Assessment Task – Tutorial Questions Assignment Unit Code: HA3011

Question 1 answer

(a

It costed $860,000 to acquire the machine.

 
(b)

Particulars LF Amount Amount

Machine Dr $860,000  
Land Cr   $700,000
Loans payable Cr   $95,000
Cash Cr   $65,000
Question 2

(a)

Date Machine Amount

1 July 2020 Carriage value $162,000
1 July 2020 Fair value $140,000

(b)

Reserve revaluation Dr $22,000

Equipment Cr $22,000

Straight line depreciation

Depreciation = (Cost of assets – salvage value) / Number of years

= ($270000 - $0) / 10

= $27,000

Book value at the Annual Accumulated Book value at the

  beginning of year depreciation depreciation end of year
2016/
17 $270,000 $27,000 $27,000 $243,000
2017/
18 $243,000 $27,000 $54,000 $216,000
2018/
19 $216,000 $27,000 $81,000 $189,000
2019/
20 $189,000 $27,000 $108,000 $162,000

Over these 4 year period, the value of assets has declined by $150,000 and
difference between face value and book value is $22,000
Question 3 answer

Journal Entries:

d)

Debenture will be sold at par value, if the value of debenture equals face value of
debenture. Debenture will be classified as’ premium’ when the face value is higher
than normal value of debenture. Debenture can be issued at “discount” if debenture
is sold at price lower than face value.
Question 4 answer

Present volume of lease fee $1,232,928

Resting worth $81,960
Present value of lease obligation $1,314,888

Depreciation expense Dr $238,978  

Accumulated depreciation Cr   $238,978

date payment interest principal present value

January 1,2015       1,314,888

December 31, 2015 320,000 131,489 188,511 1,126,377

December 31, 2016 320,000 112,638 207,363 919,015

Working Note:
Interest expense
$1,314,888 × 10% = $131,489
Principal
$320,000 - $131,489 = $188,511

Date Account LF Dr. Amount Cr. Amount

31-Dec-15 Interest expense Dr $131,489  
  Lease liability Dr $188,511  
  Cash Cr   $320,000
31-Dec-16 Depreciation expense Dr $238,978  
  Accumulated depreciation Cr   $238,978
31-Dec-16 Interest expense Dr $112,638  
  Lease liability Dr $207,363  
  Cash Cr   $320,000

 
Question 5

A. 

Therefore, taxable profit is $463,300 and accounting profit is $436,800.

B.
 
Income tax expense Dr $1,500,000  
Deferred tax liability Cr   $1,500,000

Deferred tax assets Dr $2,000,000  

Income tax benefit Cr   $2,000,000
Question 6

b)

Companies should translate foreign currency into local currency to avoid a risk of
exchange rate fluctuation. There exists different types of currency across different
countries. Exchange rate fluctuation affects the business and economy as a whole. If
foreign currency is translated into local currency, exchange rate fluctuation risk can
be avoided.
c)

The value of foreign currency varies from country to country. These difference in
value of foreign currency will lead to gain/loss in a foreign currency translation. The
decrease or an increase in currency value affects the business. IAS 21 provides an
overview on impact of revenue and expense of foreign currency as exchange rate
change result. Spot exchange rate allows to depict the fluctuation in exchange rate
and its impact in business.