Professional Documents
Culture Documents
Financial Accounting Assignment
Financial Accounting Assignment
Content:
Question 1 20
Question 2 28
Total marks 50
YPC INTERNATIONAL COLLEGE
Assignment 1
Prepared by:
No. Student Name LJMU Id No. YPC Id No.
1 Loo Wei Yang 935875 BAF2004220
2 Wong Jen Hang 935894 BAF2004202
3 Tan Kah Yong 935889 BAF2004240
4 Yu Wen Chen 935897 BAF2004197
5 Lock Chee Weng 935874 BAF2004195
136,800
Installation costs 10,500
Import duty 12,500
Pre-inspection & testing costs 8,700
c)According to IAS 16, the accounting treatment for the machine is G&G Co debit
machine account at £168,500. Debit in the Statement of Financial Position as at 31
December 20x7 as non-current asset. A depreciation charge of machine at £42,125 is
debited to the Statement of Profit or Loss as expense. A same amount with depreciation
machine is credited to accumulated depreciation machine account. According to IAS 16,
subsequent expenditure that been recognised only treated as expense when it is
incurred in a period. Since the maintenance expense is an estimation that it only will be
incurred in next year. There are no any maintenance expenses will be recorded in the
Statement of Profit or Loss for the year ended 31 December 20x7.
a) Based on IAS 17 Leases, the leased machine should be classified as finance lease. The
reason is the conditions stated in the scenario match some characteristic of a finance
lease. First, finance lease is a lease that lessee will have to take all the risks and benefits.
Soft Co is required to pay all the maintenance and insurance costs meanwhile able to
earn all the benefits generated by the machine during the lease period. Second, the lease
term of finance lease is majority of its useful life. The machine has an estimated life of 10
years which is also the lease period in the agreement between Soft Co and Plant Co.
Finally, the lessee needs to pay the lease payment with interest charge by the lessor.
Plant Co needs Soft Co pay a total of £22,500 of rental payment and a finance cost of 5%
is included annually.
b)
£ £
D Machine 150,000
r
Cr Finance Lease 150,000
(Being the fair value of the asset acquired under a finance lease)
£ £
D Depreciation Machine [(150,000-0)/10 x (11/12)] 13,750
r
Cr Accumulated Depreciation Machine 13,750
(Being the annual depreciation of the asset acquired under a
finance lease)
£ £
D Finance Charges (150,000x5%) 7,500
r
D Finance Lease (150,000/10) 15,000
r
Cr Bank 22,500
(Being the interest costs of the finance lease and the reduction
in the finance lease obligations)
c)
Soft Co
Statement of Financial Position as at 31st May 20x8 (Extract)
Non-current assets £
Machine (150,000-13,750) 136250
Current assets
Bank (78,500- 13,750- 22,500) 42,250
Non-current liability
Finance lease (150,000-15,000) 135,000
Current Liability
Lease (22,500- 7,500) 15,000