ACCOUNTING

Accounting

Accounting

Issue 1

Particulars

Debit

Credit

Accounts Receivable (Bonus PLC)

Sales/Lease Revenue (Theme Park)

(To record sale/lease of Theme parks for 10 years)

£100,000,000

£100,000,000

Cash/Bank

Accounts Receivable (Bonus PLC)

(To record sale of Theme parks for 10 years)

£100,000,000

£100,000,000

Revenue (Theme Park)

Payable to owner

(To record annual Sales)

£30,000,000

£30,000,000

Payable to owner (Bonus PLC)

Cash

£30,000,000

£30,000,000

Maintenance Expense (Theme Park)

Cash

£19,500,000

£19,500,000

Accounts Receivable (Bonus PLC)

Maintenance Revenue

£19,500,000

£19,500,000

In recording the above entries, it is assumed that the assets are being leased for 10 years as it is stated in the sales agreement that the interests will be reverted to Nexus Plc after the completion of their useful life of 10 years. Also, the revenue is recorded as the maintenance revenue as Nexus Plc is operating and maintaining the theme parks.

Another assumption is that the theme park will generate £30,000,000 revenue for the next year, out of this amount 65% (£19,500,000) will be the share of Nexus Plc and the rest of amount will be the share of Bonus Plc.

Issue 2

Particulars

Debit

Credit

Advance to Vendor (TrainZ)

Cash

(Advance to a vendor for a software)

£ 20,000

£ 20,000

It is considered as an advance to the vendor and not as charity because Nexus Plc have plans to receive benefits from this payment, so it can not be classified as charity.

At this point it is considered as (current) asset because it lies under the category of prepaid/advance to vendor(s).

Issue 3

Particulars

Debit

Credit

Cash

Unearned (Govt. Grants)

(To Record Govt. grants in anticipation)

£60,000,000

£60,000,000

It is not clear that whether Nexus Plc has to return this amount to the Government or not (as cost are not finalized yet) so it is recorded as unearned and it will be recorded when the clear picture could be seen.Issue 4

Particulars

Debit

Credit

Property Plant and Equipment

Capital

(To record additional investment in CASINO assets)

£ 25,000,000

£ 25,000,000

Property Plant and Equipment

Capital

(To record Gain on Re-evaluation of Assets)

£ 5,000,000

£ 5,000,000

Cash

Assets

(To record Disposal of Assets)

£10,000,000

£10,000,000

Depreciation Expense (Property Plant and Equipment)

Accumulated Depreciation

(To record Depreciation Expense)

£12,000,000

£12,000,000

The money invested in Property Plant and Equipment is capitalized because it will be one of the initial investments of the company. The Gain on Re-evaluation of Assets will also be capitalized because it will increase the value of the assets as well as the net worth of the company.

It is an assumption that the assets were disposed on cash and the depreciation expense for Property Plant and Equipment will remain same in the future.

Issue 5

Cash Flows from Operations

Advance to Vendor (TrainZ)

Unearned (Govt. Grants)

Cash Flows from Operations

(£ 20,000)

£ 60,000,000

£ 59,980,000

In the above stated cash flow statement, the incoming and outgoing of cash generated from operations is recorded and we can see that the cash flows from operations are positive. It tells us that the company is performing well and will be profitable in its operations in the upcoming years.

International Accounting Standards

International Accounting Standards(IASs) were issued by the International Accounting standard commission (IASC) from 1973 to 2000.The International Accounting Standard Board (IASB) replaced the IASC in setting standards on 1 April 2001.

The IASB has an advisory council and an international financial reporting interpretations committee. The foundation trustees appoint the IASB members, exercise oversight and raise the funds but the IASB has sole responsibility or setting accounting ...