When a light ray travels from water to air, the wave_____________________.

Myer’s dark day as earnings down, share price slumps

MYER has suffered its worst single-day market rout since its inglorious return to the bourse five years ago, after revealing it has suffered yet another slump in earnings.

Shares in the struggling ­department store chain plunged 13 per cent yesterday, wiping $188 million off its market value and undoing two months worth of gains.

It came as chief executive Bernie Brookes declared the group’s net profit had fallen for the third year in succession and was down almost 40 per cent since 2011.

Mr Brookes said the retailer was focused on its own game despite a big shift in the competitive landscape as David Jones’ new owners marked out an aggressive growth plan.

But disappointed investors stampeded the exits nonetheless, delivering Myer its worst single-day market performance since it was floated in November 2009.

Mr Brookes defended Myer’s long-term strategy, saying investment in store refurbishments, its online offer and its private label brands had taken a toll on the bottom line.

“The decision for us to invest back into the business is something some shareholders will see favourably and others will see unfavourably,” he said.

“But we are not here to build a business in a year.”

Myer reported a net profit of $98.5 million for the year to July 26, down from $127.2 million the previous year.

Three years earlier, the group’s net profit stood at $159.7 million.

Total sales for the past year were flat at $3.14 billion. But key like-for-like sales — which strip out the impact of stores that have opened or closed — were up 1.2 per cent.

Mr Brookes said the group was closely watching the activities of Woolworths South Africa, which bought David Jones for $2.2 billion in July.

Woolworths South Africa — not affiliated with its Australian namesake — has flagged plans to boost company-owned brands from the 3.5 per cent of sales to as much as 30 per cent.

Mr Brookes said Myer, which this year generated a record 20.3 per cent of sales from private label brands, had a headstart on its rival.

“Establishing a private label in the fashion business is a very complex and difficult thing to do. It takes a lot of engineering,” he said. “We’re comfortable we’ve got the advantage of time and learnings and loyalty from our customers.”

Mr Brookes said Myer had considered the risk that David Jones’ new owners could trigger a price war as the group sought to lure customers to the revamped business.

“If there is erratic behaviour, then they are another competitor and our job is to make sure the Myer customer is not disadvantaged,” Mr Brookes said.

Q1: Identify five items of information that would be useful in deciding whether to invest in Myer shares

Q2: List each item of information and for each item ; explain whether it creates a positive and negative image for potential investors

Magpie Ltd enters into a non-cancellable two-year lease agreement with Tiger Ltd for an item of machinery on 1 January 2020. Magpie Ltd pays $15,000 on signing the agreement with Tiger Ltd on 1 January 2020. There are eight quarter payments of $10,000, the first being made on 31 March 2020. Included within the $10,000 lease payments is an amount of $1,000 representing payment to the lessor for insurance and maintenance of the machinery. The machinery is to be depreciated on a straight-line basis. The machinery is expected to have an economic life of five years, after which time it will have a zero-salvage value. There is a purchase option Magpie Ltd will be able to exercise at the end of the second year for $30,000. If this purchase option is exercised, the machinery will be transferred to Magpie Ltd. The rate of interest implicit in the lease is 12%. Refer to the appendix for the tables of Present Value Factor for a single future amount and Present Value of an ordinary annuity of $1

Calculate the lease liability and lease asset.

Abby runs a printing business and leases a building for which she pays rent of $75,000 per annum.

During the year ended 30 June 2020, Abby incurred the following expenses:

Painting of the exterior of the building at a cost of $12,000. The original paintwork was peeling and mouldy and didn’t represent the kind of look Abby wanted for her business.

Re-surfacing of the dirt carpark with a new non-slip cement to fill in pot-holes and create a safer environment for her customers $8,000

Replace torn awning over the front door for $1,500. The replacement awning was made of the same material as the original awning.

Payment of $22,000 for a commercial embroidery machine so that Abby could introduce clothing design and printing into her business. The machine was purchased on 10 February 2020 and installed on 26 February 2020.

Advise Abby if the expenses would be deductible with reference to relevant statute or other supporting documents.

Brick Ltd is a building construction company. On 1July 2017, Brick Ltd signed a contract with Pear Ltd to build a factory. The contract price was $ 12,000,000. The relevant information is as follows:

Pear Ltd will be in control of the asset throughout the construction process. The contract is completed on 30 June 2020. Brick Ltd has a financial year ending 30 June. Assume that the actual costs and cash collections are in line with expectations and the stage of completion can be reliably estimated.

Required:

1. Calculate the total profit that will be recognised in the books of Brick Ltd for the year ended 30 June 2018, 2019 and 2020.                                                                                                                   
   

The profit that you have calculated in Part (a) above, is it based on input method or output method? Justify your answer based on AASB 15 “Revenue from Contracts with Customer

At 30 June 2019, the financial statements of McMaster Ltd showed a building with a cost of $300 000 and accumulated depreciation of $152 000. The business uses the straight-line method to depreciate the building. When acquired, the building’s useful life was estimated at 30 years and its residual value at $60 000. On 1 January 2020, McMaster Ltd made structural improvements to the building costing $94 000. Although the capacity of the building was unchanged, it is estimated that the improvements will extend the useful life of the building to 40 years, rather than the 30 years originally estimated. No change is expected in the residual value.

Required

1. Calculate the number of years the building had been depreciated to 30 June 2019.
2. Give the general journal entry to record the cost of the structural improvements on 1 January 2020.   

c.Give the general journal entry to record the building’s depreciation expense for the year ended 30 June 2020.

Australian Taxation

Abby runs a printing business and leases a building for which she pays rent of $75,000 per annum. During the year ended 30 June 2020, Abby incurred the following expenses: Painting of the exterior of the building at a cost of $12,000. The original paintwork was peeling and mouldy and did not represent the kind of look Abby wanted for her business. Re-surfacing of the dirt car park with a new non-slip cement to fill in pot-holes and create a safer environment for her customers $8,000 Replace torn awning over the front door for $1,500. The replacement awning was made of the same material as the original awning. Payment of $22,000 for a commercial embroidery machine so that Abby could introduce clothing design and printing into her business. The machine was purchased on 10 February 2020 and installed on 26 February 2020. Advise Abby if the expenses would be deductible with reference to relevant statute or other supporting documents.

Marydale Products permits its customers to defer payment by giving personal notes instead of cash. All the notes bear interest and require the customer to pay the entire note in a single payment 6 months after issuance. Consider the following transactions, which describe Marydale’s experience with two such notes: