BUACC5932 CORPORATE ACCOUNTINGMajor Assignment Semester 1 2014PART AThe following information is provided in respect of Fedyou Ltd for calculation of income tax as required by Accounting Standard.
BUACC5932 CORPORATE ACCOUNTING
Semester 1 2014
The following information is provided in respect of Fedyou Ltd for calculation of income tax as required by Accounting Standard AASB112 Income Taxes
Fedyou Ltd commenced operations on 1 July 2007 with an issued share capital of $700,000. On that date the company purchased a number of property plant and equipment (PPE) assets, details of which are provided below:
Land Plant Computers Vehicles
Cost $100,000 $200,000 $100,000 $50,000
Accounting – 15% 25% 30%
Tax – 10% 50% 40%
Method Straight Straight Straight
Line Line Line
30 June 2008 150,000 170,000 75,000 35,000
The Statement of Profit and Loss for the year ended 30 June 2008 was as follows:
Interest Revenue 40,000
Government Grant (exempt from tax) 40,000
Total Revenue 600,000
Cost of Goods Sold 200,000
Salaries and Wages 60,000
Depreciation Plant 30,000
Depreciation Computers 25,000
Depreciation Vehicles 15,000
Doubtful Debts 30,000
Long Service Leave 3,000
Other Expenses 9,000
Total Expenses 395,000
Profit before Tax 205,000
- The current tax rate is 30%
- Insurance of $23,000 was paid during the year. Of this amount $18,000 was considered to be prepaid for the coming financial year
- Rent is paid in arrears. $10,000 is due at end of current year and $8000 has been paid in cash.
- Interest Revenue will be received in the coming financial year.
- No bad debts were written off during the current year
- No payments for long service leave were made during the current year.
At 30 June 2008 the Statement of Financial Position of Fedyou Ltd was as follows:
Allowance for Doubtful Debts 30 270
Property Plant and Equipment 500
Accumulated Depreciation 70 430
Interest Receivable 40
Total Assets 1733
Accounts Payable 280
Accrued Expenses 10
Long Service Leave Provision 3
Deferred Tax Liability 15
Total Liabilities 793
Share Capital 700
Retained Profits 205
Asset Revaluation Surplus 35
Total Equity 940
Total Liabilities and Equity 1733
- Land was revalued upward by $50,000 at 30 June 2008
- The written down values for tax purposes at 30 June 2008 for other PPE assets were Plant $180,000, Computers $50,000 and Vehicles $30,000.
- Calculate taxable income and current tax liability for Fedyou Ltd for year ended 30 June 2008 including journal entry to record these amounts (show all workings)
- Prepare a deferred tax worksheet to calculate the balances of any deferred tax assets and liabilities at 30 June 2008 and prepare required journal entry.
Refer to the attached extracts from the Wannon Water 2012/2013 Annual Report:
- Comprehensive Operating Statement
- Balance Sheet
- Note 5: Income Tax
What recognition criteria for deferred tax liabilities and assets must Wannon Water meet in order to recognise the net deferred tax liability of $36.879 million in its accounts?
At 30 June 2009 Fedyou Ltd undertook a comprehensive valuation of all of its PPE assets. The results of the revaluation exercise were as follows:
Asset Fair Value 30 June 2009
Having regard to the requirements of Accounting Standard AASB116 Property Plant and Equipment and AASB136 Impairment of Assets prepare the journal entries required (including tax effects) if the assets were revalued to fair value at 30 June 2009
Under current accounting standards revaluation increments on PPE assets are credited to a revaluation surplus account in equity, whereas a revaluation decrement may be recognised as an expense under certain circumstances.
Explain and critically evaluate these requirements
PART A 6 + 6 = 12 marks
PART B = 3 marks
PART C = 3 marks
PART D = 2 marks
Total = 20 marks
Key assignment details and assessment criteria:
- Maximum length 300 words each (for PART B and PART D )
The criteria used to assess the submitted assignment will be:
- Evidence of relevant research and demonstrated understanding of research materials. As a minimum students should consult the references listed under additional resources in the Unit Description
- The structure, coherence and logic of arguments and analysis presented.
- Demonstrated understanding of the subject matter that is the focus of the assignment topic.