|
In the Books ChiHerbal Ltd. |
||||
|
Jornal Entries |
||||
|
Dr. |
Cr. |
|||
|
Date |
Particulars |
Amount |
Amount |
|
|
15/10/2014 |
Bank A/c. |
Dr. |
$1,500,000 |
|
|
To, |
Share Application A/c. |
$1,500,000 |
||
|
Share Application A/c. |
Dr. |
$1,000,000 |
||
|
To, |
Share Capital A/c. |
$1,000,000 |
||
|
16/10/2014 |
Share Application A/c. |
Dr. |
$200,000 |
|
|
To, |
Bank A/c. |
$200,000 |
||
|
30/10/2014 |
Share Issuance Cost A/c. |
Dr. |
$8,000 |
|
|
To, |
Bank A/c. |
$8,000 |
||
|
15/11/2014 |
Share Allotment A/c. |
Dr. |
$1,000,000 |
|
|
To, |
Share Capital A/c. |
$1,000,000 |
||
|
15/11/2014 |
Bank A/c. |
Dr. |
$800,000 |
|
|
Share Application A/c. |
Dr. |
$200,000 |
||
|
To, |
Share Allotment A/c. |
$1,000,000 |
||
|
1/12/2014 |
Share Final Call A/c. |
Dr. |
$500,000 |
|
|
To, |
Share Capital A/c. |
$500,000 |
||
|
15/12/2014 |
Bank A/c. |
Dr. |
$380,000 |
|
|
Calls-in-Arear A/c. |
Dr. |
$20,000 |
||
|
Share Application A/c. |
Dr. |
$100,000 |
||
|
To, |
Share Final Call A/c. |
$500,000 |
||
|
22/12/2014 |
Share Capital A/c. |
Dr. |
$100,000 |
|
|
To, |
Calls-in-Arear A/c. |
$20,000 |
||
|
To, |
Forfeited Share Liability A/c. |
$80,000 |
||
|
Forfeited Share Liability A/c. |
Dr. |
$80,000 |
||
|
To, |
Bank A/c. |
$80,000 |
|
BALANCE SHEET |
||
|
as on 30/06/2015 |
||
|
Particulars |
Amount |
Amount |
|
Shareholders’ Equity: |
||
|
Authorised Equity Shares – 500,000 shares @ $5 per share |
$2,500,000 |
|
|
Issued & Outstanding Equity Shares – 480,000 shares @ $5 per share |
$2,400,000 |
|
|
Total Equity Capital |
$2,400,000 |
|
In the books of ChiHerbal Ltd. |
||||
|
Journal Entries |
||||
|
Dr. |
Cr. |
|||
|
Date |
Particulars |
Amount |
Amount |
|
|
31/12/2015 |
Depreciation Expenses A/c. |
$26,000 |
||
|
Accumulated Depreciation- Machine A A/c. |
$15,500 |
|||
|
Accumulated Depreciation- Machine B A/c. |
$10,500 |
|||
|
Accumulated Depreciation- Machine A A/c. |
$135,500 |
|||
|
Machine A A/c. |
$120,000 |
|||
|
Gain on Revaluation A/C. |
$15,500 |
|||
|
Accumulated Depreciation- Machine B A/c. |
$40,500 |
|||
|
Loss on Devaluation A/c. |
$4,500 |
|||
|
Machine B A/c. |
$45,000 |
|||
|
Gain on Revaluation A/C. |
$15,500 |
|||
|
Asset Revaluation Reserve A/c. |
$15,500 |
|||
|
Asset Revaluation Reserve A/c. |
$4,500 |
|||
|
Loss on Devaluation A/c. |
$4,500 |
|||
|
30/06/2016 |
Depreciation Expenses A/c. |
$32,333 |
||
|
Machine A A/c. |
$15,833 |
|||
|
Machine B A/c. |
$16,500 |
|||
|
Loss on Devaluation A/c. |
$3,167 |
|||
|
Machine A A/c. |
$1,167 |
|||
|
Machine B A/c. |
$2,000 |
|||
|
Asset Revaluation Reserve A/c. |
$3,167 |
|||
|
Loss on Devaluation A/c. |
$3,167 |
|
Computation of Accummulated Depreciation: |
|||
|
Particulars |
Machine A |
Machine B |
|
|
Cost of Machine |
A |
$310,000 |
$210,000 |
|
Expected Life (in years) |
B |
10 |
10 |
|
Depreciation p.a. |
C=A/B |
$31,000 |
$21,000 |
|
Carrying Amount |
D |
$190,000 |
$180,000 |
|
Accumulated Depreciation |
E=A-D |
$120,000 |
$30,000 |
|
Depreciation Schedule for Machine A: |
||||||||
|
Date |
Carrying Amount |
Useful Life |
Depreciation p.a. |
Depreciation Period |
Depreciation charged |
Depreciated Value |
Fair Value |
Revaluation |
|
31/12/2015 |
$190,000 |
10 |
$31,000 |
0.5 |
$15,500 |
$174,500 |
$190,000 |
$15,500 |
|
30/06/2016 |
$190,000 |
6 |
$31,667 |
0.5 |
$15,833 |
$174,167 |
$173,000 |
-$1,167 |
|
Depreciation Schedule for Machine B: |
||||||||
|
Date |
Carrying Amount |
Useful Life |
Depreciation p.a. |
Depreciation Period |
Depreciation charged |
Depreciated Value |
Fair Value |
Revaluation |
|
31/12/2015 |
$180,000 |
10 |
$21,000 |
0.50 |
$10,500 |
$169,500 |
$165,000 |
-$4,500 |
|
30/06/2016 |
$165,000 |
5 |
$33,000 |
0.50 |
$16,500 |
$148,500 |
$146,500 |
-$2,000 |
|
Proof of Implicit Rate: |
||
|
Particulars |
Amount |
|
|
Annual Installment |
A |
$66,000 |
|
Less: Annual Insurance & Maintanence Cost |
B |
$6,000 |
|
Net Installment |
C=A-B |
$60,000 |
|
No. of Annual Installment |
D |
4 |
|
Required Rate of Return |
E |
12% |
|
Present Value of Lease Liability |
F |
$182,241 |
|
PV of 1st Installment |
G=[1/(1+E)^1]xC |
$53,571 |
|
PV of 2nd Installment |
H=[1/(1+E)^2]xC |
$47,832 |
|
PV of 3rd Installment |
I=[1/(1+E)^3]xC |
$42,707 |
|
PV of 4th Installment |
J=[1/(1+E)^4]xC |
$38,131 |
|
Total PV of Installment |
K=G+H+I+J |
$182,241 |
|
Schedule of Lease Payment: |
|||||
|
Year |
Lease Liability |
Annual Repayment |
Interest Rate |
Interest Expense |
Balance Liability |
|
1 |
$182,240.96 |
$60,000.00 |
12.00% |
$21,868.92 |
$144,109.88 |
|
2 |
$144,109.88 |
$60,000.00 |
12.00% |
$17,293.19 |
$101,403.06 |
|
3 |
$101,403.06 |
$60,000.00 |
12.00% |
$12,168.37 |
$53,571.43 |
|
4 |
$53,571.43 |
$60,000.00 |
12.00% |
$6,428.57 |
$0.00 |
|
In the books of ChiHerbal Ltd. |
||||
|
Journal Entries |
||||
|
Dr. |
Cr. |
|||
|
Date |
Particulars |
Amount |
Amount |
|
|
1/7/2015 |
Lease Assets A/c. |
$210,000.00 |
||
|
Lease Liability A/c. |
$210,000.00 |
|||
|
30/06/2016 |
Interest on Lease A/c. |
$21,868.92 |
||
|
Insurance & Maintenance Charges A/c. |
$6,000.00 |
|||
|
Interest Payable A/c. |
$21,868.92 |
|||
|
Accrued Expenses A/c. |
$6,000.00 |
|||
|
Depreciation on Leased Assets A/c. |
$48,750.00 |
|||
|
Accum. Depreciation A/c. |
$48,750.00 |
|||
|
1/7/2016 |
Interest Payable A/c. |
$21,868.92 |
||
|
Accrued Expenses A/c. |
$6,000.00 |
|||
|
Lease Liability A/c. |
$38,131.08 |
|||
|
Cash A/c. |
$66,000.00 |
|||
|
30/06/2017 |
Interest on Lease A/c. |
$17,293.19 |
||
|
Insurance & Maintenance Charges A/c. |
$6,000.00 |
|||
|
Interest Payable A/c. |
$17,293.19 |
|||
|
Accrued Expenses A/c. |
$6,000.00 |
|||
|
Depreciation on Leased Assets A/c. |
$48,750.00 |
|||
|
Accum. Depreciation A/c. |
$48,750.00 |
|||
|
1/7/2017 |
Interest Payable A/c. |
$17,293.19 |
||
|
Accrued Expenses A/c. |
$6,000.00 |
|||
|
Lease Liability A/c. |
$42,706.81 |
|||
|
Cash A/c. |
$66,000.00 |
|||
|
30/06/2018 |
Interest on Lease A/c. |
$12,168.37 |
||
|
Insurance & Maintenance Charges A/c. |
$6,000.00 |
|||
|
Interest Payable A/c. |
$12,168.37 |
|||
|
Accrued Expenses A/c. |
$6,000.00 |
|||
|
Depreciation on Leased Assets A/c. |
$48,750.00 |
|||
|
Accum. Depreciation A/c. |
$48,750.00 |
|||
|
1/7/2018 |
Interest Payable A/c. |
$12,168.37 |
||
|
Accrued Expenses A/c. |
$6,000.00 |
|||
|
Lease Liability A/c. |
$47,831.63 |
|||
|
Cash A/c. |
$66,000.00 |
|||
|
30/06/2019 |
Interest on Lease A/c. |
$6,428.57 |
||
|
Insurance & Maintenance Charges A/c. |
$6,000.00 |
|||
|
Interest Payable A/c. |
$6,428.57 |
|||
|
Accrued Expenses A/c. |
$6,000.00 |
|||
|
Depreciation on Leased Assets A/c. |
$48,750.00 |
|||
|
Accum. Depreciation A/c. |
$48,750.00 |
|||
|
1/7/2016 |
Interest Payable A/c. |
$6,428.57 |
||
|
Accrued Expenses A/c. |
$6,000.00 |
|||
|
Lease Liability A/c. |
$53,571.43 |
|||
|
Cash A/c. |
$66,000.00 |
|||
|
Lease Obligation A/c. |
$2,500.00 |
|||
|
Cash A/c. |
$2,500.00 |
|
Schedule of Lease Receipt: |
|||||
|
Year |
Leased Assets |
Annual Receipts |
Interest Rate |
Interest Income |
Asset Balance |
|
1 |
$182,240.96 |
$60,000.00 |
12.00% |
$21,868.92 |
$144,109.88 |
|
2 |
$144,109.88 |
$60,000.00 |
12.00% |
$17,293.19 |
$101,403.06 |
|
3 |
$101,403.06 |
$60,000.00 |
12.00% |
$12,168.37 |
$53,571.43 |
|
4 |
$53,571.43 |
$60,000.00 |
12.00% |
$6,428.57 |
$0.00 |
|
In the books of Darlington Ltd. |
||||
|
Journal Entries |
||||
|
Dr. |
Cr. |
|||
|
Date |
Particulars |
Amount |
Amount |
|
|
1/7/2015 |
Lease Receivables A/c. |
$210,000.00 |
||
|
Assets A/c. |
$210,000.00 |
|||
|
Lease Expenses A/c. |
$3,643.00 |
|||
|
Cash A/c. |
$3,643.00 |
|||
|
30/06/2016 |
Interest Receivables A/c. |
$21,868.92 |
||
|
Lease Receivables A/c. |
$6,000.00 |
|||
|
Insurance & Maintenance Charges A/c. |
$6,000.00 |
|||
|
Interest Income A/c. |
$21,868.92 |
|||
|
1/7/2016 |
Cash A/c. |
$66,000.00 |
||
|
Interest Receivables A/c. |
$21,868.92 |
|||
|
Lease Receivables A/c. |
$44,131.08 |
|||
|
30/06/2017 |
Interest Receivables A/c. |
$17,293.19 |
||
|
Lease Receivables A/c. |
$6,000.00 |
|||
|
Insurance & Maintenance Charges A/c. |
$6,000.00 |
|||
|
Interest Income A/c. |
$17,293.19 |
|||
|
1/7/2017 |
Cash A/c. |
$66,000.00 |
||
|
Interest Receivables A/c. |
$17,293.19 |
|||
|
Lease Receivables A/c. |
$48,706.81 |
|||
|
30/06/2018 |
Interest Receivables A/c. |
$12,168.37 |
||
|
Lease Receivables A/c. |
$6,000.00 |
|||
|
Insurance & Maintenance Charges A/c. |
$6,000.00 |
|||
|
Interest Income A/c. |
$12,168.37 |
|||
|
1/7/2018 |
Cash A/c. |
$66,000.00 |
||
|
Interest Receivables A/c. |
$12,168.37 |
|||
|
Lease Receivables A/c. |
$53,831.63 |
|||
|
30/06/2019 |
Interest Receivables A/c. |
$6,428.57 |
||
|
Lease Receivables A/c. |
$6,000.00 |
|||
|
Insurance & Maintenance Charges A/c. |
$6,000.00 |
|||
|
Interest Income A/c. |
$6,428.57 |
|||
|
1/7/2019 |
Cash A/c. |
$66,000.00 |
||
|
Interest Receivables A/c. |
$6,428.57 |
|||
|
Lease Receivables A/c. |
$59,571.43 |
|||
|
Cash A/c. |
$2,500.00 |
|||
|
Lease Obligation Ac. |
$2,500.00 |
|||
|
Cash A/c. |
$10,000.00 |
|||
|
Loss on Sale of Assets A/c. |
$2,500.00 |
|||
|
Lease Obligation A/c. |
$2,500.00 |
|||
|
Assets A/c. |
$15,000.00 |
|
In the books of ChiHerbal Ltd. |
||||
|
Journal Entries |
||||
|
Dr. |
Cr. |
|||
|
Date |
Particulars |
Amount |
Amount |
|
|
30/06/2014 |
Research & Development Expenses A/c. |
$1,000,000 |
||
|
Cash A/c. |
$1,000,000 |
|||
|
Profit & Loss A/c. |
$1,000,000 |
|||
|
Research Expenses A/c. |
$1,000,000 |
|||
|
30/6/2015 |
Research & Development Expenses A/c. |
$2,000,000 |
||
|
Cash A/c. |
$2,000,000 |
|||
|
Patent A/c. |
$2,000,000 |
|||
|
Research & Development Expenses A/c. |
$2,000,000 |
|||
|
30/06/2016 |
Research & Development Expenses A/c. |
$3,000,000 |
||
|
Cash A/c. |
$3,000,000 |
|||
|
Patent A/c. |
$3,000,000 |
|||
|
Research & Development Expenses A/c. |
$3,000,000 |
References:
Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia
Weil, R. L., Schipper, K., & Francis, J. (2013). Financial accounting: an introduction to concepts, methods and uses. Cengage Learning
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