Report on Issues in Financial Accounting
QUESTION 1
a) Journal entries as per AASB 116
Depreciation Cost of assets 245000 Depreciation (245000-35000/7) 30000 = 215000
| Date | Particulars | Amount |
| 30-June-2013 | Balance of machine at 2012 | 215000 |
| Depreciation | 30000 | |
| Balance at 2013 | 185000 | |
| 30-June-2014 | Balance at 2013 | 185000 |
| Depreciation | 30000 | |
| Balance at end of 2014 | 155000 | |
| 30-June -2015 | Balance at 2014 | 155000 |
| Depreciation | 30000 | |
| Balance at end of 2015 | 125000 | |
| 30-June-2016 | Balance at 2015 | 125000 |
| Depreciation | 30000 | |
| Balance at end of 2016 | 95000 |
Journal entries
| Date | Particular | Debit | Credit |
| 30-June-2013 | Machinery A/c Dr | 185000 | |
| Depreciation a/c Dr | 30000 | ||
| To Cisco Ltd | 215000 | ||
| Narration | (Being machine valued at fair value) | ||
| 30-June-2014 | Machinery A/c Dr | 155000 | |
| Depreciation a/c Dr | 30000 | ||
| To Cisco Ltd | 185000 | ||
| (Being machine valued at fair value) | |||
| 30-June-2015 | Machinery A/c Dr | 125000 | |
| Depreciation a/c Dr | 30000 | ||
| To Cisco Ltd | 155000 | ||
| (Being machine valued at fair value) |
b) AASB 116 and AASB 136
Machinery A/c Dr 95000 Depreciation a/c Dr30000 To Cisco Ltd 125000 Measurement of recoverable amount =Fair value-cost to sell-value in use = 104000-600-98000 = 5400 There will be no impairment of assets in this scenraio where in accordance with AASB 136 impairment of assets the the recoverable amount is less than the carrying amount of 95000.
c) Other assessment undertake by cisco
Cisco Ltd should comply with the framework of AASB 108 which deals in ensuring the changes in estimates in the accounts. The depreciation method currently used by an entity is Straight line method if changes to WDV are required to fulfill this standard requirements.
QUESTION 2
A. Appropriate Journal entries for Ajax Ltd for the year of 2012, 2013 and 2014
| Date | Particular | Debit | Credit |
| 30 June 2011 | Machinery A/c Dr | 320000 | |
| To cash a/c | 320000 | ||
| 30-June-2012 | Depreciation a/c Dr | 40000 | |
| To machinery a/c | 40000 | ||
| 30-June-2013 | Depreciation a/c Dr | 40000 | |
| To machinery a/c | 40000 | ||
| 30-June-2014 | Depreciation a/c Dr | 40000 | |
| To machinery a/c | 40000 |
B. Journal entries for accumulated depreciation
| Date | Particular | Debit | Credit |
| 30 June 2014 | Depreciation expense a/c Dr | 40000 | |
| To accumulated depreciation a/c | 40000 | ||
| 30-June-2015 | Depreciation a/c Dr | 40000 | |
| To machinery a/c | 40000 |
Journal entries for impairment losses
| Date | Particular | Debit | Credit |
| 30 June 2014 | Impairment loss a/c Dr | 90000 | |
| To accumulated depreciation a/c | 90000 |