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ACC 20013 Company Accounting-Paradise Ltd’s Financial Statements

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The following adjustments are required before preparation of Paradise Ltd’s financial statements for the year:
 (i) Depreciation to be provided on a straight-line basis on buildings at 5% p.a. and on office furniture and equipment at 10% p.a. The sale of office furniture occurred at the beginning of the current financial year.
 (ii) Goodwill is considered not to be impaired.
 (iii) Management was informed that a particular debtor had become bankrupt and the full account of $12 000 needs to be written off.
 (iv) The Allowance for Doubtful Debts account needs to be adjusted to 8% of accounts receivable,after considering the adjustment in item iii above.
 (v) Current income tax expense (and tax liability) for the year is estimated to be $8000.
 (vi) Accrued wages to staff: sales $1500, administrative $2000.
 (vii) Vehicle rental paid in advance at 30 June 2017 amounted to $30 000.
 (viii) Shares with calls in arrears are to be forfeited, any reserve being retained by the company.
 (ix) A dividend of 3c per share is declared on shares remaining after considering item viii.
 (x) Land is to be revalued upwards to its fair value of $250 000.
 (xi) Transfer $10 000 from the general reserve to retained earnings.


Required
In preparing the financial statements for this assignment, you are advised to comply with AASB standards and the
requirements in the Australian Corporations Legislation when determining the structure and presentation requirements for the financial reports.
A. Prepare the journal entries required by items i to xi above. 
B. Prepare the adjusted trial balance as at 30 June 2017. 
C. Prepare the statement of profit or loss and other comprehensive income with expenses classified by function for the year ended 30 June 2017.
 (Everything required to be presented on the face of the financial statements, no notes required)
D. Prepare the statement of change in equity for the year ended 30 June 2017.
E. Prepare the company’s statement of financial position as at 30 June 2017. 

Answer:


Particulars Amount 
Depreciation - buildings 50,000 
Depreciation - office furniture and equipment 12,700 
Accumulated depreciation – office furniture and equipment (12,700)
Accumulated depreciation – buildings (50,000)
Allowance for doubtful debts 12,000 
Accounts receivable (12,000)
Bad debts 14,372 
Allowance for doubtful debts (14,372)Income tax expense 8,000 Current tax liability (8,000)Salaries of sales staff 1,500 Administrative wages 2,000 Accrued salaries and wages (3,500)Prepaid Rent 30,000 Vehicle rental expenses (30,000)Share capital (called to $1 per share) 8,000 Calls in arrears (25c per share) (2,000)Shares forfeited (6,000)Shares forfeited 6,000 Capital reserve (6,000)Dividend declared  33,960 Dividend payable (33,960)Land 20,000 Gain on revaluation of land (OCI) (20,000)Gain on revaluation of land (OCI) 20,000 Revaluation Surplus (20,000)Income tax expense - OCI 6,000 Current tax liability (6,000)Revaluation Surplus 6,000 Income tax expense - OCI (6,000)General Reserve 10,000 Retained earnings (10,000)Accounts Receivable balance 2,25,400 Less: Debts written off 12,000 Net Accounts receivable remaining 2,13,400 Allowance for doutful debts balance 14,700 Less: Debts written off 12,000 Net provision to be created (8% of accounts receivable) 17,072 Less: Provision already created 2,700 Provision to be created 14,372 Total shares with the company 11,40,000 Less: shares forfeited 8,000 Remianing shares after forfeiture 11,32,000 Dividend payable @ 3c per share 33,960 

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