Posted: January 23rd, 2021

The following data are taken from the trial balance of Bula Island Limited

Corporate Accounting1.
2.
Must be word-processed, not hand written, word size 12 with ‘Times
new roman’ font type and double-spacing.
3.
Each answer must be clearly marked by the designated question to
which it corresponds.
4.
Please list any references (books, articles, web-based material) you
use at the end of your assignment in alphabetical order, using the referencing
style seen in academic articles (i.e. with in text references and bibliography,
as in the Harvard referencing style).Requirements:Question
1The
following data are taken from the trial balance of Bula Island Limited on 30
June 2015 with selected comparative information provided for 30 June 2014.20152014Sales
revenue9,245,000Interest
revenue850,000Royalties
revenue1,450,000Dividend
revenue150,000Depreciation-building147,500Depreciation-plant262,500Depreciation-equipment75,000Research
and development expenditure1,650,000Cost
of goods sold4,005,000Warranty
expense195,000Wages
and salaries expense3,475,000Long
service leave expense235,000Interest
expense305,000Rates
and taxes on property145,500Doubtful
debts expense142,500Accounts
receivable675,000375,000Estimated
uncollectible debts182,00095,000Interest
receivable300,000275,000Royalties
receivable920,000745,000Land
(at cost)2,500,0002,500,000Buildings3,200,0003,200,000Accumulated
depreciation-buildings442,500295,000Plant2,100,0002,100,000Accumulated
depreciation-Plant787,500525,000Equipment750,000750,000Accumulated
depreciation-equipment225,000150,000Wages
and salaries payable345,000265,000Provision
for long service leave355,000245,000Provision
for warranty claims130,000115,000Interest
payable100,000100,000Additional
Information1.
All depreciable assets were acquired on
1 July 2012. For financial reporting purposes, depreciation is recognised on a
straight line basis, over 20 years for buildings (estimated residual value
$250,000), eight years for plant and 10 years for equipment. For tax purposes,
straight line depreciation is applied over 40, 10 and eight years respectively.2.
After reviewing all relevant
information, the directors determined that, at 30 June 2015, the plant was
impaired by $250,000 (this is not reflected in the amounts presented in the
trial balance).
3.
On 30 June 2015, after careful
consideration, the directors of Bula Island Ltd decided to adopt the fair value
model for land; the fair value of land on 1 July 2014 was $3,500,000 and on 30
June 2015 was $3,250,000.
4.
The research and development
expenditure qualifies for the additional 25% taxation deduction.
5.
The tax rate at 30 June 2014 was 30%.
On 15 June 2015, legislation was enacted decreasing the tax rate to 25%
effective 1 July 2015.Required:1.
Calculate the amount of current tax
expense. Use an appropriately labelled table for this task.
2.
Prepare a deferred tax worksheet to
calculate the amounts for deferred tax assets and deferred tax liabilities for
the reporting period 30 June 2015. Use an appropriately labelled table for this
task.
3.
Prepare journal entries for the income
tax expense related items for the reporting period 30 June 2015.Question
2Viti Ltd has three
divisions, Dairy, Yoghurt and Chocolate, which operate independently of each
other to produce milk products. The company has a headquarters and a research
centre located in Nausori, with the divisions located throughout Fiji. The
research centre interacts with all the divisions to assist in the improvement
of the manufacturing process and the quality of the products manufactured by
the entity.There is not as yet any
basis on which to determine how the work of the research centre will be
allocated to each of the three divisions, as this will depend on priorities of the
company overall and issues that arise in each division. The company
headquarters provides approximately equal services to each of the divisions,
but an immaterial amount to the research centre.Neither the headquarters nor
the research centre generates cash inflows.On 30 June 2015, the net
assets of Viti Ltd were as follows:Dairy DivisionYoghurt DivisionChocolate DivisionHead OfficeResearch CentreLand$ 440,000$ 280,000$ 160,000$ 110,000$ 67,000Plant and equipment840,000620,000540,00080,00045,000Accumulated depreciation(240,000)(200,000)(160,000)(10,000)(12,000)Inventories240,000180,000140,00000Accounts receivable120,000100,00060,000001,400,000980,000740,000180,000100,000Liabilities120,000100,000100,00000Net Assets1,280,000880,000640,000180,000100,000Management of Viti Ltd
believes there are economic indicators to suggest that the company’s assets may
be impaired. Accordingly, they have had recoverable amount assessed for each of
the divisions:
Dairy Division $ 1,550,000
Yoghurt Division
1,000,000
Chocolate Division 750,000The land held by Dairy
division was measured at fair value using the revaluation model because of the
specialised nature of the land. At 30 June 2015, the fair value was $440,000.
The land held by Yoghurt division was measured at cost, and had a fair value
less cost to sell of $270,264 at 30 June 2015.Required:Provide journal entries to
account for the impairment of Viti Ltd as at 30 June 2015. Show all relevant
working where required.

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