ACC204 Financial Accounting Proof Reading Service

ACC204 Financial Accounting Assignment Help

ACC204 Financial Accounting Proof Reading Service

Introduction

This ACC204 Financial Accounting Assignment Help is relating to accounting which is followed by Australian companies. There are three tasks in this assignment. Each task has its own specification and own criteria that is required for solving these tasks. First task is relating to revaluation where assets will be revaluated and relevant journal entries will be passed. Second task is relating to calculation of fair value of debentures and passing relevant journal entries. Third task is relating to completion of a project and so profit for each year from such project will be calculated and relevant journal entries will be passed.

ACC204 Financial Accounting Assignment Help

Question 1

Anderson Pty Ltd is an Australia based company which is dealing in manufacturing of floating devices for babies and toddlers. Over the past few years business of the company has earned profits and directors of the company have kept the payment of dividends so that Anderson Pty Ltd can diversify company into other activities. In this case directors of the company wants to revalue the assets of company law and want to pass relevant journal entries for this.

List of property, plant and machinery is as follows.

Investments in companies	Carrying Value ($)	Current fair value ($)
Property, plant and equipment
Factory (NSW)
Land	100 000	150 000
Buildings
– Cost	70 000	80 000
– Accumulated depreciation	(20 000)	–
Factory (Old)
Land	150 000	120 000
Buildings
– Cost	125 000	70 000
– Accumulated depreciation	(45 000)	–

(a) Revaluation of assets

Revaluation of assets:This technique is used by business to get a fair and true view of assets of the company. Through revaluation of assets, business can know the fair value of all those assets which they are holding in their balance sheet. The main purpose of revaluation is to record the assets in a fair value in the books of accounts so that business can decide that whether it need to invest in such asset or need to sell it. These decisions are taken by business on the basis of revaluating the assets for determination of their true and fair value. According to Hu, et. al., (2015), AASB 116 provides the provisions that are required to be followed when an Australian Company is dealing with the revaluation of assets.

There are certain reasons for which assets are been revalued such as to identify the fair value of assets, to issue shares to the existing shareholders, to disclose the fair value of the assets of the company in the books of accounts. Revaluation is also necessary in case where companies wants to decrease their leverage ratio. Revaluation is also necessary for the companies to enable internal and external reconstruction (Hu, et. al., 2015).

Revaluation of the assets will be as follows

Investment in companies	Carrying value ($)	Current fair value ($)	Revaluation value ($)
Property, plant and equipment
Factory (NSW)
Land	1,00,000	1,50,000	50,000
Building (cost-Depreciation)	50000	80000	30000
Factory(old)
Land	150000	120000	(30000)
Building(cost-Depreciation)	80000	70000	(10000)

(b) Relevant journal entries for revaluation of assets

Journal entries that are required to be passed for the above revaluation of assets are as follows

Factory (NSW)
Land a/c	Dr.	50,000
To Revaluation a/c	Cr.		50,000

Building A/c	Dr.	30,000
To Revaluation a/c	Cr.		30,000

Factory (Old)

Revaluation A/c	Dr.	30000
To Land A/c	Cr.		30000

Revaluation Surplus	Dr.	10000
To Building A/c	Cr.		10000

In the above statement entries that are required to be passed in the case of revaluation of assets has been passed. According to Sun (2015), in this statement it can be seen that if there is an increase in value of assets revaluation a/c has been credited. Value of land and building in Factory (NSW) has been increased so in both these cases revaluation a/c has been credited. If there is a decrease in value of assets then revaluation account has been debited. Value of land and building has been decreased in the case of Factory (Old) so in both these cases revaluation a/c has been debited (Sun, 2015).

Calculation of net amount of revaluation a/c

Revaluation a/
Opening balance	0
Credit made during the year	80000
Debit made during the year	40000
Closing balance	40000

This statement shows the balance of revaluation account that the opening balance of revaluation a/c was nil and further the increase in the value of revaluation a/c was added and then decrease in the value of revaluation a/c was subtracted from this balance. This calculation showed the closing balance of revaluation reserve.

According to Strouhal (2015), Positive balance of revaluation is treated as revaluation surplus so this will be treated as an asset for the company. As a result of this revaluation surplus will be disclosed in the asset side of the balance sheet. This revaluation surplus is a result of increase in the value of revaluation of assets. Hence this revaluation reserve will be shown in the asset side of the balance sheet of Anderson Pty Ltd. (Strouhal, 2015).

Conclusion

This task has concluded that sometimes it becomes necessary for the business to revalue their assets so that they can identify the true and fair value of assets of the business management. In this task assets of Anderson Pty Ltd were revalued and then journal entries for such revaluation are passed. This task has also explained the impact of revaluation on the balance sheet of the company.

Question 2

Kruger Limited privately issued $1 million in six year debentures on July 01, 2015. Interest rate for these debentures each six months at a coupon rate of 6% per annum. When these debentures were issued the market requires a rate of 4%. These debentures are accounted for effective interest method as per the provisions of AASB 9.

(a) Determination of fair value of debentures

Calculation of fair value of debentures is as flows (at the time of issues) is as follows.

Date	Interest payment Stated 10,00,000*3%	Interest payment Stated 10,00,000*2%	Amortization of Debentures Discount	Credit Balance in Debentures Premium Account	Credit Balance in Debentures Payable Account	Book Value of the Debentures
	Credit Cash	Debit Interest Expense	Credit Debentures Discount
1-Jul-15				212000	$1,000,000	$788,000
31-Dec-15	$30,000	$15,760	($14,240)	$197,760	$1,000,000	$802,240
30-Jun-16	$30,000	$16,045	($13,955)	$183,805	$1,000,000	$816,195
31-Dec-16	$30,000	$16,324	($13,676)	$170,129	$1,000,000	$829,871
30-Jun-17	$30,000	$16,597	($13,403)	$156,726	$1,000,000	$843,274
31-Dec-17	$30,000	$16,865	($13,135)	$143,592	$1,000,000	$856,408
30-Jun-18	$30,000	$17,128	($12,872)	$130,720	$1,000,000	$869,280
31-Dec-18	$30,000	$17,386	($12,614)	$118,105	$1,000,000	$881,895
30-Jun-19	$30,000	$17,638	($12,362)	$105,743	$1,000,000	$894,257
31-Dec-19	$30,000	$17,885	($12,115)	$93,628	$1,000,000	$906,372
30-Jun-20	$30,000	$18,127	($11,873)	$81,756	$1,000,000	$918,244
31-Dec-20	$30,000	$18,365	($11,635)	$70,121	$1,000,000	$929,879

Fair value of debentures= Face value*PV factor for number of semiannual payments at market rate (Laing & Dunbar, 2015)

= 10,00,000*PV factor @ 2%, 12 months

= 10,00,000*0.788

=788000

(b) Relevant journal entries on the following dates

(i) 1 July 2015

		Amount ($)	Amount ($)
Bank a/c	Dr.	788000
Discount a/c	Dr.	212000
To 6% Debenture a/c	Cr.		1000000

(ii) 31 December 2015

		Amount ($)	Amount ($)
Interest on debenture a/c	Dr.	15760
To Bank a/c	Cr.		1520
To Discount a/c	Cr.		14240

(iii) 30 June 2015

		Amount ($)	Amount ($)
Interest expense a/c	Dr.	16045
To Cash a/c	Cr.		2090
To Discount a/c	Cr.		13955

Above are the entries that are to be passed on the respective mentioned date (Milliman, 2015).

Conclusion

This task has explained the method that is to be followed to calculate the fair value of debentures which were issued earlier. Provisions relating to debentures are mentioned in AASB 9. This task has also showed the calculation for fair value of debentures. Relevant journal entries relating to specified dates are also passed in this task.

Question 3

Sun City Limited commenced construction business of a multi-purpose water park on 1^st July 2014 for Pretoria Limited. Sun City signed a fixed price contract for revenues of $50million. Pretoria asset control the asset throughout the period of construction and this project is expected to get complete by the end of 2017. Expected cost on the commencement of construction project is $38 million. It is expected that the cost of construction project can change during the project. Data related to the project is as follows.

	2015 ($m)	2016 ($m)	2017($m)
Costs for the year	10	18	12
Costs incurred to date	10	28	40
Estimated costs to complete	28	12	–
Progress billings during the year	12	20	18
Cash collected during the year	11	19	20

(a) Computation of gross profit for each of three years

Gross profit for year 2015

Firstly we need to find the percentage of the project completed so far and for this formula will be applied which is as follows.

Project completion %= Total Construction Costs till date/ Estimated cost of the contract

Total Construction Cost of Sun City for the year 2015= $ 1000000

Total estimated cost of the contract = $ 3800000

= 1000000/3800000*100= 26.31%

Hence this 26.31% represents that the project is completed till this % in 2015. According to Drake, (2013), after this total expected revenue from the project will be multiplied by percentage of completion of project so that revenue earned till 2015 can be calculated on the basis of this (Drake, 2013).

Calculation of gross profit till 2015= Project completion %* Total estimated gross profit

Expected gross profit = Expected Gross Profit= Expected revenue – Expected Cost

= $ 5000000 - $ 3800000 = 1200000

Gross profit till 2015= 26.31 * 1200000 * 100 =$ 315720

Gross profit till 2015= $315720

Gross profit for year 2016

For this firstly we need to calculate the project completion percentage which will be calculated as follows.

Project completion %= Total Construction Costs to date/ Estimated cost of the contract

Total Construction Cost of Sun City for the year 2015= $ 2800000

Total estimated cost of the contract = $ 4000000

= 2800000/4000000*100= 70%

Hence this 70% represents that the project is completed till this 70% in 2016. After this total expected revenue from the project will be multiplied by percentage of completion of project so that revenue earned till 2016 can be calculated on the basis of this.

According to Dziadosz et al., (2015), calculation of gross profit till 2016= Project completion %* Total estimated gross profit

Expected gross profit = Expected Gross Profit= Expected revenue – Expected Cost

= $ 5000000 - $ 4000000 = 1000000

Gross profit till 2016= 1000000 *70 * 100 =$ 700000

So the expected gross profit for the year 2016 is $700000- $315720

= $384280

Gross profit till 2016= $384280

Gross profit for year 2017

Gross profit for the year 2017 will be calculated as follows.

Gross profit for 2017= Total cost- profit recognized in the year 2016 and 2015 (Dziadosz, et. al., 2015)

Total cost = $5000000- $4000000

Total cost = $1000000

Profit in previous years = $ 315720 – $ 384280= $700000

Profit for the year 2017= $ 1000000-$ 700000

Profit for the year 2017= $ 300000

(b) Journal entries using the percentage of completion method for year 2015

Journal entries for 2015 using the percentage completion method are as follows.

Journal		Amount ($)	Amount ($)
Work in progress a/c	Dr.	10,00,000
To Accounts payable a/c	Cr.		10,00,000

Contract Receivable a/c	Dr.	12,00,000
To Progress Billing a/c	Cr.		12,00,000

Construction in process a/c	Dr.	315500
Construction Expenses a/c	Dr.	1000000
To Construction Revenue a/c	Cr		1315500

(c) Journal entries for 2015 on assumption that stage of completion cannot be reliably assessed

Journal entries for 2015 on assumption that stage of completion cannot be reliably assessed are as follows (Hathorn, 2011)

Journal		Amount ($)	Amount ($)
Work in progress a/c	Dr.	10,00,000
To Accounts payable a/c	Cr.		10,00,000

Accounts Receivable a/c	Dr.	12,00,000
To Billing a/c	Cr.		12,00,000

Bank A/c	Dr.	315500
To Accounts Receivable a/c	Cr		1315500

Conclusion

This task is has concluded the implementation of a project that a project is likely to get completed in a specified time and so through this profits from that project for each year can also be calculated. This will help in identifying the expected profit from such project every year or also in the end year when project will gets completed. In this task relevant journal entries relating to the project has also been passed.

References

Drake, R. (2013). Delving into debentures. Equity, 27(2), 14.

Dziadosz, A., Tomczyk, A., & Kapli?ski, O. (2015). Financial risk estimation in construction contracts. Procedia Engineering, 122, 120-128.

Hathorn, J. (2011). Accounting for unprofitable construction contracts: a teaching note. Journal of Finance and Accountancy, 7, 1.

Hu, F., Percy, M. & Yao, D., (2015).Asset revaluations and earnings management: Evidence from Australian companies. Corporate Ownership and Control, 13(1), 930-939.

Laing, G., & Dunbar, K. (2015). EVA (TM) EPS, ROA and ROE as Measures of Performance in Australian Banks: A Longitudinal Study. Journal of Applied Management Accounting Research, 13(1), 41.

Milliman, (2015). Discount Rate for Australian Employee Benefits Liability Valuation. Milliman Report. Pp 1-84.

Strouhal, J. (2015). Historical Costs or Fair Value in Accounting: Impact on Selected Financial Ratios. Journal of Economics, Business, and Management, 3(5), 560-564.

Sun, L., (2015). Fair Value and Volatility in the Cases of Assets Securitization, Derivative Hedging and Loan Loss Provisioning. Theoretical Economics Letters, 5(05), 670-682.