Final Supplementary Examination Cover Sheet Trimester 1 – 2022 STUDENT INFORMATION name

Final Supplementary Examination Cover Sheet

Trimester 1 – 2022

STUDENT INFORMATION

name

Date

ID number

Signature

EXAMINATION INFORMATION

Subject

CAC 305 – CORPORATE ACCOUNTING

Reading time

N/A

Writing time

N/A

No. of pages including cover sheet and blank page

17

Total marks in exam

100

% of Final grade

50

EXAMINATION STRUCTURE

Sections

Weighting

Marks

Multiple Choice Questions

10 questions

20%

20

Short Answer Questions

4 Questions

20%

15

Practical Questions

4 Questions

60%

60

TOTAL

100%

100

INSTRUCTIONS

This is a Take-home exam. Text books, dictionaries and notes are allowed in the exam.

This is an individual exam. You must not speak to other students or look at others work.

Create a new word document and on top of the first page type your StudentID_First Name_Last Name_Lecturer’s Name_T1 2022.

Do NOT rewrite the question in your exam answers. Just mention each part (A/B or C) and write the number of the question.

The typed answers must need to be submitted in Turnitin in Moodle within the 24 hours of the given timeframe.

Section 1: Multiple Choice Questions (20 marks)

PLEASE BOLD THE CORRECT ANSWER IN YOUR WORD DOCUMENT. (2 marks each, 20 marks in total).

Question 1

The following segment information relates to Tolkein Enterprises:

Applying the tests for identifying a reportable segment in accordance with AASB 8, which of the above segments qualify for reporting and do the segments satisfy the 75 per cent test?

A. mechanical engineering and retailing, 75 per cent test satisfied;

B. industrial manufacturing, mechanical engineering and retailing, 75 per cent test satisfied;

C. project consulting, mechanical engineering and retailing, 75 per cent test satisfied;

D. industrial manufacturing, project consulting, mechanical engineering and retailing, 75 per cent test satisfied;

Question 2

Richmond Ltd has the following potential ordinary shares on issue as at 30 June 2009:

The closing price for Richmond Ltd shares on 30 June 2009 was $3.35 and the average share price for the period was $3.20.

What is the total number of shares deemed issued for no consideration for all of above potential ordinary shares that is in accordance with AASB 133 Earnings per Share?

A. 14 063
B. 18 750
C. 31 343
D. 33 582

 

Question 3

ABC Ltd’s basic earnings per share is $1.25 for the year ended 2012. The company has the following outstanding potential ordinary shares at the start of the year with the following information:

Average share price for ABC Ltd during the year is $1.80.

Which of the above potential ordinary shares is the most dilutive and least dilutive POS in accordance with AASB 133 Earnings per Share, respectively?

A. convertible notes, employee options
B. executive options, convertible notes
C. employee options, convertible notes
D. preference shares, executive options

Question 4

Which of the following is not a required disclosure to be made in relation to each class of share capital? 

A. Number of shares authorised.
B. Number of shares issued and fully paid and issued but not fully paid.
C. Par value per share or that the shares have no par value.
D. None of the given answers is correct.

Question 5

On 1 July 2022, Han Solo Ltd acquired 80 per cent of the share capital of Chewbacca Ltd for $400 000, which represented the fair value of the consideration paid, when the share capital and reserves of Chewbacca Ltd were:

All assets of Chewbacca Ltd were recorded at fair value at acquisition date, except for equipment that had a fair value $20 000 greater than its carrying amount. The cost of the equipment was $40 000 and it had accumulated depreciation of $10 000. The tax rate is 30 per cent.

Using the partial goodwill method, what is the amount of fair value adjustment and goodwill, respectively, on 1 July 2022 for non-controlling interests in Chewbacca Ltd?

 
A. $ 2800; zero
B. $11 200; 22 200
C. $ 2 800; $22 200
D. $11 200; $88 800

 

Question 6

In the case of a lease, the accounting treatment by the lessee could: 

A. calculate the IRR implicit in the lease contract and disclose it in the notes to the accounts.
B. provide note disclosure to the accounts and recognise the lease payments in the same way as a rental expense.
C. accrue the lease payments and match them against revenues earned by using a unit of production method.
D. recognise an asset and associated liability equal in value to the present value of the minimum lease payments.

Question 7

Companies A, B and C are all part of the one economic entity, but are all separate legal entities required to prepare their own financial statements. Company A sold Company B’s inventory that cost $56 000 for $78 000. At the end of the same period Company B has three-quarters of that inventory still on hand and the rest has been sold to an entity outside the economic group. At what amount should the inventory remaining in Company B be recorded in Company B’s own financial statements? 

A. $42 000
B. $58 500
C. $56 000
D. $14 625

 

Question 8

Buster Ltd owns 85 per cent of the issued capital of Rhymes Ltd. During the period ended 30 June 2016 the operating profit of Rhymes Ltd was $680 000. Buster Ltd bought goods for $540 000 from Rhymes. The goods cost Rhymes $400 000 and at the end of the period none of this inventory was still on hand. Rhymes paid Buster a management fee of $100 000 during the period. Goodwill on consolidation was impaired by $30 000. Rhymes paid a dividend of $40 000 at the end of the period.
What is the non-controlling interest in the operating profit of Rhymes Ltd?

A. $87 000
B. $112 500
C. $102 000
D. $101 969

Question 9

Aus Co Ltd has a foreign operation based in New Zealand. The following information was extracted from the foreign operation’s accounts for the period ended 30 June 2015:

Exchange rate information is:

What is the amount at which each item will be translated (rounded to the nearest A$)?

 
A. 

B. 

C. 

D. 

Question 10

Emu Co Ltd purchased a foreign operation based in Singapore on 1 July 2012. The following information was extracted from the foreign operation’s accounts for the period ended 30 June 2014:

Exchange rate information is:

What is the amount at which each item will be translated (rounded to the nearest A$)?

 
A. 

B. 

C. 

D. 

 

PART B –Short Questions (20 Marks)

Question 1

Briefly identify the types of information that must be disclosed in relation to key management personnel-related transactions.

Question 2

What is a non-controlling interest, and how should it be disclosed? How are non-controlling interests affected by intragroup transactions?

Question 3

Explain what rates should be used for the assets, liabilities and equity items of a foreign entity items of a foreign entity when translating the financial statements from a functional currency to a presentation currency.

Question 4

‘Lease term’ is defined within the accounting standard as

PART C- Practical Questions (60 Marks)

Question 1: (15 Marks)

Part A: (Marks 7)

On 5 June 2022 Perth Ltd acquires goods on credit from a supplier in London. The goods are shipped FOB London on 5 June 2022. The cost of the goods is UK250,000 and the debt remains unpaid at 30 June 2022. On 5 June 2022 the exchange rate is A$1.00 = UK0.46. On 30 June 2022 it is A$1.00 = UK0.44. Hence the value of the Australian dollar has decreased relative to the UK pound. Perth Ltd’s reporting date is 30 June.

Provide the accounting entries necessary to account for the above purchase transaction for the year ending 30 June 2022.

Part B: (8 Marks)

On 1 July 2021 Double Island Ltd enters into an agreement to borrow £2 million from Point plc (UK). Point plc sends the loan money to Double Island Ltd’s Australian bank account. The loan is for four years and requires the payment of interest at the rate of 8 per cent on 30 June each year. Double Island Ltd’s reporting date is 30 June.

The relevant exchange rates are:

1 July 2021 A$1.00= UK0.48

30 June 2022 A$1.00 = UK0.50

Provide the necessary journal entries that would be made in the books of Double Island Ltd to account for the above transaction for the year ending 30 June 2022. LO 28.5

Question 2: Intragroup Transactions (15 marks)

On 1 July 2021, Dark Ltd acquired 100 per cent interest in Sandy Ltd

On 1 July 2021, Dark Ltd Ltd sells an item of plant to Sandy Ltd for $650,000

This plant cost Dark Ltd $950,000, is five years old and has accumulated depreciation of $500 000 at the date of the sale

The remaining useful life of the plant is assessed as five years

The tax rate is 30 per cent

Prepare all the necessary adjusting entries.

Question 3: Intragroup Transactions (15 marks)

Tim Ltd owns all of the shares of Sam Ltd. In relation to the following intragroup transactions, all parts of which are independent unless specified, prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2022.

Assume an income tax rate of 30%.

Part A: On 1st July 2021, Tim Ltd acquired all shares of Sam Ltd for $800,000. At that date the equity of Sam Ltd was recorded at:

Share capital $550 000

Reserves $110 000

Retained earnings $80 000

Prepare the acquisition entry. (2 marks)

Part B: Tim Ltd sold inventory to Sam Ltd on 1 September 2021 for $40 000. The inventory costs Tim Ltd $20 000. Three quarter of the inventory was sold by Sam Ltd to Goanna Ltd an external party.

Prepare all three elimination entries. (5 marks)

Part C: In January 2022, Sam Ltd paid a $3000 interim dividend.

Prepare the elimination entry. (3 marks)

Part D: In January 2022, Sam Ltd declared a $5000 dividend.

Prepare the elimination entry (5 marks)

Question 4 (15 marks)

On 1st of July 2021, Silly Ltd leased a machine from Andre Ltd. The machine had a fair value of $95,055 on 1 July 2021. The lease agreement contained the following provisions:

Lease term 3yrs

Annual Rental, first payment 30/06/2022 $30 000

Residual value at end of the lease term $20 000

Residual guaranteed by lease $10 000

Interest rate implicit in lease 7%

The lease is cancellable only with the permission of the lessor. The expected useful life of the machine is 4 years. Silly Ltd intends to return the machine to the lessor at the end of the lease term.

The annuity factor for Single Payment T1 (7%, n=3) = 0.8163

The annuity factor for T2 (7%, n=3) = 2.6243

Part A- ( 1 marks)

Calculate Present value of Lease Payments.

Part B- (5 marks)

Prepare a Lease Payments Schedule for the lessee? Show all workings

Part C- (2 marks)

Prepare journal entries for the lessee to record the lease for the year ended 30.06.2023.

Show all workings

Part D- (5 marks)

Prepare a Lease receipts Schedule for the lessor. Show all workings

Part E- (2 marks)

Prepare journal entries for the lessor to record the lease on 30.06.2023. Show all workings

THIS PAGE IS FOR ROUGH WORKINGS AND WILL NOT BE MARKED

END OF EXAM