ACFI2011

Question 1 (4 marks)

XYZ Accounting Services has just invoiced one of its clients $5,000 for accounting services provided to ABC Pty Ltd.

i) Explain how XYZ Accounting Services should recognise this event, justifying your answer by reference to relevant Conceptual Framework definitions and recognition criteria.

ii) Would your answer be different if the services had not yet been provided; that is, the payment is in advance by ABC Pty Ltd.

Show the necessary journal entries if required for (i) & (ii) after your explanations.

(Hint: consider recognition criteria for revenue and assets in your answers)


Question 2 (8 marks)

A summarised comparative statement of financial position of Elizabeth Ltd is presented below.

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Additional information

  • There were no disposals of land or plant during the year.

  • A $60 000 borrowing was settled through the issue of ordinary shares. There were no other

    repayments of borrowings.

  • Profit for the year was $240 000, interest expense was $28 000, and income tax expense

    paid was $82 000. There were no items of other comprehensive income.

  • A $146 000 dividend was paid during the year.

  • Sales revenue for the year was $600 000. There was no other revenue.

    Required
    Prepare the operating section of the statement of cash flows using the direct method.

  1. Question 3 (5 marks)

    McDonalds Ltd provides long service leave for its retail staff. Long service leave entitlement is determined as 13 weeks of paid leave for 10 years of continued service. The following information is obtained from McDonald’s Ltd’s payroll records and actuarial reports for its retail staff at 30 June 2022.


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Additional information

• The estimated annual increase in retail wages is 1% p.a. for the next 10 years, reflecting expected inflation.page2image23812288 page2image23813056 page2image23812672 page2image23812864 page2image23813632 page2image23813440

• The provision for long service leave for retail staff at 30 June 2021 was $22 000.

• No employees were eligible to take long service leave during the year ended 30 June 2022.

Required
Prepare the journal entry to account for McDonald’s Ltd’s provision for long service leave at 30 June 2022.
(Use attached NPV table to check the respective factors as required)


Question 4 (4 marks)

On 30 June 2022, the statement of financial position of Canberra Ltd showed the following non-current assets after charging depreciation.

The company has adopted fair value for the valuation of non-current assets. This has resulted in the recognition in previous periods of an asset revaluation surplus for the building of $28 000. On 30 June 2022, an independent valuer assessed the fair value of the building to be $320 000 and the vehicle to be $180 000. Hint: Use revaluation method.

Required

  1. Prepare any necessary entries to revalue the building and the vehicle as at 30 June 2022.

  2. Assume that the building and vehicle had remaining useful lives of 25 years and 4 years

    respectively, with zero residual value. Prepare entries to record depreciation expense for the year ended 30 June 2023, using the straight-line method for both building and motor vehicle.

Question 5 (4 marks)

The general ledger trial balance of Lion Ltd includes the following accounts at 30 June 2022.

Additional information

  • A revaluation gain of $14 000 net of tax was recognised for financial assets recognised at fair value through other comprehensive income held during 2022. Hint: This is to be shown under header of other comprehensive income.

  • No financial assets recognised at fair value through other comprehensive income were sold during the year.

  • Lion Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and classifies expenses by function.

    Required
    Prepare the statement of profit or loss and other comprehensive income of Lion Ltd for the year ended 30 June 2022, showing the analysis of expenses in the statement.






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