Level 3 Company Reporting Revision Exercise
Important note: This exercise is comprehensive. A wide range of additional information is provided. Within
the confines of a one-hour examination, financial statement extracts rather than full financial statements
are likely to be assessed. Students should be competent in completing financial statement extracts and
extracts from the notes to the financial statements. Students aspiring to higher grades need to be
competent in all aspects of the assessment – completing accounting entries, completing financial
statements or financial statement extracts and providing explanations for the accounting entries and
entries in the financial statements. Cash flows are also likely to be assessed. A separate cash flow revision
question is provided.
Accounts Receivable
Auditors' remuneration
Bad Debts
Bank
Garden Tools Ltd
Trial Balance as at 31 March 2013
32,000
Accounts Payable
17,000
500
2,000
Buildings
142,000
Cost of goods sold
430,000
Directors Fees
Donations
25,000
28,000
Accumulated Depreciation
- Buildings
Accumulated Depreciation
4,000
50,000
- Plant and Equipment
Accumulated Depreciation
20,000
- Vehicles
9,000
Allowance for Doubtful Debts
Final dividend (2012)
20,000
Buildings revaluation surplus
Financial assets
30,000
Contributed equity
General expenses
41,000
(55,000 shares)
5,000
128,000
Interest on Debentures
3,300
Interim dividend (2013)
10,000
Dividends Received
1,000
Inventory
40,000
Gain on sale of vehicles
1,000
Land
62,000
GST
2,900
Plant and Equipment
120,000
Debentures (6%, due 2017)
900
Land revaluation surplus
12,000
64,000
Provisional tax paid
18,000
Retained Earnings
Vehicle Expenses
15,000
Sales
Vehicles
70,000
Wages and salaries
65,000
$1,151,800
60,000
775,000
$1,151,800
Additional information
 Financial assets have a current market value considered to be fair value of $34,000
 Financial assets are shares in Briscoe Group Ltd
 Dividends are owing $1,200
 Adjust the allowance for doubtful debts to 5% of accounts receivable
 Wages and salaries owing $2,000
 General expenses paid in advance $3,450 including GST
 Inventory with a cost of $7,000 has a net realisable value of $4,000
 Invoice on hand for delivery vehicle expenses $2,300 including GST
 Interest is owing on debentures
 Depreciation on vehicles 20% p.a. diminishing value (use the balances in the trial balance)
 Depreciation on plant and equipment 10% p.a. straight line
 Depreciation on buildings $2,000
 Tax expense $42,000
 Garden Tools Ltd repurchased 5,000 shares at a fair value of $2.90. These shares were initially issued at
$2.20
 The directors of Garden Tools Ltd placed a public share issue of 15,000 shares at a fair value of $3.00
with a sharebroker. The share issue was fully subscribed and payment received less the sharebroker’s
5% brokerage fee.
 Revalue land to its current independent valuation of $67,000
 Revalue buildings to their current independent valuation of $145,000
 Auditors' remuneration is the audit fee
 A vehicle, which cost $20,000, with a carrying amount of $15,000 was sold in April 2012
 A new vehicle costing $34,500 including GST was purchased in April 2012.
 Directors have recommended a final dividend of 10c per share on 30 April 2013 to be paid on 15 May
2013.
You should complete the following tasks:
(a) Prepare journal entries for the provisional tax paid and tax expense, share issue and revaluation of
buildings.
(b) Complete the Retained Earnings general ledger account from 1 April 2012 to 31 March 2013, including
any necessary closing entries. (You will need to complete the income statement before you can finish
this task.)
(c) Complete the Contributed Equity general ledger account from 1 April 2012 to 31 March 2013.
(d) Prepare a Statement of Comprehensive Income and accompanying notes.
(e) Explain in detail the impact each of the following has on the Statement of Comprehensive Income:
i.
Revaluation of land
ii.
Financial assets have a current market value considered to be fair value of $34,000
iii.
Provisional taxation paid
(f) Prepare a Statement of Financial Position and accompanying notes.
(g) Identify and explain in detail one temporary current asset and one temporary current liability that arise
from the additional information.