Consider the market for the British pound sterling (GBP). Note that although the United Kingdom (Great Britain) is an official member of the European Union, it has chosen not to adopt the euro as its official currency. For each of the following, determine whether the situation described is part of the supply, demand, or neither side in the foreign exchange market for GBP.

a. John and Adam are British economists who are going to Washington, D.C. for an economics conference.

     In the foreign exchange market for GBP, John and Adam are part of (supply, both supply and demand, demand, neither supply or demand).

b. An American pharmaceutical firm buys a smaller competitor based in London.

     In the foreign exchange market for GBP, the American pharmaceutical firm is part of (supply, both supply and demand, demand, neither supply or demand).

c. Louise, who lives in France, is going on a vacation to Germany.

     In the foreign exchange market for GBP, Louise is part of (supply, both supply and demand, demand, neither supply or demand).

d. Raj, who moved to Great Britain from India to work as an engineer, sends some of his paycheck each month to his parents in India.

     In the foreign exchange market for GBP, Raj is part of (supply, both supply and demand, demand, neither supply or demand).

e. An economics class from the United States is traveling to Great Britain as part of a study-away program.

     In the foreign exchange market for GBP, these students are part of (supply, both supply and demand, demand, neither supply or demand).

Protek Ltd, a masks distributor company, provides the following trial balance for the year ended 30 June 2020:

Protek Ltd

Trial balance as at 30 June 2020

Debit ($)

Credit ($)

Sales of N97 surgical masks

2,151,670

Sales of 4-ply masks

3,120,850

Sales of masks filters

3,288,426

Cost of goods sold

4,688,000

Rental expenses

375,950

Salaries and wages

1,980,000

Administration expenses

128,450

Annual leave expense

98,510

Doubtful debts expense

158,000

Depreciation expense

376,000

Amortisation expense - patent

56,900

Interest expense

22,500

Interest income

8,200

Selling expenses

66,800

Income tax expense

228,600

Cash on hand

53,000

Cash management account

230,000

Trade debtors

478,600

Allowance for doubtful debts

19,144

Inventories

455,040

Land   

760,000

Motor vehicles

630,000

Accumulated depreciation - motor vehicles

252,000

Office equipment

620,000

Accumulated depreciation - office equipment

124,000

Patent (5 years)

569,000

Accumulated amortisation - patent

56,900

Deferred tax asset

28,500

Deferred tax liability

125,000

Bank loan

450,000

Trade creditors

182,560

Provision for annual leave

43,000

Current tax liability

132,100

Retained earnings, 1 July 2019

70,000

Dividends paid

20,000

Share capital

2,000,000

12,023,850

12,023,850

Additional information:

Protek Ltd is a reporting entity in accordance with the requirements of Australian’s Conceptual Framework.

The bank loan is repayable in 3 years.

The depreciation expense of $376,000 relates to motor vehicles and office equipment amounted to $252,000 and $124,000 respectively.

60% of the provision for annual leave are expected to be payable within 1 year and the remaining is payable after 1 year.

The patent was acquired on 1 January 2020. It represents fees paid to Teknova Group, a manufacturer company based in China. Protek Ltd is given the sole distributorship in Australia to sell the new high quality mask, N97, designed for first line workers in the health industry. The patent lasts for 5 years.

There was no new shares issued during the financial year ending 30 June 2020.

Protek Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and presents an analysis of expenses by function on the statement.

The following expenses are allocated to administrative expenses and distribution costs for the purposes of preparation of the statement of profit or loss and other comprehensive income:

Administrative expenses

Distribution costs

Rental expenses

40%

60%

Salaries and wages

50%

50%

Administration expenses

100%

-

Annual leave expense

50%

50%

Doubtful debts expense

-

100%

Depreciation expense – motor vehicles

10%

90%

Depreciation expense – office equipment

80%

20%

Amortisation expense - patent

100%

-

Selling expenses

-

100%

In relation to the statement of financial position, where AASB 101 requires entities to disclose further sub-classifications of the minimum line items on the face of the statement or in the notes, the directors of Protek Ltd want to report only the minimum line items on the face of the statement, and leave the sub-classifications to be disclosed in the notes.

Part A

As the accountant for the entity, prepare the following statements of Protek Ltd the year ended 30 June 2020 in accordance with AASB101:

Statement of profit or loss and other comprehensive income;

Statement of financial position; and

Statement of changes in equity.

In preparing the above statements, you should use the line items that a listed company is likely to use and refer to paragraphs 54, 82, 82A and 106 of AASB 101 in determining the line items to be presented. Show all workings to support your figures presented in the statements. Disclosure notes and comparative figures are not required.

Note: In preparing the statements for Part A, you should consider only information given in this part and ignore information given in Part B below.

Part B

The following events occurred after the preparation of statements was completed in Part A above.

Event 1

The directors have asked you to review the doubtful debts allowance due to the high level of bad debts expense that occurred during the year. The allowance is currently measured based on 4% of trade debtors’ balances following the advice of Jane, who is one of the directors. After reviewing industry averages, you have advised the directors that the allowances should be revised to 8% of the trade debtors’ balances and the directors agreed to your proposal and adopt the new basis from 1 July 2019. This change is considered material in Protek Ltd’s case.

Required:

State if the above situation would constitute a change in accounting policy or a change in accounting estimate. Explain and support your answers by making reference to relevant paragraphs in AASB108.

Prepare necessary adjusting entries and/or notes disclosures required to account for the change in the doubtful debt allowance for the year ended 30 June 2020.

Event 2

Protek Ltd stored its masks in rented warehouses located in several locations. One of the warehouses in Orange was destroyed by bushfires on 29 July 2020. From the accounting records, there were 8,000 boxes of N95 masks stored in that warehouse, with cost of inventories valued at $120,000. Unfortunately, there was no insurance policy acquired to cover this loss and the loss is considered material for Protek Ltd.

The financial statements for the year ended 30 June 2020 were authorised for issue by the directors on 28 August 2020.

Required:

Classify the above event as either an adjusting or non-adjusting event after the end of the reporting period. Justify your answer by making reference to AASB110.

Consistent with your answer to (i) above, prepare any journal entries and/or note disclosures required to comply with the requirements of AASB110.

At December 31, 2020, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows:

Depreciation methods and useful lives:
Buildings—150% declining balance; 25 years.
Equipment—Straight line; 10 years.
Automobiles and trucks—200% declining balance; 5 years, all acquired after 2017.
Leasehold improvements—Straight line.
Land improvements—Straight line.

Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2021 and other information:

1. On January 6, 2021, a plant facility consisting of land and building was acquired from King Corp. in exchange for 18,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $40 a share. Current assessed values of land and building for property tax purposes are $136,000 and $544,000, respectively.
2. On March 25, 2021, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $150,000. These expenditures had an estimated useful life of 12 years.
3. The leasehold improvements were completed on December 31, 2017, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2023, was renewable for an additional four-year term. On April 30, 2021, Cord exercised the renewal option.
4. On July 1, 2021, equipment was purchased at a total invoice cost of $318,000. Additional costs of $12,000 for delivery and $43,000 for installation were incurred.
5. On September 30, 2021, Cord purchased a new automobile for $11,800.
6. On September 30, 2021, a truck with a cost of $23,300 and a book value of $7,800 on date of sale was sold for $10,800. Depreciation for the nine months ended September 30, 2021, was $1,755.
7. On December 20, 2021, equipment with a cost of $13,500 and a book value of $2,800 at date of disposition was scrapped without cash recovery.

Required:

2. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2021.

Current practice requires that the assets acquired in a business combination be measured at fair value as defined by SFAS No. 157 (see FASB ASC 820-10).

Side 1: Argue that the acquiring company should measure the acquired company's plant assets that it plans to use in int operations in accordance with the requirements of SFAS No. 141 before its revisions.

Side 2: Argue that the acquiring company should measure the acquired company's plant assets that it plans to use in its operations in accordance with the SFAS No. 141 revision. Choose one side and present an argument.

Please answer 1-7

1. Which of these has the potential to differentiate into either myeloid stem cells or lymphoid stem cells?

   		erythrocytes
   		mast cells
   		pluripotent stem cells
   		plasma cells

1. Innate immunity involves which components of the human body?

   		skin
   		mucus
   		blood cells
   		all of these

1. Giardiasis is caused by the protozoa Giardia, what is its most common method of entry into the human body?

   		blood transfusions
   		through contaminated water
   		poorly cooked meat
   		none of these

1. Which immunoglobulin has a pentamer structure?

   		IgG
   		IgM
   		IgA
   		IgD

1. The process of hematopoiesis is best described as __________.

   		the differentiation of blood cells
   		the differentiation of viruses
   		the differentiation of bacterial cells
   		none of these

1. Which of these best describe adhesins/ligands?

   		they are either cilia or flagella and are used in cell movement
   		they are surface molecules on a pathogen that bind to the host cell
   		they are a type of exotoxin
   		they are a type of endotoxin

1. Which of these is an example of artificially acquired active immunity?

   		immunity acquired after catching measles from someone
   		immunity acquired from mother to child through antibodies in breast milk
   		immunity acquired via vaccination of a specific antigen
   		immunity acquired via injection of antibodies into the body

Applying Interrelations of Financial Statements

Fill in the missing amounts, a through t, for each of the three separate companies.

Below is an extract from the initial trial balance of Zamzam provided to the auditors for the financial
year ended 31 December 2020 (‘FY2020’), before any of the errors and omissions identified and
noted below, were corrected and taken into consideration:
General ledger account Balance
Dr/ (Cr)
4000/000: Current tax expense (p/l) R420 651
4200/000: Deferred tax expense (p/l) R65 187
9100/000: SARS payable (SoFP) R420 651
9200/000: Deferred tax (SoFP) – 31 December 2020 R54 160
5400/000: Revaluation surplus: Owner-occupied land (SoCE) – 1 January 2020 (R117 500)
5500/000: Revaluation surplus: Owner-occupied land (OCI) (Before tax) R150 000
The only errors and omissions identified by the auditors (not yet correctly accounted for in the above
balances) are listed below:
Error 1: Incorrect depreciation expense on the office building
The depreciation expense on the office building was incorrectly calculated as R67 000 instead of
R77 000. Zamzam used R67 000 in the current tax calculation for the current financial year. The
South African Revenue Service (SARS) does not allow any capital allowances on the office building.
It is the intention of Zamzam to use the office building until the end of its useful life.
Omission 1: Exclusion of current tax effect on exchange of assets
Zamzam exchanged its old air conditioners for more technologically advanced air conditioners on
30 June 2020. The effect of both the old and new air conditioners were omitted from the current tax
calculation for the current financial year. Details of the old and new air conditioners include the
following:
Old air conditioners
Cost on 1 January 2019 (ready for and taken into use on this date; paid immediately
in cash)
R170 000
Fair value on 30 June 2020 R150 000
Useful life as of 1 January 2019 10 years
New air conditioners
Fair value on 30 June 2020 (ready for and taken into use on this date) R160 000
Useful life as of 30 June 2020 10 years.
The residual values of both the old and new air conditioners were considered to be immaterial. The
useful life and residual value estimates remained unchanged. The exchange transaction had
commercial substance as defined in terms of IAS 16 Property, Plant and Equipment. The SARS
allows a section 11(e) wear and- tear allowance over 15 years on both the old and new air
conditioners; apportioned for periods shorter than a year. Zamzam has never had any intention to
sell any of its air conditioners. The SARS deems the exchange transaction as if the old air
conditioners were sold and the new air conditioners were obtained for the same consideration as
would be recognised for accounting purposes in terms of IAS 16.
Omission 2: Deposits received in the current financial year
Zamzam receives deposits for large orders placed from new customers. The deposit is refundable
on cancellation of the order, which results in control only passing when the order will be delivered.
At the end of the current financial year, Zamzam received deposits to the value of R90 000 which
were correctly classified as revenue received in advance. The effect of these deposits were however
not taken into account in the current tax calculation for the current financial year. No such deposits
were received at the end of the prior financial year.
Omission 3: Exclusion of allowance for credit losses in the current financial year
The SARS allows a section 11(j) deduction of 25% of the accounting allowance for credit losses
each year. Zamzam did not recognise the doubtful debt as part of IFRS 9 Financial Instruments for
the purposes of SARS. The effect of the allowance was correctly accounted for in the current financial
year’s deferred tax calculation. However, the FY2020 current tax calculation does not include the
effect of the allowance for credit losses. The allowance for credit losses of Zamzam amounted to the
following at the respective dates:
Description Amount
Dr / (Cr)
Balance on 31 December 2019 (R145 000)
Balance on 31 December 2020 (R170 000)
Other relevant information:
1. The correctly calculated accounting profit before tax, after correctly taking into account the
above errors and omissions amounted to R1 950 000. This profit includes a net non-deductible
permanent difference of R2 000. The latter consists of dividends received form a local listed
company to the value of R10 000 and the remaining balance consists of other non-deductible
expenses incurred during the current financial year. The latter items were correctly accounted
for in the current year tax calculation.
2. The assessed loss for the financial year ended 31 December 2019 amounted to R360 000.
3. Zamzam’s board has always been of the opinion that the company will make taxable profits in
the foreseeable future to utilise any unused tax losses.
4. Zamzam always utilises any tax deductions received from SARS in the year of assessment
they are entitled to do so.
5. Assume that none of the identified errors and omissions affect any of the prior year balances.
6. Assume that all other information provided are correct and accurately accounted for to the
extent that it is not affected by the errors and omissions noted.
ZigZag provided an extract of the asset register as at the end of the current and prior financial year:
ASSETS CARRYING AMOUNTS
31 December 2020
R
31 December 2019
R
Land (1) 3 800 000 3 000 000
Office buildings (2) 1 900 000 1 370 000
Industrial buildings (3) 3 333 333 3 666 667
Machinery (4) 1 800 000 2 700 000
Additional information:
1. Land is vacant land and it is classified as investment property. The land was acquired on
1 April 2019 at R2 800 000. The fair value adjustments have been accounted for at the end of
the respective financial years.
2. The office building was acquired on 1 July 2019 for R1 400 000 and was revalued for the first
time on 31 December 2020 to its fair value of R1 900 000. The office buildings are depreciated
on the straight line basis over 20 years to its residual value of R200 000. During 2019,
management expected to use the asset up to the end of its economic life.
On 1 January 2020, management estimated the remaining useful life of the building to have
changed to 10 years and the residual value to be R500 000.
In December 2020 the management changed the intention and decided they were going to sell
the office building.
Office buildings have no capital allowances available.
3. Industrial buildings are depreciated over 12 years on the straight line basis. In terms of the
Income tax act, a section 13 allowance of 5% applies to the industrial buildings. The buildings
were bought on 1 January 2019, with the intention to keep the building, for an amount of
R4 000 000 paid in cash immediately with its residual value regarded as being insignificant.
4. Machinery is depreciated on a straight line basis at 20% per year to Rnil residual value. The
SARS allows a section 12C allowance of 40%/20%/20%/20% on machinery. The machinery had
a tax base of R1 800 000 on 31 December 2019 and R900 000 on 31 December 2020. No
additional machinery was acquired during FY2020.
5. ZigZag always pays their insurance in advance. At the end of FY2020 the balance for insurance
paid in advance amounted to R35 000 (2019: R25 000).
6. On 1 December 2020, Zamdela, a loyal customer, ordered transportation equipment from
ZigZag which will be delivered to him during December 2021. ZigZag received R500 000 from
Zamdela in cash when the order was placed.
7. The accounting profit before tax, which included dividends received of R40 000, amounted to
R3 200 000 for the year ended 31 December 2020. All above mentioned movements were taken
into account in arriving at this accounting profit.
8. The deferred tax asset balance as at 31 December 2019 was R390 150 due to an assessed
loss of R2 200 000 that existed at that time. ZigZag expected to make sufficient taxable profits
during 2020 and onwards to fully utilize assessed losses and other deductible temporary
differences.
Accounting policies and other information for both companies:
 Owner-occupied land is accounted for on the revaluation model and is revalued at the end of
each financial year in terms of IAS 16.
 Office buildings are carried on the revaluation model using the net replacement method in
terms of IAS 16.
 Machinery is measured on the cost model in terms of IAS 16.
 Industrial buildings are measured on the cost model in terms of IAS 16.
 In terms of IAS 8 Change in accounting policies, estimates and errors, changes in estimates
are accounted for using the re-allocation method.
 All other items of property, plant and equipment are accounted for on the cost model in terms
of IAS 16.
 Investment property is accounted for on the fair value model in terms of IAS 40 Investment
Properties.
 Depreciation and amortisation are accounted for on the straight-line method.
 Assume a normal tax rate of 28% for FY2020 (2019: 27%) and that 80% of capital gains are
taxable.
 There are no temporary differences other than those that are apparent from the given
information.

Required:
calculate deferred tax for the year ended 31 December 2020

The before-tax income for Nash Co. for 2020 was $101,000 and $81,800 for 2021. However, the accountant noted that the following errors had been made:

Prepare a schedule showing the determination of corrected income before taxes for 2020 and 2021. (Enter negative amounts using either a negative sign preceding the number e.g. -15,000 or parentheses e.g. (15,000). Round answers to 0 decimal places, e.g. 125.)