Zappa is a mining company listed in Australia with a number of subsidiaries. Extracts from the consolidated statement of profit or loss and other comprehensive income of Zappa for the year ended 30 June 2020 appear below: Attributable to Zappa Non-controlling interest Total $’000 $’000 $’000 Profit for the year 39,000 3,000 42,000 Other comprehensive income Total comprehensive income 5,000 ––––––– 44,000 ––––––– Nil –––––– 3,000 –––––– 5,000 ––––––– 47,000 ––––––– Additional information of Zappa comprises: i. 200 000 000 ordinary shares in issue at the beginning of financial year - 1/7/2019. On 1 April 2020, Zappa issued further 50 000 000 new ordinary shares at full market value. ii. 80 000 000 preference shares. These shares were in issue for the whole of financial year ended 30 June 2020. The dividend on these preference shares is discretionary. iii. $180 000 000 in convertible debentures issued on 1 July 2018 and repayable on 30 June 2023. Interest is payable annually in arrears and the interest rate is 10%. These debentures could be converted to 100 000 000 ordinary shares at the option of the debenture holders. In the year ended 30 June 2020, Zappa declared an ordinary share dividend of 10 cents per share and a dividend of 5 cents per share on the preference shares. The corporation tax for Zappa and its subsidiaries is 30%. All transactions have been correctly accounted for in the financial statements of Zappa for the year ended 30 June 2020. Required: a) Explain the meaning of the term ‘potential ordinary shares’ and provide TWO examples of potential ordinary shares OTHER THAN convertible loans. b) Explain how the diluted earnings per share is calculated and when it needs to be disclosed. c) Compute the basic and diluted earnings per share amounts for Zappa for the year ended 30 June 2020 which will be presented in its consolidated financial statement

Required: Prepare the proper ADJUSTING journal entries for the following events. Also, prepare a balance sheet after adjusting entries have been made.

The unadjusted trial balance for Tahini & Jam Inc. appears below:

                                        Tahini & Jam Inc.

                                   Unadjusted Trial Balance

                                       December 31, 2020

                                                                      Debit                     Credit

Cash                                                          $75,500

Accounts receivable                                       5,000

Prepaid rent                                                 1,000

Prepaid insurance                                         15,000

Supplies                                                        3,000

Equipment                                                   40,000

Accumulated depreciation-equipment                                          $4,000

Accounts payable                                                                       11,000

Bank loan payable                                                                     10,000

Unearned service revenue                                                           10,500

Common shares                                                                          48,250

Retained earnings                                                                       32,000

Dividends                                                      5,000

Service revenue                                                                          44,600

Salary expense                                               7,200

Utilities expense                                            1,200

Rent expense                                                 5,250

Advertising expense                                        2,200              ________

                                                                $160,350                $160,350

Additional data is as follows. Record the adjusting entry below the information.

1. Unearned service revenue NOT YET earned at year end, $2,000.

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2. Depreciation for the current year amounts to $4,500.

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3. Prepaid insurance consists of a policy purchased on January 1, 2020 for a 15 months coverage.

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4. Supplies on hand/counted at year end amount to $1,200.

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5. Accrued salaries on December 31, 2020, amount to $2,500.

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6. The bank loan was received on March 1, 2020, and the annual interest rate was 12%.

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7. Rent is $500/month, and January, 2021 rent is included in the trial balance amount.

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8. Corporate income tax is 20% of net income before tax.

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Prepare a balance sheet based on the unadjusted trial balance and the adjusting entries.

Record your answers below (in white).

                                        Tahini & Jam Inc.

                                           Balance Sheet

                                  (As at December 31, 2020)

Prepare balance sheet here.

                                        Tahini & Jam Inc.

                                        Income Statement

                                        (for the year ended

                                       December 31, 2020)

Prepare balance sheet here.

1. What factor is important in classifying an investment at fair value through profit or loss?

a. Whether the instrument has a set maturity date.

b.What is the business model within which the investments are held?

c.Whether the instrument is a debt, equity or derivative instrument.

ACE Inc has the following investments at December 31, 2020:

4..If ACE classifies its investment in DEF at fair value through profit or loss, what amount will be reported in income for the three months ended December 31, 2020 pertaining to this investment?

d.Whether the instrument generates dividends.

2. What should an investment in a debt investment be classified as when management has not specifically identified the classification? That is to say, in the absence of an election, what is the default category?

3. Fisher Corporation has the following investments at September 30, 2020:

What method of accounting can Fisher not use to account for its investment in Cookstown?

Upstream Intercompany Merchandise Transactions

Jimmitz Inc. is a subsidiary of Krocker Gear. Jimmitz sells shoe accessories to Krocker at a 25% markup on cost. Information on these intercompany merchandise transactions is below:

Required

a. Prepare the working paper eliminating entries related to these intercompany transactions at December 31, 2020.

b. Krocker sold shoes containing Jimmitz’s shoe accessories during 2020.

What amount did Krocker and Jimmitz record as cost of goods sold for the shoe accessories in 2020?

$Answer

What amount should appear in consolidated cost of goods sold for these shoe accessories?

$Answer

Show how the eliminating entries in part a adjust Krocker’s cost of goods sold balance to the correct consolidated balance.

Shamrock Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2020, and May 31, 2021. The income from operations for the fiscal year ended May 31, 2020, was $1,818,000 and income from continuing operations for the fiscal year ended May 31, 2021, was $2,424,000. In both years, the company incurred a 10% interest expense on $2,424,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $575,000 on February 2021. The company uses a 20% effective tax rate for income taxes. The capital structure of Shamrock Corporation on June 1, 2019, consisted of 1,037,000 shares of common stock outstanding and 19,100 shares of $50 par value, 6%, cumulative preferred stock. There were no preferred dividends in arrears, and the company had not issued any convertible securities, options, or warrants. On October 1, 2019, Shamrock sold an additional 511,000 shares of the common stock at $20 per share. Shamrock distributed a 20% stock dividend on the common shares outstanding on January 1, 2020. On December 1, 2020, Shamrock was able to sell an additional 785,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal years.

Determine the weighted-average number of shares that Shamrock Corporation would use in calculating earnings per share for the fiscal year ended:

Prepare, in good form, a comparative income statement, beginning with income from operations, for Shamrock Corporation for the fiscal years ended May 31, 2020, and May 31, 2021. This statement will be included in Shamrock’s annual report and should display the appropriate earnings per share presentations. (Round earnings per share to 2 decimal places, e.g. $1.55.)

On January 1, 2018, a machine was purchased for $100,000. The machine has an estimated salvage value of $6,400 and an estimated useful life of 5 years. The machine can operate for 104,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2018, 20,800 hrs; 2019, 26,000 hrs; 2020, 15,600 hrs; 2021, 31,200 hrs; and 2022, 10,400 hrs.

Compute the annual depreciation charges over the machine’s life assuming a December 31 year-end for each of the following depreciation methods. (Round answers to 0 decimal places, e.g. 45,892.)

On January 1, 2018, a machine was purchased for $100,000. The machine has an estimated salvage value of $6,400 and an estimated useful life of 5 years. The machine can operate for 104,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2018, 20,800 hrs; 2019, 26,000 hrs; 2020, 15,600 hrs; 2021, 31,200 hrs; and 2022, 10,400 hrs.

Compute the annual depreciation charges over the machine’s life assuming a December 31 year-end for each of the following depreciation methods. (Round answers to 0 decimal places, e.g. 45,892.)

Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following methods. (Round answers to 0 decimal places, e.g. 45,892.)

Mars Dump is a multinational company that is caught by the Emissions Trading Scheme (ETS).

Details of ETS are as follows:

It is a cap and trade scheme in which permits are traded in an active market. Its annual compliance period is from 1 July of the current period to 30 June of the following year.

Each participating company receives an allocation of free permits each year based on their reporting carbon emissions from the previous period. In the case of Mars Dump Ltd, permits to emit 36 000 tonnes of carbon dioxide equivalents have been issued on the first day of the current period (i.e. 1 July 2019) when the market price of a permit was $25 per tonne of carbon dioxide equivalents.

During the 2019/2020 financial year, Mars Dump emitted 37 000 tonnes of carbon dioxide equivalents, which exceeded its permitted emissions of 36 000 tones. This occurred despite the managers of Mars Dump estimating that it had emitted 19 000 tonnes of carbon dioxide equivalents by 31 March 2020 and was therefore on target to emit 36 000 tonnes by 30 June 2020. The market price of a permit is $27 on 31 March 2020. As a result of exceeding allowed emission levels, on 30 June 2020, Mars Dump purchased 1 000 permits at a market price of $33 per tonne. Mars Dump uses the cost model in accordance with AASB 138, and amortises any deferred income arising from the permits using the proportion of actual emissions to estimated total emissions.

Required

1. How can stakeholder theory be used to explain companies voluntarily undertaking corporate social responsibility reporting? Discuss.                                                                            
2. “There is no mandatory reporting of corporate social responsibility in Australia.” What is your understanding of this phrase? Explain.                                                          
3. Account for above events in the books of Mars Dump Ltd for the period 1 July 2019 to 30 June 2020 in accordance with the requirements of Interpretation 3 and AASB138.                                                                                                                                                                     

Corporate Social Responsibility (CSR)

Mars Dump is a multinational company that is caught by the Emissions Trading Scheme (ETS).

Details of ETS are as follows:

It is a cap and trade scheme in which permits are traded in an active market. Its annual compliance period is from 1 July of the current period to 30 June of the following year.

Each participating company receives an allocation of free permits each year based on their reporting carbon emissions from the previous period. In the case of Mars Dump Ltd, permits to emit 36 000 tonnes of carbon dioxide equivalents have been issued on the first day of the current period (i.e. 1 July 2019) when the market price of a permit was $25 per tonne of carbon dioxide equivalents.

During the 2019/2020 financial year, Mars Dump emitted 37 000 tonnes of carbon dioxide equivalents, which exceeded its permitted emissions of 36 000 tones. This occurred despite the managers of Mars Dump estimating that it had emitted 19 000 tonnes of carbon dioxide equivalents by 31 March 2020 and was therefore on target to emit 36 000 tonnes by 30 June 2020. The market price of a permit is $27 on 31 March 2020. As a result of exceeding allowed emission levels, on 30 June 2020, Mars Dump purchased 1 000 permits at a market price of $33 per tonne. Mars Dump uses the cost model in accordance with AASB 138, and amortises any deferred income arising from the permits using the proportion of actual emissions to estimated total emissions.

Required

1. How can stakeholder theory be used to explain companies voluntarily undertaking corporate social responsibility reporting? Discuss.                                                                            
2. “There is no mandatory reporting of corporate social responsibility in Australia.” What is your understanding of this phrase? Explain.                                                          

Account for above events in the books of Mars Dump Ltd for the period 1 July 2019 to 30 June 2020 in accordance with the requirements of Interpretation 3 and AASB138.

The following statement of financial position relates to XYZ Ltd for the years ending 30 June 2019 and 30 June 2020.

Additional Information:

1. Gross profit for the year ended 30 June 2020 was $110,500, and consisted of:

Sales Revenue                 $393,500

Cost of Sales                     283,000

2. All purchases and sales of inventory were on credit.
3. Loss for the year ended 30 June 2020 was $18,750, after deducting expenses of $129,250 from the gross profit figure.
4. Expenses of $129,250 comprise of depreciation on Buildings and on Plant & Equipment, a loss on sale of land, $5,000 in interest expense, and other expenses (other expenses relate to Accrued Employee Expenses in the statement of financial position).
5. During the year ended 30 June 2020, cash dividends were paid.
6. The increase in Buildings was due to building extensions which were paid for during the year, and a block of land costing $37,500 was sold for $31,250 cash.
7. No Plant & Equipment was purchased or sold during the year.
8. The revaluation increment on land of $20,000 does not have any effect on profit or loss.

Required:

Prepare the statement of cash flows of XYZ Ltd for the year ended 30 June 2020 based on the direct method of presentation. Ignore tax effects. Notes are not required.