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SOLOMON ISLANDS NATIONAL UNIVERSITY

SCHOOL OF BUSINESS AND MANAGEMENT

INTERMEDIATE FINANCIAL ACCOUNTING I

ACC613 – ASSIGNMENT 2
Instructions:
 The assignment weighs 12%.
 This assignment is an individual assignment.
 Please include a Title Page and Bibliography
 Provide proper referencing of materials cited, copying other peoples work
without properly acknowledging it is known as plagiarism and is not allowed.
 Copying from another student is NOT allowed. Anyone found doing so will get
ZERO mark.
 Please submit original copy of your assignment as photocopied copy will not be
accepted.
 Assignment must be Word Processed (typed); hand written assignment will not
be accepted nor marked.
 Due date – 4 May 2017, time 5pm. Upload soft copy of your assignment through
SINU moodle, or email your soft copy to my email: Toncan.eli@sinu.edu.sb ,
hard copy will not be accepted. Late assignment will attract mark deduction as
per outline specifications.
 The cover page of this assignment must have your name, ID number and must
be clearly worded as “Assignment 2”.

 Assignment mark composition


Question 1 52
Question 2 48
TOTAL MARKS 100

1
Question 1: Financial Statement Presentation [52 marks]
The balances of Kukum Ltd as at 30 June 2016 are shown below.
The following adjustments are yet to be taken into account s:
I. Inventory on hand at 30 June 2016 valued at $94 250.
II. Allowances for doubtful debts to be increased to $1625, which was the balance of the
account on 1 July 2015.
III. It was discovered that $780 for office equipment had been charged in error to the
purchases account on 1 July 2015.
IV. Depreciation of delivery vehicles and office equipment for the current year to be at the
rate of 20% p.a. on cost, and on buildings at 5% on cost.
V. Interest expense accrued, $325.
VI. Unexpired insurance, $130.
VII. Declare a dividend to shareholders of $22 750 for the current year.
VIII. Transfer $6500 to general reserve and reduce goodwill by $13 000 because of
impairment

Kukum LTD
Trial Balance
as at 30 June 2016
Debit Credit
$ $
Accounts receivable 81 250
Accounts payable 40 700
Advertising expense 4 875
Stationery expenses 585
Share capital 325 000
Bills receivable 6 175
Bank overdraft 10 650
Delivery vehicle (at cost) 30 875
Directors’ fees 8 125
Discount allowed 3 250
First call (25c per share) 6 500
General expenses 5 070
Goodwill (at cost) 39 000
Income from investments 5 000
Insurance expense 625
Interest expense 3 120
Investments (at cost) 104 000
Land (at cost) 26 650
Building (at cost) 100 000
Electricity expense 1 075
Maintenance of vehicle expense 4 375
Office equipment at cost 3 250

2
Petty cash advance 130
Retained earnings (1/7/15) 34 585
Accumulated depreciation – delivery vehicle 5 850
- Buildings 4 550
Allowance for doubtful debts 975
Current tax liability 27 650
Purchases 124 870
Sales 227 500
Income tax expense 27 650
Salaries expense – administrative 11 245
- selling 15 015
Inventory (1/7/15) 74 750 ________
$682 460 $682 460

Required
A. Prepare the income statement and other comprehensive income for the year ended 30 June
2016 in accordance with the requirements of IAS 1/AASB 101. Ensure to show all yours
working out. Income Statement [10 marks], working-out [5 marks]
B. Prepare the statement of financial position as at 30 June 2016 in accordance with the
requirements of IAS1/AASB101. Ensure to show all yours working out. Statement of
finanacial position [20 marks], working-out [5 marks]

Please ensure to provide Note 1, 2, 3,& 4 as per your statement of financial position, I have
purposely show the name of the items so that you can make a note on each that would
normally appear in the notes to the accounts in the financial statement. [12 marks]

NB: The formats I expect to see are on page 3&4. Please follow exactly these formats.

xxxxxxx
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2016
Note 2016
Revenue xxxxxx
Other income xxxxxx
Expenses (xxxxx)
Finance costs (xxxx)
Profit before income tax xxxxxx
Income tax expense xxxxx
Profit for the period xxxxx
Other comprehensive income for the period, net of tax xxxxx
TOTAL COMPREHENSIVE INCOME FOR THE YEAR xxxxxx

3
XXXXXX
Statement of Financial Position
as at 30 June 2016
Note 2016
NON-CURRENT ASSETS
xxxxxxxxxxxxxxxxxx xxxxxxx
Property, plant and equipment* 1 xxxxxxx
xxxxxxxxxxxxxxxxxxx xxxxxxx
TOTAL NON-CURRENT ASSETS xxxxxxx
CURRENT ASSETS
xxxxxxxxxxxxxxxx xxxxxxx
Trade receivables 2 xxxxxxx
xxxxxxxxxxxxxxxx xxxxxxx
xxxxxxxxxxxxxxxx xxxxxxx
TOTAL CURRENT ASSETS xxxxxxx
TOTAL ASSETS xxxxxxx
EQUITY AND LIABILITIES
CURRENT LIABILITIES
xxxxxxxxxxxxxxxx xxxxxxx
xxxxxxxxxxxxxxxx xxxxxxx
xxxxxxxxxxxxxxxx xxxxxxx
TOTAL CURRENT LIABILITIES xxxxxxx
TOTAL LIABILITIES xxxxxxx
EQUITY
Share capital 3 xxxxxxx
Xxxxxxxxxxxxxxx xxxxxxx

Retained earnings 4 xxxxxxx


TOTAL EQUITY xxxxxxx
TOTAL EQUITY AND LIABILITES xxxxxxx

4
Question 2: Accounting for LEASES [48 marks]

On 1 July 2013, Rove Ltd leased a photocopier from Point Cruz Ltd, a company that
manufactures, retails and lease copiers. The photocopier costs Point Cruz $30 000 to make but
had a fair value on 1 July 2013 of $35 080. The lease agreement contained the following
provisions:

Lease term 3 years


Annual payment, payable in advance on 1 July each year $14,500
Economic life of the copier 4 years
Estimated residual value at the end of the lease term when the copier
is returned to Point Cruz Ltd $3 000
Residual value guaranteed by Rove Ltd $1 500
Interest rate implicit in the lease 10%
The lease is cancellable, provided another lease is immediately entered into.

The annual payment included an amount of $2 500 p.a. to reimburse Point Cruz Ltd for the cost
of paper and toner supplied to Rove Ltd. Point Cruz Ltd’s solicitor prepared the lease
agreement for fee of $1365.

On 30 June 2016, at the end of the lease term, Rove Ltd returned the copier to Point Cruz Ltd,
which sold the copier for $3000.

Required
Part A
a) Classify the lease for both the lessor and the lessee. Justify your answer. [4 marks]
b) Prepare the following:
i. for the lessee: the lease payment schedule and the journal entries for the year
ended 30 June 2016 only.[18 marks]
ii. for the lessor: the lease receipt schedule and the journal entries for the year ended
30 June 2014 only. [17marks]
Part B
Assume that the lease term is for 2 years, payments are $12 000 immediately and a further
$12 000 in 12 months time, and no residual value has been guaranteed by Rove Ltd on the
return of the asset to Point Cruz Ltd.

a. Classify the lease for both the lessor and the lessee. Justify your answer. [3 marks]
b. Prepare the journal entries for both the lessor and lessee for the year ended 30 June
2009 only. [6 marks]

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