AF 314 CORPORATE ACCOUNTING

FLEXI-SCHOOL: 2022

INDIVIDUAL ASSIGNMENT

STUDENT: ID NAME
S11183282 SHIVNIL SAMY ACHARI
Question: 1
i. Current Tax Worksheet as at 30th June 2021
$ $
Accounting Profit before tax 131,900
Add:
Rent Received* 100,000
Employee Expense** 660,000
Insurance Expense*** 50,000
Accounting Fees Expense**** 5,500
Allowance for doubtful debts***** 19,500
Depreciation on equipment 5,500
Entertainment Expense 4,000
Legal Fees 3,800
Restructuring cost****** 23,000 871,300

Deduct:
Insurance income (claims) 41,200
Rent Revenue* 50,000
Employee benefit paid** 650,500
Insurance Paid*** 55,950
Accounting Fees Paid**** 1,000
Bad Debts Written Off***** 1,500
Tax Depreciation – Equipment 7,000
Restructuring Expense Paid****** 0 807,150

Taxable Income 196,050

Current Tax Liability (30%) 58,815

Working:
Unearned Rent Revenue*
Rent Revenue 50,000 Opening balance 0
Closing Balance 50,000 Rent Received 100,000

$100,000 $100,000

Employee Expense Paid**

Leave Paid 650,500 Opening balance 40,000
Closing Balance 49,500 Expense 660,000

$700,000 $700,000
 Prepaid Insurance***
Opening balance 5,000 Expense 50,000
Insurance Paid 55,950 Closing balance 10,950

$60,950 $60,950

Accounting Fees****
Fees Paid 1,000 Opening balance 0
Closing balance 4,500 Expense 5,500

$5,500 $5,500

Allowance for Doubtful Debts*****

Bad debts w/off 1,500 Opening Balance 20,000
Closing balance 38,000 Expense 19,500

$39,500 $39,500

Provision for Restructuring******

Cost Paid 0 Opening balance 0
Closing balance 23,000 Expense 23,000

$23,000 $23,000

Journal Entry:
Date Particulars DR CR
30 June 2021 Income Tax Expense 58,815
Current Tax Liability 58,815
Carrying Deductible Tax Base Taxable Deductible
Amount Amount Temporary Temporary
Difference Difference
Assets:
Cash at bank 900,100 0 900,100 0 0
Trade debtors 202,550 0 240,550 0 38,000
Prepaid Insurance 10,950 0 0 10,950 0
Land 450,000 200,000 250,000 250,000 0
Equipment 33,500 28,000 28,000 5,500 0
Other debtors 41,200 0 0 41,200 0

Liabilities:
Trade creditors 239,000 0 239,000 0 0
Borrowings 543,800 0 543,800 0 0
Unearned rent revenue 50,000 50,000 0 0 50,000
Provision for Employee 49,500 49,500 0 0 49,500
Benefits
Provision for restructuring 23,000 23,000 0 0 23,000
Other Creditors 4,500 4,500 0 0 4,500
Total Temporary 307,650 165,000
Difference
Deferred Tax Liability 92,295
Deferred Tax Assets 49,500
Beginning Balance 32,700 18,000
Increase for the Year 59,595 31,500
Other comprehensive 45,000 0
income (OCI)*
Profit 14,595 31,500
ii. Deferred Tax Worksheet as at 30th June 2021

Working:
Other Comprehensive Income (OCI)*
Revaluation increment on land for the period (450,000 – 300,000)
Deferred tax included in OCI: 150,000 x 30% = 45,000

Journal Entries:
Date Particulars DR CR
30 June 2021 Deferred Tax Asset 31,500
Deferred Tax Liability 14,595
Income Tax Expense 16,905

Income Tax Expense - Land 45,000

Deferred Tax Liability 45,000

Question: 2
i. Journal Entries
 Carrying Amount of Assets 1,592,000
Recoverable Amount of Assets 1,456,000
Impairment Loss 136,000
Allocate $16,000 to goodwill and the remaining balance of $120,00 (136,000 – 16,000) to
other identifiable assets.
Carrying Amount Proportion Allocation Net Carrying Amount
Building 656,000 0.46 54,667 601,333
Trademark 80,000 0.05 6,666 73,334
Plant & Equipment 704,000 0.49 58,667 645,333
1,440,000 120,000

Date Particulars DR CR
30 June 2021 Loss on Revaluation (OCI) 8,000
Land 8,000

30 June 2021 Asset Revaluation Surplus 5,600

Income Tax Expense 2,400
Land 8,000

30 June 2021 Accumulated Impairment Loss - Goodwill 44,000

Impairment Loss 16,000
Goodwill 60,000

30 June 2021 Impairment Loss 120,000

Accumulated depreciation & impairment loss - 54,667
Building
Accumulated depreciation & impairment loss – 58,667
Plant & Equipment
Accumulated impairment loss - Trademark 6,666

ii. The Plant & Equipment had a written down value of $640,000 after allocating
impairment losses. However, the fair value less cost of disposable value is
$600,000. Hence, adjustments are not required ad Plant & Equipment cannot be
written down less than its fair value (Adjustments would be necessary and
required if the written down value was greater than fair value). Moreover,
impairment losses are calculated over cash generating unit (CGU) and not over
individual assets. Thus, Plant & Equipment is combined with cash generating unit
(CGU) and it does not make cash flows separately. Hence, it is impractical to
determine the Value in Use and Recoverable Amount for Plant & Equipment. To
conclude, we cannot carry out an impairment test on Plant & Equipment on the
basis of individual assets. Therefore, we must adopt a cash generating unit (CGU)
with relations to Plant & Equipment.