The profit before tax, as reported in the statement of profit or loss and other comprehensive income of Andreas Ltd for the year ended 30 June 2020, amounted to $85 000, including the following revenue and expense items:

The statement of financial position of the company at 30 June 2020 showed the following net assets.

Additional information

(a) Accumulated depreciation of plant for tax purposes was $30 000 at 30 June 2019, and depreciation for tax purposes for the year ended 30 June 2020 amounted to $ 6 500.

(b) The tax rate is 30%.

Required(show all workings):

Prepare a current tax worksheet and the journal entry to recognise the company’s current tax liability as at 30 June 2020.

The condensed financial statements of Oriole Company for the years 2019 and 2020 are presented as follows. (Amounts in thousands.)

Compute the following ratios for 2020 and 2019. (Round current ratio and inventory turnover to 2 decimal places, e.g. 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 12.6%.)

Headland Inc., a greeting card company, had the following statements prepared as of December 31, 2020.

Additional information:

Prepare a statement of cash flows using the direct method. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

On July 31, 2020, Oriole Company paid $2,750,000 to acquire all of the common stock of Conchita Incorporated, which became a division (a reporting unit) of Oriole. Conchita reported the following balance sheet at the time of the acquisition.

It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,510,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2020, Conchita reports the following balance sheet information.

Finally, it is determined that the fair value of the Conchita Division is $1,850,000.

a. Compute the amount of goodwill recognized, if any, on July 31, 2020. (If answer is zero, do not leave answer field blank. Enter 0 for the amount.)

Question 3 Part A XYZ Windows Ltd is involved in a research and development project to create a filtering window that removes the need for curtains. For the current year ended 30 June 2020 expenditure on the project is as follows: Research $235,000 Development $500,000 The window is expected to return profits of $70,000 per year for the 10 years commencing 1 July 2020. Assuming the company uses a straight-line method amortisation. This company uses a discount rate of 8 per cent. Required: i) How much research and development cost should be expensed in the year to 30 June 2020? ii) How much development expenditure should be amortised in the year to 30 June 2021?

Part B An assistant of yours has encountered the following matter during the preparation of the draft financial statements of XYZ Ltd for the year ending 30 June 2020. He /She has given an explanation of his/her treatment of the item. “XYZ Ltd management spent $200,000 sending its staff on training courses during the year. This has already led to an improvement in the company’s efficiency and resulted in cost savings. The organiser of the course has stated that the benefits from the training should last for a minimum of four years. The assistant has therefore treated the cost of the training as an intangible asset and charged six months’ amortisation based on the average date during the year on which the training courses were completed.” Required: Comment on the assistant’s treatment of them in the financial statement for the year ended 30 June 2020 and advise him how they should be treated under AASB 138 Intangible Assets.

Part C If an organisation is constructing a building, and that building will take a number of years to complete, can the organisation recognise revenue throughout the contract, or does the construction-based organisation have to wait until project completion before it recognises the revenue associated with the construction contract? Discuss this statement in accordance to AASB 15.

Sage Inc., a greeting card company, had the following statements prepared as of December 31, 2020.

Additional information:

Prepare a statement of cash flows using the direct method. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Jamie Bard is the owner Café Corner, a popular restaurant located at a busy traffic intersection in the city of Clutchmore.

For the financial year ended 30 June 2020:

• Café Corner earned a profit after income tax of $16,000. This was after taking into account sales of $821,000 and cost of sales of $623,000.

• Other operating expenses incurred to operate the business totalled $179,000. This figure included:
  1. depreciation expenses, and

2. interest expenses of $11,000 which were fully paid.

• There were some additional plant and equipment purchased for cash. However, there were no disposals of property, plant and equipment.

• The company paid $7,000 to the Tax Office in full settlement of its income tax obligations.

• The company received some interest income amounting to $4,000 when it placed some of its excess cash in an investment fund.

• The shareholders of Café Corner received dividends of $18,000 from the company.

The following are balances extracted from the Statements of Financial Position of Café Corner at the end of its most recent two financial years:

Jamie wants to understand the cash flow of Café Corner better and has asked for your assistance to help him prepare some information regarding the cash flows of the business.

Jamie Bard is the owner Café Corner, a popular restaurant located at a busy traffic intersection in the city of Clutchmore.

For the financial year ended 30 June 2020:
 Café Corner earned a profit after income tax of $16,000. This was after taking into account sales of $821,000 and cost of sales of $623,000.

 Other operating expenses incurred to operate the business totalled $179,000. This figure included:
(i) depreciation expenses, and
(ii) interest expenses of $11,000 which were fully paid.

 There were some additional plant and equipment purchased for cash. However, there were no disposals of property, plant and equipment.

 The company paid $7,000 to the Tax Office in full settlement of its income tax obligations.

 The company received some interest income amounting to $4,000 when it placed some of its excess cash in an investment fund.

 The shareholders of Café Corner received dividends of $18,000 from the company.

The following are balances extracted from the Statements of Financial Position of Café Corner at the end of its most recent two financial years:
30 June 2020 30 June 2019
$ $
Accounts payable 12,000 27,000
Accounts receivable 28,000 103,000
Accrued expenses 5,000 11,000
Accumulated depreciation 84,000 65,000
Cash 34,000 23,000
Inventory 72,000 46,000
Plant and equipment 293,000 228,000
Prepaid expenses 4,000 15,000
Share capital 180,000 160,000

Jamie wants to understand the cash flow of Café Corner better and has asked for your assistance to help him prepare some information regarding the cash flows of the business.

Required:

a) Calculate the cash receipts from customers, cash payments to suppliers and cash payments for other expenses. Show all workings. (7½ marks)

b) Using the direct method, prepare the Statement of Cash Flows for Café Corner for the financial year ended 30 June 2020. (6½ marks)

c) Prepare a reconciliation of Cash Flows from Operating Activities and Profit After Tax for Café Corner.

The CEO of Z-Corp is puzzled as to why the company has run into bank overdraft when it has been profitable in the past year. The financial statements appear below:-

Comparative Balance Sheets as at December 31

Assets 2019 2020

Bank          $ 28,600          $     -
Accounts receivable 21,850 38,000
Merchandise inventory 30,700 45,400
Prepaid expenses 5,520 4,900
Property, plant, and equipment           118,000           155,000
Accumulated depreciation            (54,500)          (65,400)
Total           150,170           177,900

Liabilities and Stockholders’ Equity 2019                2020

Bank overdraft           $     -          $ 39,200
Accounts payable 35,170 27,100
Income taxes payable 10,300 8,200
Bonds payable 30,000 10,000
Common stock 45,000 55,000
Retained earnings 29,700 38,400
Total           150,170           177,900

Income Statement for the year ended December 31, 2019

Sales                          250,000
Cost of goods sold      130,000
Gross profit                120,000
Selling expenses 45,000
Administrative expenses 19,000 64,000
Income from operations 56,000
Interest expense                1,500
Income before income taxes 54,500
Income tax expense        15,800
Net income after tax         38,700

Additional information regarding the year ended December 31, 2019

1) Dividends declared and paid were $30,000.
2) During the year an old equipment costing $15,000 was sold for $2,800 at a loss of $1,000. New equipment costing $22,000 was purchased to replace the old equipment.
3) Total depreciation expenses of $22,100 and the loss on sale of equipment are included in
            selling expenses.
4) Purchased property costing $30,000, full cash payment was made.
5) Bonds were redeemed at face value.
6) Additional shares of stock were issued for cash at par.
      
Required:
Prepare a cash flow statement for the year ended December 31, 2019 using the indirect method. (Show all relevant workings)

Morris Company had the following adjusted trial balance:

Additional Resources

The president of Morris Company has asked you to close the books (prepare and process the closing entries).

Required:

After the closing process has been completed, answer the following questions: