on 30 June):
2015 2016 2017($
($m) ($m) m)
Costs for the year 10 18 12
Costs incurred to date 10 28 40
Estimated costs to complete 28 12 –
Progress billings during the year 12 20 18
Cash collected during the year 11 19 20

REQUIRED
(a) Using the above data, compute the gross profit to be recognised for each of the three
years, assuming that the outcome of the contract can be reliably estimated.
(b) Prepare the journal entries for the 2015 financial year using the percentage-of-
completion method.
(c) Prepare the journal entries for the 2015 financial year, assuming the stage of completion
cannot be reliably assessed.
3. Mam Ltd acquired Bo Ltd on 1 July 2018 for cash of $7 000 000. At that date, Bo Ltd’s net
identifiable assets had a fair value of $5 800 000. The fair value of the net identifiable assets
of Bo Ltd are determined as follows: (in $000)
Customer List 50
Machinery 1450
Buildings 1500
Land 3000
6000
Less: Bank Loan 200
Net assets 5800
At the end of the reporting period of 30 June 2019, the management of Mam Ltd determines
that the recoverable amount of the cash-generating unit, which is considered to be Bo Ltd,
totals $6 200 000. The carrying amount of the net identifiable assets of Bo Ltd, which
excludes goodwill, has not changed since acquisition and is $5 800 000.
REQUIRED
(a)Prepare the journal entry to account for any impairment of goodwill.
(b)Assume instead that at the end of the reporting period the management of Mam Ltd
determines that the recoverable amount of the cash-generating unit, which is considered to be
Mam Ltd, totals $4 800 000. Prepare the journal entry to account for the impairment.