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ACCT6003: Financial Accounting Processes- Laureate International Universities- ChiHerbal Ltd- Accounting Assignment Help
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Internal Code: MAS7683
The options are exercisable by 28 February 2019. Each option entitles the holder to acquire two ordinary Class 3 shares at a price of $3.60 per share, payable by 28 February 2019.
The following transactions occurred during the financial year ending 30 June 2019:
Scenario 2 Property, Plant and Equipment
a) The extracted financial statements of ChiHerbal shows the following land and buildings on 30 June 2018:
At 30 June 2018, the balance of Revaluation Surplus is $640 000, of which $480 000 relates to Factory land and $160 000 relates to Buildings. On 30 June 2018, independent valuations of the land and building are obtained. The assessed fair values of the above assets as at 30 June 2018 are:
ChiHerbal Ltd classifies Residential land and Factory land as different classes of assets.
b) ChiHerbal acquired a delivery truck on 1 July 2015 for $480 000. The truck is expected to have a useful life of seven years, and is depreciated using the straight-line method.
On 1 July 2017 the truck was revalued to $400 000. On this same date, its useful life is reassessed, according to which the truck is expected to have a remaining useful life of six years.
On 1 July 2018, the truck is unexpectedly sold for $220 000.
Scenario 3 Leases
ChiHerbal Ltd leases a motor vehicle from Easy Rental Ltd, a dealer/manufacturer lessor.
The lease terms are as follows:
• Lease term is six years, commencing on 1 July 2018.
• The motor vehicle has a useful life of six years, after which it will have no residual value.
• Annual lease payments are $24 000, commencing on 1 July 2018.
• The interest rate implicit in the lease is 10 per cent.
• The motor vehicle has zero unguaranteed residual value.
• The motor vehicle has a normal selling price, i.e. fair value, of $115 200.
• The cost of motor vehicle in the book of Easy Rental Ltd is $83 200.
Scenario 4 Intangible Assets
In 2016, ChiHerbal decided to develop a new type of lavender sales bags, which were made from a new material. The material to be used was more like plastics and thus more resistant to damage than the traditional material used to make sales bags. In 2016, ChiHerbal spent $350 000 on research to gain knowledge of different plastics. ChiHerbal believed this knowledge could be utilised to bring significant future economic benefits.
In 2017, ChiHerbal developed a prototype of new sales bags and asked a number of experts on plastics materials for their opinions regarding the durability of new bags. The company incurred total costs of $528 000 in developing the prototype in 2017. The experts’ comments were positive. Some other companies even put in orders to buy new bags. Anticipating a substantial market demand, ChiHerbal spent $22 000 on legal costs to register a patent for new bags. The patent has a life of 4 years, after which time other producers may copy the bag design.
In 2018, ChiHerbal conducted a large-scale marketing campaign for new bags at total costs of $650 000. The marketing campaign indicated a huge demand for new bags. Within four months, total orders for over $2 million worth of bags were received. ChiHerbal employed an accounting firm to estimate the present value of revenues from new bags at $15 million. The company’s Chief Financial Officer decided that he would like to have
this present value of the bags recognised in the company’s financial statements at its fair value. While the accounting company determined the present value at $15 million, a major competitor of ChiHerbal made a legally binding offer to buy the patent for new bags at a price of $12 million.
Accounting Assignment Help:
Task: This assignment forms Part B (final part) of the major assignment. Students are provided with a business case in which an entrepreneur, Xiaojing Wu, from China immigrated to Australia and considered setting up a small business in South Australia. Xiaojing decided to start her business as a partnership but decided to dissolve the partnership. Subsequently, Xiaojing formed a public company named ChiHerbal Ltd. In Part A of the assignment, students are required to discuss the accounting regulation and reporting requirements for companies. In Part B, students are required to account for a range of transactions undertaken by ChiHerbal Ltd. Assignment Part B Questions Assume you were the accountant of ChiHerbal Ltd, address the requirements of the following independent scenarios for the company. Scenario 1 Financing Company Operations The equity of ChiHerbal Ltd as at 30 June 2018 comprises the following:
The options are exercisable by 28 February 2019. Each option entitles the holder to acquire two ordinary Class 3 shares at a price of $3.60 per share, payable by 28 February 2019.
The following transactions occurred during the financial year ending 30 June 2019:
Scenario 2 Property, Plant and Equipment
a) The extracted financial statements of ChiHerbal shows the following land and buildings on 30 June 2018:
At 30 June 2018, the balance of Revaluation Surplus is $640 000, of which $480 000 relates to Factory land and $160 000 relates to Buildings. On 30 June 2018, independent valuations of the land and building are obtained. The assessed fair values of the above assets as at 30 June 2018 are:
ChiHerbal Ltd classifies Residential land and Factory land as different classes of assets.
b) ChiHerbal acquired a delivery truck on 1 July 2015 for $480 000. The truck is expected to have a useful life of seven years, and is depreciated using the straight-line method.
On 1 July 2017 the truck was revalued to $400 000. On this same date, its useful life is reassessed, according to which the truck is expected to have a remaining useful life of six years.
On 1 July 2018, the truck is unexpectedly sold for $220 000.
Scenario 3 Leases
ChiHerbal Ltd leases a motor vehicle from Easy Rental Ltd, a dealer/manufacturer lessor.
The lease terms are as follows:
• Lease term is six years, commencing on 1 July 2018.
• The motor vehicle has a useful life of six years, after which it will have no residual value.
• Annual lease payments are $24 000, commencing on 1 July 2018.
• The interest rate implicit in the lease is 10 per cent.
• The motor vehicle has zero unguaranteed residual value.
• The motor vehicle has a normal selling price, i.e. fair value, of $115 200.
• The cost of motor vehicle in the book of Easy Rental Ltd is $83 200.
Scenario 4 Intangible Assets
In 2016, ChiHerbal decided to develop a new type of lavender sales bags, which were made from a new material. The material to be used was more like plastics and thus more resistant to damage than the traditional material used to make sales bags. In 2016, ChiHerbal spent $350 000 on research to gain knowledge of different plastics. ChiHerbal believed this knowledge could be utilised to bring significant future economic benefits.
In 2017, ChiHerbal developed a prototype of new sales bags and asked a number of experts on plastics materials for their opinions regarding the durability of new bags. The company incurred total costs of $528 000 in developing the prototype in 2017. The experts’ comments were positive. Some other companies even put in orders to buy new bags. Anticipating a substantial market demand, ChiHerbal spent $22 000 on legal costs to register a patent for new bags. The patent has a life of 4 years, after which time other producers may copy the bag design.
In 2018, ChiHerbal conducted a large-scale marketing campaign for new bags at total costs of $650 000. The marketing campaign indicated a huge demand for new bags. Within four months, total orders for over $2 million worth of bags were received. ChiHerbal employed an accounting firm to estimate the present value of revenues from new bags at $15 million. The company’s Chief Financial Officer decided that he would like to have
this present value of the bags recognised in the company’s financial statements at its fair value. While the accounting company determined the present value at $15 million, a major competitor of ChiHerbal made a legally binding offer to buy the patent for new bags at a price of $12 million.