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HI6025
ACCOUNTING THEORY AND CURRENT ISSUES
FINAL ASSESSMENT
TRIMESTER 3, 2021
Assessment Weight: 50 total marks
Instructions:
• All questions must be answered by using the answer boxes provided in this paper.
• Completed answers must be submitted to Blackboard by the published due date and time.
Please ensure you follow the submission instructions at the end of this paper.
Purpose:
This assessment consists of six (6) questions and is designed to assess your level of knowledge of the key topics covered in this unit.

Question 1 (7 marks)
ABC Ltd has the following land and buildings in its financial statements as at 30 June 2022:
Residential land, at cost 2,260,000
Factory land, at valuation 2020 2,034,000
Buildings, at valuation 2020 1,808,000
Accumulated depreciation -226,000
At 30 June 2022, the balance of the revaluation surplus is $904 000, of which $678 000 relates to the factory land and $226 000 to the buildings. On this same date, independent valuations of the land and buildings are obtained. In relation to the above assets, the assessed fair values at 30 June 2022 are:
Residential land, previously recorded at cost 2 486 000
Factory land, previously revalued in 2020 1 582 000
Buildings, previously revalued in 2020 2 034 000
Required:
Provide the journal entries to account for the revaluation on 30 June 2022. ABC Ltd classifies the residential land and the factory land as different classes of assets.
ANSWER: ** Answer box will enlarge as you type

Question 2 (7 marks)
XYZ Ltd acquires 100 per cent of Red-X Ltd on 1 July 2021. XYZ Ltd pays the shareholders of Red-X Ltd the following consideration:
Cash 79 100
Plant and equipment fair value $282 500; carrying amount in the books of ABC Ltd $192 100
Land fair value $339 000; carrying amount in the books of ABC Ltd $226 000
There are also legal fees of $214 700 involved in acquiring Red-X Ltd.
On 1 July 2021, Red-X Ltd’s statement of financial position shows total assets of $339 000 and liabilities of $339 000. The fair value of the assets is $904 000.
Required:
Has any goodwill been acquired, and, if so, how much? And discuss the potential for including associated legal fees into the cost of acquiring Red-X using appropriate accounting standards.
ANSWER:

Question 3 (7 marks)
ABC Ltd enters into a five-year lease agreement with Legal Ltd on 1 July 2023 for an item of machinery.
There is a bargain purchase option that ABC Ltd will be willing to exercise at the end of the fifth year for $90 000. The machinery is expected to have a useful life of five years
There are to be five annual payments of $140 000, the first being made on 30 June 2024. Included within these payments is $20 000 representing payment to the lessor for insurance and maintenance of the equipment.
Additional information
Implicit interest rate: 8 per cent
Present value of an annuity in arrears of $1 for five years at 8 per cent = 3.9927
Present value of $1 in five years at 8 per cent = 0.6806
Required:
a) Determine the initial measurement of the lease liability (2 Marks)
ANSWER a):
b) Determine the initial measurement of right-of-use asset cost (2 Marks)
ANSWER b):
c) Provide the accounting journal entries for the year ended 30 June 2024 (3 Marks).
ANSWER c):

Question 4 (11 marks)
Discuss when a company in the extractive industries needs to start accounting for its restoration costs? Explain the measurement requirement for potential restoration provisions.
ANSWER:
Question 5 (7 marks)
Pearson Ltd is an Australian listed company. Its results for the financial year ending 30 June 2023 have exceeded expectations—profit before tax is $12 649 220 million, and income tax expense is $2 504 050 million. As of 30 June 2022, there were 13 221 000 million ordinary shares on issue. On 11 May 2023, 4 774 250 million further ordinary shares were issued at a price of $2.99—paid to $2.4. The partly paid shares carry rights to dividends in proportion to the amount paid relative to the total issue price.
Required:
Calculate the basic EPS for Pearson Ltd for the year ending 30 June 2023.
ANSWER:

Question 6 (11 marks)
Explain the hedging arrangement and how does it reduce foreign currency risk exposure? Explain the time that a foreign currency monetary item considered to be hedged.
ANSWER:
END OF FINAL ASSESSMENT
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