FIJI NATIONAL UNIVERSITY

College of Business, Hospitality and Tourism Studies

School of Accounting & Law

Department of Accounting

ACC803 ADVANCED FINANCIAL REPORTING

MAJOR ASSIGNMENT (20%)

Semester 1, 2019

Instructions:
• This is a group assignment.
• This assignment carries 20% towards your total coursework.

• All assignments should be typed (Font type: Times New Roman, font size: 12 and alignment: justified) and with
proper referencing.

• Only original work is to be submitted. Copied assignments will get a zero mark.

• Plagiarism is a serious issue. Any student found plagiarizing their work will be given zero marks and will be
subject to discipl inary actions.
• Late assignments will be penalized at a rate of 10% per day.
• Due Date: 21 sl May, 2019. Students need to submit a printed copy of their assignment in Building 19 in the
ACC803 Assignment drop box provided.
OUESTION 1 [5%]

Conduct a journal review in order to answer the following questions:

1. Which entities should be required to prepare financial reports that are subject to regulation?
Why? How would you frame an appropriate rule that directs any entity to comply with a
particular set of regu lations?

2. Identify the costs and benefits of preparing financial reports for small businesses. What
conclusions can you draw regarding optimum disclosures for small and medium entities?

Note:

Take note of the following in terms of answering this question:

- Proper references (including in text referencing/citation) should be provided for all the
scholarly articles used to write answers.

- Answers without any 'proper reference' will be deemed as 'copy and paste' from the
internet and will automatically attain zero marks!!!

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OUESTION 2 [15%]

Western Ltd acquired 75% of the shares of QuoII Ltd on 1 July 2012. In exchange for these share Western
Ltd gave a consideration of $26000 cash and 10000 shares in Western Ltd , these having a fair value of $2
each . At this date the shareholders' equity of QuoII Ltd consisted of:

Share capital (15 000 shares) $ 45000

Retained earnings 9000

At this date all the identifiable assets and Iiabilities of Quoll Ltd were recorded at amounts equal to their fair
values except for plant for which the fair value was $2000 greater than the carrying amount of $25 000
(original cost was $35 000). The plant was expected to have a further 5-year life. The fair value of the non­
controlling interest at 1 July 2012 was $15 000. Western Ltd uses the full goodwill method . The tax rate is
30%.
Assets held by Quoll Ltd at 30 June 2017 include financial assets. Gains and losses on these assets are
recognised in other comprehensive income. During the 2016-17 year Quoll Ltd recorded gains of$1500 on
these assets. Financial information supplied by the two companies at 30 June 2017 was as follows:
Western Ltd Quoll Ltd
Sales revenue $75000 $118000
Interest revenue 375 1 000
Dividend revenue 2700 1 000
78 075 ) 20 000
Cost of sales (51 000) (87750)
Financial expenses (2 250) (3 000)
Selling expenses (6 000) (9 000)
Other expenses (2 250) (2 250)
(61 500) (102000)
Profit before tax 16575 18000
Income tax expense (7 500) (8 200)
Profit for the year 9075 9800
Retained earnings (117116) 28900 21700
37975 31 500
Dividend paid {4OOO 2 {36OO 2
Retained earnings (30/6/17) 33975 27900
Share capital 60000 45000
Other components of equity 7500
Total equity 93975 80400
Current liabilities 12750 4350
Non-current liabilities: Loans 7500
Total liabilities 12750 11850
Total equity and liabilities $106725 $92 250

Plant 45000 90000

Accumulated depreciation (25500) (45750)
Shares in Quoll Ltd 46000 0
Loans from Quoll Ltd 3750 0
Inventory 13400 23250
Cash 21 075 750
Financial assets 0 16500
Deferred tax assets 3000 7500
Total assets $106725 $92 250
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Additional information

(a) At 1 July 2017, Western Ltd held inventory that had been sold to it by Quoll Ltd in the previous year at
a profit of $1200 .

(b) During the 2016-17 year, Quoll Ltd sold inventory to Western Ltd for $28 500. At 30 June 2017,
Western Ltd still had on hand inventory that had been sold to it by Quoll Ltd for a profit of $1800
before tax.

(c) Interest of$375 was paid by Western Ltd to Quoll Ltd on both 30 June 2016 and 30 June 2017.

Required:

A. Prepare the journal entries to effect the consolidation .

B. Prepare the consolidation worksheet.

C. Prepare the Statement of Comprehensive Income and the Statement of Changes in Equity
th
for the group for the year ended 30 June 2017.

D. Prepare the Statement of Financial Position as at 30 th June 2017.

THE END

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