Corporate Accounting Assignment Help | Property, Plant and Equip



Corporate Accounting

Answer to the Question no. 1

Q 1.a
Balance Sheet of  Should Be My Own Work Ltd, in the year of 2018
Asset or Liability Carrying Amount Tax Base Differences
Computers at Cost 300 300
Accumulated depreciation -60 -100
Computers Net 240 200 40
Account Receivable 100 100
Allowances for doubtful debt -10 0
Account Receivable, Net 90 100 10
Provision for warranty Cost 30 0 30
Provision for employee benefits (LSL) 20 0 20

Figure 1: 2018 Balance Sheet of Should Be My Own Work Ltd.

Based on the above balance sheet  it has observed that, in case of normal case the net cost of computer, Accounts receivable and other cost amount is 240,90, 30 and 20 only. On the other hand, value of the assets and liability has changed, when tax included the amount.

However, tax only charged upon the income of an organization. Based on that it can state, tax only charged upon the bills receivable account, in case of depreciation tax has not been charged because it is not an income for the company. For that reason, depreciation is always deductable. The changed balance sheet has shown below:

Q 1.a
Balance Sheet of  Should Be My Own Work Ltd, in the year of 2018
Asset or Liability Carrying Amount
Computers at Cost 300
Accumulated depreciation -60
Computers Net 240
Account Receivable 100
Allowances for doubtful debt -10
Tax on Income -33.33
Account Receivable, Net 56.67
Provision for warranty Cost 30
Provision for employee benefits (LSL) 20

According to the Figure one it has observed, the difference between carrying amount and tax base is 40 for computer net, 10 for account receivable, 30 for the provision warranty cost and 20 for the Provision employee benefit. Based on that it can be state, the Provision warranty cost and Provision employee benefit can be considered as a deferred tax liability of the company and other two components, which is computer net and net account receivable can be considered as a deferred asset for the company (Larson, Lewis and Spilker, 2017)

1.c Taxable Income for 30th June 2019 (Gross Income – Deductions)
 Income Expenses
Profit Before Tax (Gross Income) 650000 Bad debts 15000
Warranty Cost 70000
Taxable Income of ShouldBeMyOwnWork Ltd. 565000

In accordance to the question it has observed that the, gross profit of the company is $650000 in the year of 30th June 2019. Therefore, expenses of the company are $15000 as a bad debt and $70000 as a warranty cost of the company. Based on that, the taxable income of the company is $565000 at end of the year 2019 (Dhaliwal et al., 2017).

In the books of Should Be My Own Work Ltd. as on at 30/06/2019

Date Particular Ledger Folio Amount

$(Debit)

Amount

$(Credit)

01/07/2017

 

 

 

Profit and Loss A/c …………….Dr.

To, Deferred tax A/c………………..Cr.

(Narration: Being Liability on deferred tax has been created  )

————

 

 

 

 

———–

 

 

 

30/06/2018

 

 

Profit and Loss A/c ……….Dr.

To, Current tax A/c …………….Cr.

(Narration: Being tax has been paid by the company)

———–

 

 

 

————

 

30/06/2018

 

 

 

 

 

Deferred tax A/c…………Dr.

To, Profit and Loss A/c……..Cr.

(Narration: Being Liability of Deferred tax has been adjusted by the company)

 

———–

 

 

 

 

 

 

———–

 

 

 

 

01/07/2018

 

 

 

 Profit and Loss A/c……..Dr.

To, Current tax A/c………..Cr.

(Narration: Being tax has been estimated in this year)

 

————

 

 

 

 

 

————

 

 

 

 

 

30/06/2019

Deferred Tax A/c………..Dr.

To, Profit and Loss A/c………..Cr.

(Narration: Being deferred tax liability has been created)

 

————

 

 

 

————

 

According to the Journal entry it has been determine, in the year of 1/07/2017 deferred has been crated and 30/06/2018 the due tax has been paid and the same date the tax has been adjusted. In next year the tax has been estimated by the company and 30/06/2019 the deferred tax has been crated again, which may be adjusted in next year of Should Be My Own Work Ltd (Watson, 2017). 

On the basis of case scenario it has observed that, the employer of a company has provided different kind of benefits such as, Incentive or other beneficial amount, which can be considered as expenses of a company (Patel, Guedes and Pearce, 2017). On the other hand, if the amount has not been paid by the employer, then it has treated as a liability for employer in the organization. Based on that, it has been determined, provided benefits of employee can be considered as a major responsibility of a company as well as the spent amount always treated as a cost or expenses for the business.

This kind of expenses of a company may generate profit for the organization in future, therefore if the company has invested money on workers for skill development as well as capability development then it may considered as a future asset of a company (Graves, 2017). It may happen, the expended amount on employee has been treated as expenses for recent year but the expenses will recovered after the completion training process of employee. The productivity of a worker or employee may increase when employee skill has developed properly, which can be considered as a asset for the organization.

In the books of **** Ltd. as on at */**/*

Date Particular Ledger Folio Amount

$(Debit)

Amount

$(Credit)

*/**/*

 

 

 

 

 

 

 

*/**/*

 

 

 

 

 

*/**/*

 

Salary/Incentive/Employee/Benefit A/c …………………….Dr.

To, Cash        A/c………………………Cr.

(Narration: Being Incentive Given to the Employees for good performance)

Note: In this case expended money treated as a expenses of a company

 

Employee (Employee name or Code) …….Dr.

To, Salary/Incentive/Employee Benefit A/c……Cr.

(Narration: Being Incentive has not been paid the employer)

Note: In this case the Expended money treated as a Liability of a company.

 

Tanning Expenses A/c …….Dr.

To, cash A/c……Cr.

(Narration: Being Cash has been expended for employee training purpose)

Note: In this scenario the expended amount treated as a expenses but it can be considered as a future asset of the company.

———  

———

——– ———
 

 

——–

 

 

 

——–

——– ——-
 

 

 

———

 

 

 

 

———

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Answer to the Question no. 3

In the books of NT News On The Go Ltd. as on at */**/*

Date Particular Ledger Folio Amount

$(Debit)

Amount

$(Credit)

*/**/*

 

 

 

 

 

*/**/*

 

 

Masthead A/c …………….Dr.

To, Cash A/c………………..Cr.

(Narration: Being NT News On The Go Ltd. developed a masthead for a news paper, which is valuable asset for the company)

Note: Here, The masthead treated as a Asset for the company

Cash A/c ……….Dr.

To, Sale A/c …………….Cr.

(Narration: Being The masthead has been sold)

Note: In case of The Masthead Sold.

3000000

 

 

 

 

 

3000000

 

3000000

 

 

 

 

 

3000000

Based on the case scenario it has been determined, Masthead of NT News On The Go Ltd. treated as an asset for the company because if company has sold this masthead may gain approximately $3 million (André and Fournier, 2017). The masthead of the company can be considered as a tangible asset for the company. For that reason the depreciation has been charged upon this asset as well as tax also has deducted from the income from masthead. On the other hand, if masthead has been sold by the company then company gets $3million profit instantly, which has increased the cash flow within the organization.

In the books of John Wiley & Sons Australasia Ltd. as on at */**/*

Date Particular Ledger Folio Amount

$(Debit)

Amount

$(Credit)

*/**/*

 

 

 

*/**/*

 

 

*/**/*

 

 

*/**/*  

Purchase A/c ………..Dr.

To, Cash A/c…………Cr.

(Narration: Being John Wiley & Sons Australasia Ltd has been purchased a publishing title)

Depreciation A/c………….Dr.

To, Title A/c……………………Cr.

(Narration: Being Depreciation has been charged upon the Title)

Tax on income from asset ……….Dr.

To, Cash A/c………….Cr.

(Narration: Being Income tax charged on income from asset)

Cash A/c ……….Dr.

To, Sale A/c …………….Cr.

(Narration: Being Title has been sold by the company)

Note: In this case if the title will sold in re of 1.5 ,million

 

1200000

 

 

 

———-

 

 

———–

 

 

1500000

 

1200000

 

 

 

———–

 

 

———-

 

 

1500000

Based on the case scenario has observed that, the company named John Wiley & Sons Australasia Ltd. purchased a published a title in $1.2 million, which can be considered as tangible asset for the company. Therefore, Depreciation has been charged upon the asset as well as income tax also has charged upon income from the asset over the two years. On the other hand the asset value has increased after two years, which is $1.5 million after the deduction of depreciation and income tax, it can be considered as a valuable asset for the company as well as if Asset will sold then it has considered as a capital gain for the company, worth $1.5million.

In the books of Booze Your Juice Ltd. as on at */**/*

Date Particular Ledger Folio Amount

$(Debit)

Amount

$(Credit)

*/**/*

 

 

 

*/**/*

 

 

 

 

 

ice-cream stand A/c ………..Dr.

To, Cash A/c…………Cr.

(Narration: Being Booze Your Juice Ltd has been acquired a ice-cream stand)

Cash A/c ……….Dr.

To, Sale A/c …………….Cr.

(Narration: Being ice-cream stand has been sold by the company)

Note: In this case if the ice-cream stand sold in $200000

 

100000

 

 

 

200000

 

100000

 

 

 

200000

 

On the basis of case scenario it has been identified that, Booze Your Juice Ltd. has acquired an ice-cream stand for business in the beach, worth $100000. The company has invested on this ice-cream stand to gain profit from that. The company wants to expand their business to other beaches, which can be considered as a valuable strategy for the company. On the hand it has observed, the ice-cream stand market value is $200000, which is double on the company investment. If company wants to business with ice-cream stand then the return on investment may take time as well as many issues may introduce during the payback period time. In case company sell ice-cream stand then the company gets instantly $200000, which is market value of ice-cream stand and it may considered as a short term investment of the company.

In the books of DJB Ltd. as on at */**/*

Date Particular Ledger Folio Amount

$(Debit)

Amount

$(Credit)

*/**/*

 

 

 

*/**/*

 

 

 

 

 

Development Expenses  ………..Dr.

To, Cash A/c…………Cr.

(Narration: Being DJB Ltd has invested money for development purpose )

Development recoverable A/c ……….Dr.

To, Cash A/c …………….Cr.

(Narration: Being Money has been recovered from expenses on development )

 

520000

 

 

 

860000

 

520000

 

 

 

860000

 

Through an overview on case it has identified that, The Company named DJB Ltd. has expended money for development purpose, worth $520000. It can be considered as a cost or expenses of the company. However, the company has recovered $860000 due to appropriate development process, which can be considered as a liquid asset or return on investment for the company as well as company may recover capital from this activity of the company (El-Halwagi, 2017). 

On the basis of case scenario it has observed that, the company named ACT503 Ltd, has performed well in last 10 years. Somehow, company performance has been diluted in past two years, Bank has fully controlled the organization.  According to the AASB 10, a company has to be maintaining a proper financial statement, otherwise company fallen (Australian Government, 2011). In following AASB 10 B18 and B28 Investor power is always greater than investee as well as the taken loan has to be paid by the company , based on that it can be claimed, Bank have full control on the company because, company has too much liability in the bank.

Based on the case scenario it has identified that, GyK Pty Ltd has installed hi-tech machinery for increasing productivity and product. However, company’s machineries are corrupted and its not able to give proper productivity, which has introduce loss for the company. In accordance with AASB B77 it can be claimed that,  if company’s liability has increased in this year and bank tool all asset then bank has full control to recover its liability and company treated a different entity in respect of  other company in the market.

An overview on the case study it has noticed that, there are several share holder of the company ACT502 Ltd. the company have only five seat for the share holders, Two for the non executive and three for the share holder as well as company has arranged a meeting to maintain relationship with shareholders. In accordance with AASB 10 B23 (b), it can be claimed, only shareholder are attend meeting of shareholder relationship. Therefore, only chief executive has been liable to attend board meetings.

On the basis of case scenario it has determined that, B1 Ltd. and B2 Ltd have 50% share each for the company S Ltd and they appointed a managing director for control and maintain the share related activities. According to the AASB 10 B97d, 23(b) and B43, each company has to be share profit and loss in business. Therefore, these companies have to treated equal regarding business loss. However, only B1 have 10 share with 10% discount, which cannot be divided in these companies because that share acquired by B1 and only the organization get the profit from share.

Based on the case scenario it can be asserted that, The Company named Boost Juice Ltd has 51% share of the Chatime Tea Ltd. and Trampoline Ltd has 49% share of the company. There are five shareholder seat is available for both company, where Boost Juice Ltd has acquired two seats and another three seats operated by the Trampoline Ltd. According to the AASB B23 (b), every share holder treated as a same within the organization and share percentage of share is only related to the profit on share. Therefore, Boost Juice Ltd has to be happy due to equality regulation of AASB 10; the profit issue regarding share percentage may introduce unhappiness for the Boost Juice Ltd.

According to the cast it can be claimed that, there are three companies P Ltd, G Ltd and H Ltd are the main shareholder of the a company named PGH Pty Ltd. In accordance with AASB 10 23(b), B43 and B97d, it can be asserted that, each company have equal rights regarding share as well as the organizations also have rights to vote regarding share issue. Apart from this, the loss on share and company has to be divided in these three companies. Answer to the Question no. 5

Acquisition analysis

Statement of financial position TakeItEasy Ltd as at 30 June 2018
Asset Amount Liabilities Amount
Accounts Receivable 49000 Loan 300000
Inventory 100000
Land 400000 Share Capital 500000
Property, Plant and Equip 530000 Retained Earnings 140000
Accumulated Depreciation 270000 Share capital 360000
Property, Plant and Equip value After Depreciation 260000 Dividend Paid 40000
Goodwill 60000 Retain earnings 100000
Suspense Liability 109000
Total Asset 869000 Total Liability 869000

On the basis of above balance sheet it has observed, the company named TakeItEasy Ltd.’s Assets are higher than liability, which may looks good for the organization but financially it is not good for the organization. According to the AASB, it can be state that, the asset and liabilities should be same in both side of balance sheet. In the case of TakeItEasy Ltd, balance sheet has suspense liability, which may harm company’s profit maximization. On the other hand, ChallengeMe Pty Ltd. has acquired completely this organization, for gain more profit to the market. Although, TakeItEasy Ltd has been acquired by the ChallengeMe Pty Ltd. but both companies may effected for its unbalanced suspense liability.
In the year of 30 June 2019, the company ChallengeMe Pty Ltd. gains a reliable profit for the organization after the acquisition of TakeItEasy Ltd. Companies retain earnings also has increased at end of the year 2019.

Retained earnings of ChallengeMe Pty Ltd. and TakeItEasy Ltd

  ChallengeMe Pty Ltd. TakeItEasy Ltd.

 

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

Consolidated Statement worksheet and Financial Position of ChallengeMe Pty Ltd. and TakeItEasy 

Consolidated financial position Statement of ChallengeMe Pty Ltd. and TakeItEasy Ltd. as at on 30th June 2019

Consolidation ChallengeMe Pty Ltd. TakeItEasy Ltd Eliminations Consolidated
Working Paper
Assets Debit  Credit
Cash 80 40 120
Accounts Receivable 50 50 100
Inventory 140 123 263
Land 600 400 1000
Equipment Net 600 387 987
Goodwill
Investment in ChallengeMe Pty Ltd. 900 900
Total Asset 2370 1000 2470
Liability and equity
Accounts Payable 100 10 110
Dividends Payble 100 50 100 50
Loan 670 140 810
Share Capital 1000 500 500 1000
Retained Earnings: 500 300 300 500
Total Liability 2370 1000 2470

Australian Government, 2011. Consolidated Financial Statements. AASB Standard. [Online] Available at: http://www.aasb.gov.au/admin/file/content105/c9/AASB10_08-11.pdf   [Accessed on 25th September, 2017]

Larson, M.P., Lewis, T.K. and Spilker, B.C., 2017. A Case Integrating Financial and Tax Accounting Using the Balance Sheet Approach to Account for Income Taxes. Issues in Accounting Education.

Dhaliwal, D.S., Lee, H.S., Pincus, M. and Steele, L.B., 2017. Taxable Income and Firm Risk. The Journal of the American Taxation Association39(1), pp.1-24.

Watson, L., 2017. Discussion of’Does the Deferred Tax Asset Valuation Allowance Signal Firm Creditworthiness?’.

Patel, P.C., Guedes, M.J. and Pearce, J.A., 2017. The Role of Service Operations Management in New Retail Venture Survival. Journal of Retailing93(2), pp.241-251.

Graves, K., 2017. The Management and Employee Development Review: Competitive Advantage Through Transformative Teamwork and Evolved Mindsets. CRC Press.

André, C. and Fournier, A., 2017. Brand as a Legal Asset for Luxury Companies: Brand Power. In New Luxury Management(pp. 103-124). Springer International Publishing..

El-Halwagi, M.M., 2017. A return on investment metric for incorporating sustainability in process integration and improvement projects. Clean Technologies and Environmental Policy19(2), pp.611-617.


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