BAC205: Corporate Reporting - Construction Ltd Case Study - Accounting and Finance Assignment Help

Assignment Task :

Question 1  

Construction Ltd decides to lease a crane from Crane Master Finance Ltd on 1 July 2023. The term of the lease is 12 years. The implicit interest rate in the lease is 10 per cent. It is expected that the crane will be scrapped at the end of the lease term. The fair value of the crane at the commencement of the lease is $576,959. The lease is non-cancellable, returns the crane to Lessor at the end of the lease, and requires a lease payment of $100,000 on inception of the lease (on 1 July 2023) and lease payments of $70,000 on 30 June each year (starting 30 June 2024). There is no residual payment required. 

Required: 

a) Demonstrate that the interest rate implicit in the lease is 10 per cent (show all workings). 

 b) Provide the journal entries for the lease in the books of Construction Ltd as at 1 July 2023.  

c) Provide the journal entries for the lease in the books of Crane Master Finance Ltd as at 1 July 2023.  

d) Provide the journal entries in the books of Construction Ltd for the final year of the lease (that is, the entries in 12 years’ time).  

e) Provide the journal entries in the books of Crane Master Finance Ltd for the final year of the lease (that is, the entries in 12 years’ time).  

SLO 3. Analyse financial accounting records for specified transactions and events in accord with relevant Australian Accounting Standards and generally accepted accounting principles. 

Question 2  

Management at Spender Ltd want to understand why they need to prepare both Cash flow and Profit and loss statement to evaluate the financial performance and position of their entity. 

Required: 

a) List and describe TWO benefits EACH for preparing Cash flow statement and Profit and loss statement.  

SLO 2. Apply the regulatory framework for general purpose financial reporting in Australia to actual accounting problems and critically discuss the arguments for and against accounting regulation. 

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