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AF210 Financial Accounting Semester 1 - 2012 Assignment 2 (7.

1. Due Date: Thursday 17th May in the Lecture and on moodle. Penalty at 10% per day. 2. Must be word-processed, not hand written, word size 12 with Times new roman font type and double-spacing.

The trail balance of Dee Bee Ltd at 30th June 2011 is as follows: $000 Revenue - Sales of merchandise Revenue - Sale of services Dividend revenue Interest revenue Revenue - Sale of available-for-sale investment Cost of goods sold Wages and salaries Long services leave expense Superannuation expense Depreciation expense - plant Depreciation expense - services fleet Depreciation expense - buildings Depreciation expense - equipment Amortization expense - patents and copyrights Impairments expense - goodwill Expense- Sale of available-for-sale investments Interest expense Income tax expense Audit fees Directors fees Cash at bank Accounts receivable Call in arrears- ordinary B shares Inventory - raw materials Inventory - work in process Inventory - finished goods Plant Service fleet Buildings Equipment Land $000 3500 1250 250 275 600

1750 850 95 120 105 400 95 150 10 50 600 187 327 220 135 185 375 100 275 25 185 1650 1300 1600 750 2200
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Accumulated depreciation - plant Accumulated depreciation - service fleet Accumulated depreciation - buildings Accumulated depreciation - equipment Notes receivable Investments (available-for-sale securities ) Patents and copyrights Accumulated amortization - patents and copyrights Accumulated impairments - goodwill Goodwill Accounts payable Current tax liability Notes payable Provision for long service leave Provision for annual leave Debentures Paid up capital - 10% cumulative redeemable preference shares Paid up capital - ordinary A shares Paid up capital - ordinary B shares Asset revaluation reserve Accumulated other comprehensive profit-available-for-sale securities General reserves Retained profits 1 July 2010 Final dividend paid 27 October 2010 Interim dividend paid 15 April 2011

445 615 220 250 950 900 250 50 100 520 120 327 175 400 25 2200 500 1500 1500 775 180 664 828 240 150 16749


Other information, not necessarily reflected in the trial balance: The net realizable value of inventory on 30 June 2011 was estimated to be: raw material $250 000, work in process $25 500 and finished goods $190 000. The goodwill relates to net assets comprising a business. At 30 June 2011, the recoverable amount of all physical non-current assets other than the service fleet exceeded their carrying amount. The recoverable amount for all service fleet was estimated to be $580 000. The recoverable amount of patents and copyrights to be $175 000. The investments sold formed part of the companys share portfolio. Under IAS 39 the investments are classified as available-for-sale and any charge in the fair value is recognized as other comprehensive profits are recognized as a reclassification adjustment. The sale price was the same as the fair value on 30 June 2010. Accumulated other comprehensive profit in relation to the shares was $180 000. The cost of the shares

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was $420 000. On 15 July 2010, the proceeds were used to discharge a debenture secured by a floating charge over the companys inventory. When an investment is sold, Dee Bee Ltd accounting system separately records the proceeds of the sale as a revenue, and the carrying amount as an expense (here each being $600 000). The debentures on issue at reporting date are secured by a mortgage over the land and building. There are two debentures, each of $1 100 000, one due on the 31 December 2011 and the other on 31 December 2013 (both with the term of five years and interest at 10% p.a.). Interest is paid on 30 June and 31 December of each year. Share capital consists of fully paid shares, being 1500 000 ordinary A shares and 1500 000 ordinary B shares, all with an issue price of $1. Although the B Shares are fully called, a call of 50c on 200 000 shares was overdue by 3months. On 30 June, the directors forfeited the shares. The company issued 500 000 cumulative 10% redeemable preference shares on 1 September 2010 for $1 each. The preference shares are classified as debt for financial reporting purposes. Land and buildings are recognized using the revaluation model. A valuation was made by a Real Estate Valuation Limited 30 May 2011 in which the fair value of the land was estimated to be $2 350 000 and the buildings $1 580 000. The directors have a policy of classifying a difference between carrying amount and fair value of 5% or more as being material. The investment in available-for-sale securities comprises ordinary shares in listed companies. The market value (fair value) of the portfolio was $1 450 000. One objective in investing in shares is to fund the redemption of debentures. All of these shares were acquired during the reporting period. Re-measurement increments and decrements are recognized as other comprehensive profit. Included in fees paid to the auditor were $15 000 of fees for taxation planning advice. The notes payable relate to the purchase of raw materials. They are all due within six months. Notes receivable do not relate to sale of goods or services. All but $100 000 of the notes receivable mature within 12 months of the reporting date. On 15 August 2011, the director approved a dividend of 10c per share, to be paid on 20 October. They also gave formal approval to the payments of the dividend on the preference shares due on 31 August 2011. During 2008, the companys warehouse was destroyed by fire. All but $150 000 of the $2 150 000 cost of replacing the inventory lost and repairing the warehouse was covered by insurance. During the current reporting period, litigation by the company and its insurance company against the company that installed and maintained the fire prevention and controlled system began in High Court of Fiji. All cost associated with the litigation are the responsibility of the insurance company. Because of the recently discovered information, the litigation team now believes the probability of the success to be 0.75 (previously 0.40), and the expected amount of compensation for loss of profits to be $275 000.
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Required Prepare a Statement of comprehensive income, Statement of financial position and statement of changes in equity suitable for publication, including notes relevant to the financial statement where data are available (other than those describing accounting policies adopted). Round amounts to nearest $1000.

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