Prepare Financial Reports For Corporate Entities


Task 1

Read each part carefully.

  1. Discuss the requirements of both s. 292 (1) of the Corporations Act 2001and those required by accounting standards.
  2. Discuss ethical considerations regarding confidentiality and conflict of interest for directors and senior financial management of corporate companies in relation to the preparation of financial statements.
  3. Identify and explain three current business taxation requirements for preparing corporate accounting reports.
  4. Identify three procedures you would perform on a set of financial statements to ensure they are accurate, error free and complete in terms of all reporting and disclosure requirements prior to publishing and sending the accounts to shareholders.

Task 2

Sophisticated Shutters Ltd was incorporated on 1 August 2017. On 10 August 2017 a prospectus was issued inviting the public to subscribe for 1,500,000 ordinary shares at an issue price of $3.50 each.

On application for these shares, the applicant was to pay $3.00 per share. According the prospectus, any excess application money was to be refunded in full. A second instalment of $0.50 was payable on 1 March 2018.

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By the prospectus closing date of 1 September 2017, 1,600,000 applications for ordinary shares had been received. Only application money was sent in with all applications.

On 10 October 2017 the company’s directors decided that only the 1,500,000 shares would be allotted on a pro -rata basis and excess application money was refunded. No additional shares were issued.

By 1 March 2018 all the second instalment payments had been made, with the exception of one holder of 5,000 ordinary shares.


  1. Prepare the general journal entries to record the application for and issue of the shares, including any refund;
  2. Prepare the payment of the second instalment

Task 3

Refer to the information and requirement provided in each part below:

Part (a)

Elastic Ltd intended to raise funds to launch their product in a new state. Elastic Ltd decided to issue 15,000 x $100 debentures on 1 November 2017.


Prepare general journal entries to record the above.

Part (b)

Elastic Ltd had on issue 15,000 x $ 100 debentures at 30 June 2017. Using profits from their new expanded business, Elastic Ltd took the opportunity to purchase 8,000 of the debentures at a price of $102 each on 1 July 2017.


Prepare general journal entries including closing journals to record the above.

Part (c)

Elastic Ltd decided to redeem the remaining 7,000 x $100 debentures on 1 March 2018 for $97.50 per $100.


Prepare general journal entries including closing journals to record the above.

Task 4

The accounts of Double Ltd show equity at 1 July 2017 as follows:

Item $
Share capital – 200,000 ordinary shares 240,000
fully paid, issue price $1.20  
General reserve 160,000
Retained earnings (credit balance) 300,000
Total equity 700,000


The following transactions occurred during the financial year ended 30 June 2018:

  • On 30 September 2017 paid dividend declared on 30 June 2017 ($0.07 per share).
  • On 31 March 2018 an interim dividend of $0.05 per share was declared and paid. In addition, buildings were revalued upwards by $150,000 (no tax effect adjustment). This revaluation surplus led to a 1 for 5 bonus issue of ordinary shares at an issue price of $1.50.
  • On 31stMay 2018 Double Ltd issued 100,000 ordinary shares payable in full on application of $150,000.
  • On 30 June 2018 profit before tax was determined at $150,000. Tax expense was $45,000, a final dividend of $0.10 per share was declared and an amount of $40,000 was transferred to general reserve.


  1. Prepare the general journal entries including cash to record the above.
  2. Prepare an extract from the statement of profit or loss and other comprehensive income.
  3. Prepare a statement of changes in equity for the year ended 30 June 2018.

Task 5

Part (a)

Using the Boral Limited Annual Report provided with this assessment (or visit the website of Boral Limited to obtain a recent copy and) consider the statement of accounting policy in regard to income tax by completing the following information that discusses the tax treatment by the group:

‘Income tax expense includes current and deferred tax…’

Part (b)

For each of the following assets or liabilities:

  • Calculate the carrying amount in balance sheet of the asset or liability.
  • Calculate the tax base of the asset or liability.
  • Calculate the deductible or taxable temporary difference between the carrying amount in balance sheet and the tax base.
  • Indicate whether the deductible or taxable temporary difference will create a deferred tax asset (DTA) or a deferred tax liability (DTL).
  • Interest income of $950 relating to next year had been received by 30 June. Interest income is taxed on receipt.
  • At the balance date, the Receivables general ledger account has a balance of $21,300 and the Allowance for impairment account has a balance of $1,150.
  • The business had an opening balance in the Provision for long service leave (LSL) account of $9,000. During the year, long service leave paid totalled $3,500 (this was paid from the provision account) and a further transfer to the provision of $6,000 was made on 30 June.
  • The business purchased factory equipment for $300,000 on 1 July last year. The accounting depreciation rate is 30% but the tax depreciation rate is 25%.
  • An amount of $32,000 for prepaid insurance is deductible in the current year.

Part (c)

Verona Imports Ltd commenced operations on 1 July 2017.

For the year ended 30 June 2018, the company recorded an accounting profit before tax of $1,760,000.

On 30 June 2018, the accounting balance sheet and the taxation balance sheets disclosed the following:

Item Carrying amount

in balance sheet


Tax base


  in balance sheet  
  $ $
Motor vehicles (at cost) 500,000 500,000
Accumulated depreciation – motor vehicle (100,000) (125,000)
Office equipment (at cost) 650,000 650,000
Accumulated depreciation – office (117,000) (97,500)
Bank 192,500 192,500
Inventories 111,500 111,500
Accounts receivable (net) 95,600 104,600
  1,332,600 1,336,100
Bank loan 750,000 750,000
Accounts payable 88,400 88,400
Provision for employee entitlements 21,500  
  859,900 838,400
Net Assets 472,700 497,700

Included in the calculation of accounting profit were the following items, which have to be treated differently for taxation purposes:

Item Accounting Entries Taxation Entries
  $ $
Depreciation of motor vehicles 100,000 125,000
Depreciation of office equipment 117,000 97,500
Entertainment expenses (not tax deductible) 4,350 Nil
Transfer to provision for employee benefits 19,420 Nil
Transfer to allowance for impairment of 11,500 Nil

Additional information:

  • All depreciation is calculated using the straight line method.
  • Income tax rate is 30%.
  • Motor vehicles totaling $500,000 were purchased on 1 July 2017. For accounting purposes, these vehicles are being depreciated at 20% per year. For taxation purposes it is being depreciated at 25% per year.
  • Office equipment was acquired on 1 July 2017 for $650,000. For accounting purposes, the equipment is being depreciated at 18% per year. However, for taxation purposes, it is depreciated at 15%.
  • Employee entitlements amounting to $3,100 was paid during the year and charged against the provision. This amount is a taxation deduction.
  • During the year, a bad debt of $2,500 was written off and charged against the allowance for impairment of receivables. This amount is a taxation deduction.


  • Prepare a statement to determine taxable profit and tax on taxable profit (assuming a 30% tax rate) for the year ended 30 June 2018.
  • Prepare a deferred tax worksheet.
  • Prepare general journal entries to record current tax payable and deferred tax in accordance with AASB 112 Income Taxes.


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