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Accounting For Liabilities

The document outlines an accounting assignment for BACC 2213, focusing on liabilities and equities, with specific tasks related to deferred tax calculations, journal entries for equipment purchases, and treatment of pending lawsuits. It includes detailed financial data for Blackwood PLC's machine, journal entry requirements for Ann's cleaning equipment, and scenarios for George's goods purchase. Additionally, it addresses the recognition and disclosure of contingent liabilities for Pop Corp.'s lawsuits.

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16 views2 pages

Accounting For Liabilities

The document outlines an accounting assignment for BACC 2213, focusing on liabilities and equities, with specific tasks related to deferred tax calculations, journal entries for equipment purchases, and treatment of pending lawsuits. It includes detailed financial data for Blackwood PLC's machine, journal entry requirements for Ann's cleaning equipment, and scenarios for George's goods purchase. Additionally, it addresses the recognition and disclosure of contingent liabilities for Pop Corp.'s lawsuits.

Uploaded by

kathambiyvonne8
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BACC 2213; Accounting for Liabilities and Equities

Individual CAT 2 March 2025.


Submit via emasomo by 20th march 1pm absolutely no extension will be allowed

QUESTION ONE [Twenty marks]

Blackwood PLC bought a machine for £ 700,000 on 1st January, 2009. The following
information
pertains to the profits made by the company together with the depreciation expenses and
capital allowances on the machine.

PBDT DEPRECIATION EXPENSE CAPITAL ALLOWANCES


YEAR £ ‘000 £’000 £’000
2014 11,000 20 30
2015 13,000 19 22
2016 12,500 18 17
2017 14,000 17 14
2018 13,300 16 11
2019 14,200 15 9
2020 13,900 14 6
The machine has a useful life of 10years corporation tax rate is 30%
Required
a. Compute the deferred tax asset/ liability each year 2009-2015. [6 Marks]
b. Deferred tax a/c (i.e. asset/liability a/c) for year 2009-2015. [6 marks]
c. SPL/IE extract for the years 2014-2020. [5 marks]
d. Statement of financial position extract for the same period [3 marks]
QUESTION TWO [Eight marks]
On 1st March 2024, Ann bought a cleaning equipment of £50,000 on credit. Freight cost were
£700. Payments with regard to the item were made by Ann on 25th March, 2024.
Required
Open journal entries in the books of Ann, assuming that the cleaning equipment was sold on the
following terms;
a) FOB shipping [4 marks]
b) FOB Destination [4 marks]
QUESTION THREE [Four marks]
George bought goods worth £116,000 on credit on 10th January 2023. The price of the goods
was
VAT inclusive the VAT rate being 16% George paid for the goods on 20th January 2023
Required
Record the above transactions through journal entries in the books of George. [4 Marks]

QUESTION FOUR [Eight marks]


Pop Corp. has several pending lawsuits against its company. Review each situation and (1)
determine the treatment for each situation as probable and estimable, probable and inestimable,
reasonably possible, or remote; (2) determine what, if any, recognition or note disclosure is
required; and (3) prepare any journal entries required to recognize a contingent liability.
A. A pending lawsuit, claiming $100,000 in damages, is considered likely to favor the
plaintiff and can be reasonably estimated.
B. Machine Corp. believes there might be other potential lawsuits about this faulty
machinery, but this is unlikely to occur.
C. A claimant sues Machine Corp. for damages, from a dishonored service contract
agreement; the plaintiff will likely win the case but damages cannot be reasonably
estimated.
D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not
likely and is not remote. It is possible the customer will win.

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