Answer Happy

Relating to Question 1:- Acquisition of net assets On 1 December 2021, Braddock Ltd purchased a 100% interest in Cele Ltd. The cost of acquisition is $2.5 million plus associated due diligence cost of $65 000. Braddock Ltd has yet recorded the necessary journal entries relating to this acquisition. At the date of acquisition, the statement of financial position of Cele Ltd shows: $ $ $ Assets Current Assets Cash 400 000 Accounts receivables 1 100 000 Allowance for impairment of receivables (210 000) 890 000 Inventories 930 000 Other receivables 680 000 Total current assets 2 900 000 Non-Current Assets Leasehold land, at cost 230 000 Accumulated amortisation - leasehold land (25 000) 205 000 Warehouse, at revaluation 180 000 Accumulated depreciation - warehouse (56 000) 124 000 Plant and machinery, at cost 820 000 Accumulated depreciation - plant and machinery (350 000) 470 000 Total non-current assets 799 000 Total assets Liabilities Current Liabilities Trade and other payables 650 000 98 000 Bank overdrafts Current tax liability 53 000 Total current liabilities 801 000 Current Liabilities Loan payables 800 000 Total liabilities Net assets 3 3 699 000 1 601 000 2 098 000
Additional information • The assets and liabilities of Cele Ltd are fairly stated except for leasehold land which has a fair value of $300 000. • Cele Ltd has a brand name that is not recognised on the statement of financial position and that has a fair value of $49 000. • Cele Ltd is currently being sued by a previous customer on an unfulfilled order. The expected damages are $100 000. Relating to Question 2(1) – Events after the reporting date The final dividend of $69 000 for the 490 000 shares was declared by Cele Ltd on 27 December 2021 from retained earnings and was paid subsequently on 18 January 2022. The constitution of the Braddock Ltd allows directors to declare final dividend at any time and this is not subject to any further approval, authorisation, or discretion. On 5 January 2022, it was discovered that creditors' invoices dated 30 December 2021 related to services rendered by suppliers of Braddock Ltd, to be classified as administrative and other expenses, during the financial year amounted to $33 000 have been omitted. Further accounting review on 6 January 2022 showed that Braddock Ltd's sales invoices amounted to $56 000 have been omitted for the year ended 31 December 2021. The corresponding cost of sales of $39 000 was also omitted in the financial statements. Note: Cele Ltd uses the perpetual inventory system. Relating to Question 2(2) – freehold land revaluation On 1 July 2020, Braddock Ltd acquired a freehold land at a cost of $200 000 and made the following estimates of the value of the land: Net selling price Value in use Fair Value 1 July 2020 $170 000 $320 000 $330 000 1 July 2021 $190 000 $350 000 $390 000 31 December 2021 $210 000 $200 000 $250 000 Braddock Ltd revalued its freehold land on 1 July 2020, 1 July 2021 and 31 December 2021. Braddock Ltd had yet recorded the necessary journal entries relating to the revaluation on 31 December 2021.
Relating to Question 2(3) – construction contract On 1 February 2021, Braddock Ltd signed a contract with Sky Utilities Ltd to build a factory at a contract price of $19 million. Sky Utilities Ltd will be in control of the asset throughout the construction process. The project is expected to be completed by the end of 2023. Braddock Ltd estimates that construction costs to be $15 million. The following data is relevant to this project. Braddock Ltd has yet recorded the necessary journal entries relating to this project. 31.12.2022 31.12.2021 (actual) 31.12.2023 (estimate) (estimate) Cost for the year 3 900 000 5 700 000 5 600 000 Costs incurred to date 3 900 000 9 600 000 ? 11 100 000 5 400 000 ? Estimated costs to complete Progress billings during the year A cheque collected at 1.10.2021 4 500 000 11 000 000 3 500 000 2 300 000 N/A N/A Relating to Question 2(4) - lease accounting Braddock Ltd leased a building crane from Crane Movers Ltd to use during the construction of Sky Utilities Ltd's factory. Braddock Ltd plans to keep the crane after the lease and the lease terms are as follows: • Date of lease inception: 1 January 2021 • Duration of lease: four years • Life of lease assets: five years, after which it will have no residual value • Lease payments: $100 000 at the end of each year. Included within the lease payment is an amount of $10 000 representing service cost for the crane. Interest implicit in the lease: 9% • Bargain purchase option at the end of the lease: $100 000 The crane is to be depreciated on a straight-line basis. Braddock Ltd has yet recorded the necessary journal entries relating to this lease.
Relating to Question 2(5) - forward rate contract On 16 May 2021, Braddock Ltd entered into a non-cancellable purchase commitment with Aselda Limited for the supply of aluminium for the Sky Utilities Ltd's project to be shipped on 1 June 2021, at which time control of the assets would be transferred to Braddock Ltd. However, the aluminium was finally shipped on 18 June 2021 due to some administrative issues. Total contract price was US$3 million, and the full amount was due for payment on 23 August 2021. Because of concerns about movements in foreign exchange rates, on 16 May 2021, Braddock Ltd entered into a forward rate contract on US dollars with a foreign exchange broker so as to receive US$3 million on 23 August 2021 at a forward rate of A$1.00=US$0.7650. The respective spot rates are provided below. The forward rates offered on particular dates, for delivery of US dollars on 23 August 2021, are also provided. Forward rate for 23 December 2021 delivery of US$ Date Spot rate 16 May 2021 0.7779 0.7650 1 June 2021 0.7751 0.7590 18 June 2021 0.7477 0.7415 23 August 2021 0.7214 0.7214 Braddock Ltd prepares monthly management accounts and it elects to treat the hedge as a cash flow hedge. Braddock Ltd has yet recorded the necessary journal entries relating to this forward contract. Other information The statutory tax rate is 30%. Braddock Ltd depreciates its property, plant and equipment over 10 years, unless otherwise stated.
Q3: Prepare the adjusted Statement of Financial Position at 31 December 2021 and Statement of Profit or Loss and Other Comprehensive Income for Braddock Ltd for the year ended 31 December 2021. (20 marks)
Additional up to 10 Marks will be given for the overall presentation of assignment. The Journal Entries must include narration(s) and supporting computation(s) (wherever relevant). Explanations and calculations are needed whenever necessary. List any assumptions that you may have. Students are advised to comply with typical accounts used in the Australian Approved Accounting Standards (AASBs) or IFRSs when determining the presentation format.