Tag: : Business Finance – Accounting

Question 1
Bell  Ltd.  exchanged  a  piece  of  equipment  for  land  and  also  paid  $10,000  cash.  The equipment  was  acquired  at  a  cost  of  $420,000  in  previous  years.      At  the  date  of exchange, the equipment has a carrying amount (net book value) of $295,000 and the land has a fair market value of $320,000.
Required:
Provide the entry that Bell Ltd. should record for this transaction.
 
Question 2
Box  Ltd.  exchanged  a  piece  of  equipment  for  land  and  also  paid  $30,000  cash.  The equipment  was  acquired  at  a  cost  of  $600,000  in  previous  years.      At  the  date  of exchange,  the  land  has  a  fair  market  value  of  $420,000  and  a  $15,000  loss  on  disposal was to be recognized for the equipment.
Required:
Provide the entry that Box Ltd. should record for this exchange transaction.
 
Question 3
On 1 January 2014, T&T Ltd. purchased equipment for $630,000 cash.    The equipment was  depreciated  using  straight-line  and  had  an  estimated  useful  life  of  8  years  and  an estimated  residual  value  of  $30,000.    Effective  from  1  January  2016,  T&T  revised  the total useful life of the equipment to 7 years with an estimated residual value of $10,000.
Required:
a.   Determine the carrying amount of the equipment at 1 January 2016.
b.   Compute depreciation expense for year-ended 31 December 2016.
 
Question 4
A  piece  of  freehold  land was acquired  for $500,000  cash  on 1  January  2015.  The  land is not  subject  to  depreciation  and  is  revalued  at  each  fiscal  year-ending  31  December.
Details about the fair value at each year-end are as follows:
31.12.2015
$510,000
31.12.2016
$495,000
The land was sold on 1 August 2017 for $503,000 cash.
Required:
Prepare all relevant entries relating to the land for 2015 to 2017. Indicate the date next to each entry.
 
Question 5
A piece of freehold land was acquired for $700,000 cash on 10 July 2015. The land is not subject  to  depreciation  and  is  revalued  at  each  fiscal  year-ending  31  December.  Details about the fair value at each year-end are given below:
31.12. 2015 Fair value$670,000
31.12. 2016 Fair value$710,000
The land was sold on 15 April 2017 for $725,000 cash.
Required:
Prepare all relevant entries relating to the land for 2015 to 2017. Indicate the date next to each entry.

The purpose of this assignment is to help you become familiar with examining the stockholders’ equity section of the balance sheet. 
Assignment Steps
Resources: Financial Accounting: Tools for Business Decision Making, Ch. 11
Answer the following questions in 1,050 words using the Lachlin Corporation Balance Sheet located on p. 575 of Financial Accounting:

• How many shares of common stock are outstanding?
• Assuming there is a stated value, what is the stated value of the common stock?
• What is the par value of the preferred stock?
• If the annual dividend on preferred stock is $36,000, what is the dividend rate on preferred stock?
• If dividends of $72,000 were in arrears on preferred stock, what would be the balance reported for retained earnings?

This assessment is worth 15% of the total subject assessment and is marked out of 100. Part A (40 Marks)The management team of Online Jeans Sales have just received a new proposal from one of the firm’s marketing managers. The proposal outlines a new investment to create a Custom Finish Laboratory. Through the lab, online customers will be able to select an option to personalise their jeans in a range of finishes. This proposal was made following the completion of market research costing $100,000.The capital cost to establish the Custom Finish Lab will be $1,650,000. This cost will depreciated on the straight-line basis to zero over the 8 year productive life of the lab. It is estimated $100,000 will be recovered at the completion of the project as the salvage value of the lab. In the first year of operations, the new lab is expected to increase the firm’s revenues by $1,445,000. In addition to depreciation, the costs to run the lab will include additional staff costs ($900,000 p.a.), materials costs ($210,000 p.a.), marketing costs ($46,000 p.a.), and other costs ($25,000 p.a.). Over the 8 year life of the lab, these revenues and expenses are expected to change. The following summarises the base-case, worst-case and best-case scenarios concerning these changes: Base-caseWorst-caseBest-caseRevenuesIncrease by 10% p.a.Increase by 6% p.a.Increase by 15% p.a.Costs (other than depreciation)Increase by 6% p.a.Increase by 10% p.a.Increase by 3% p.a. The firm’s tax rate is 30% and all analysis should be based on after-tax figures. The firm requires a 16% required rate of return on all potential investments. Required:

• For the base-case, worst-case, and best-case scenarios calculate the following:
  • After-tax cash flows (9 marks).
  • Payback periods (6 marks).
  • Discounted payback periods (6 marks).
  • Net present values (6 marks).
  • Profitability index (3 marks).
• Other than modelling ‘best case’ and ‘worst case’ projections, discuss and describe what other capital budgeting approaches could be taken to allow for the increased riskiness of the estimated future cash flows (5 marks).
• Discuss whether the above proposal should be accepted. Discuss any further information that you may require to help you make the accept/reject decision about this project (5 marks).

Part B (60 Marks) ReportGuidelines:For this assignment, you are encouraged to use the information provided on the firm’s corporate websites together with the following sources:

• OneSource: Global Business Browser (available through Library Databases: http://library.csu.edu.au/services/find-books-and-other-resources/databases/subject/business)
• Australian Stock Exchange http://www.asx.com.au/
• Yahoo Finance https://au.finance.yahoo.com/
• Reuters http://www.reuters.com/finance/markets

News sources such as those secured through the Library’s ANZ Newsstream and Factiva databases are also likely to be relevant (http://library.csu.edu.au/services/find-books-and-other-resources/databases).Show all your calculation on the annexure.Your report should include:

• A brief executive summary.
• Introduction.
• Body (use appropriate headings and sub-headings as relevant sign-posts).
• Conclusion.

The following guide is useful in providing further information on effective report writing: https://interact2.csu.edu.au/webapps/blackboard/execute/displayLearningUnit?course_id=_22905_1&content_id=_1053355_1 Required:APN Outdoor Group (APO) is an ASX Listed firm which specialises in offering advertising services including digital billboards, static roadside billboards, transit advertising, rail advertising and airport advertising throughout Australia and New Zealand (Reuters, 2017). In 2016, the firm’s sales exceeded AUD$300 million. Being part of the finance team of APN Outdoor Group, you have been tasked with reviewing and preparing a report on the capital structure of the firm and critique whether the firm has been successful in maximising wealth generation for shareholders. An excelloent source for information specifically on the APN Outdoor Group is the analysis provided by the Wall Street Journal at http://quotes.wsj.com/AU/XASX/APO (Note: this site opens at an overview of APO.AX and historical financial data and ratios for the firm can be accessed by clicking on the link to ‘All Sections’ on the right). Your report should be 1000 words and cover the following areas:

• Assume that for the 2016 year the firm APO.AU has a Beta of 1.3, that return on the ASX market was 7%, and that the yield on Australian Government bonds was 2.4%.
• Using data from the firm’s 2016 annual report:
  • Categorise the firm’s current capital structure into debt and equity.
  • Calculate the firm’s after-tax Weighted Average Cost of Capital.
• Compare the firm’s capital structure with at least one other firm operating within their industry.
• Critically analyse other key financial ratios for APN.
• Outline any significant changes to have occurred to the firm’s capital structure during the past three years.
• Critically evaluate the extent to which the firm has been successful in maximising wealth for shareholders in the past three years.
• Discuss why it is important for the firm to minimise their cost of capital.
• Recommend possible ways in which the firm could adopt an alternative capital structure and lower their cost of capital.

Part 1: Creating an Event

• Develop the event. Explain how it aligns with the firm’s mission with a definable target audience.
• Describe how you will link the image of the firm and the event. Keep in mind that people attend events mainly because of a connection with the theme or topic, not because of the sponsoring organization.
• Create a presence so that the firm’s message and sponsorship will be remembered.
• Provide a souvenir so that people will remember your event and company.

Part 1 of the Individual Project should be 3 pages in length.
Part 2: Notifying Connectors

• Notify connectors before the event. Create a 1-page pitch to the media.
• Write a 1-page recap of the event with quotes of attendees.

Part 2 of the Individual Project should be 2 pages in length.