Piper Ltd makes an offer of 1,000,000 ordinary shares to the public

On 1 August 2014, Piper Ltd makes an offer of 1,000,000 ordinary shares to the public. The shares are to be issued at $2 per share, payable as follows:
$0.80 on application (due 31 August)
$0.80 on allotment (due 30 September)
$0.40 on final call
By 31 August 2014, applications had been received for 1,100,000 ordinary shares. Shares were allotted on 2 September 2014. To deal with the oversubscription, Piper Ltd provided a refund to unsuccessful applicants.
The issue was underwritten at a commission of $12,500, and this commission was paid on 15 September 2014. All amounts due on allotment are paid by the due date.
The final call was made on 1 December 2014 with money due by 31 December 2014. All money was received on the due date except for the holder of 50,000 shares who failed to meet the final call. On 5 January 2015, the shares on which the call was unpaid were forfeited. According to the constitution, a refund is to be provided to former shareholders, and this refund was paid on 7 January 2015.
On 3 March 2015, Piper Ltd makes a private placement of redeemable preference shares, and 500,000 6% redeemable preference shares are issued at a price of $3 per share. These shares are classified as equity, and are redeemable at a 10% premium. On 30 April 2017, the preference shares are redeemed out of profits and cheques are sent to preference shareholders on 2 May 2017.

Required:
Prepare the general journal entries to record the transactions of Piper Ltd for the events outlined above. Show all workings. Ignore preference share dividend payments.

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Question 2:
Gravatt Ltd, which operates in the mining industry, decided not to comply with the accounting standard AASB112 on tax-effect accounting. If it had done so, its profit would have been significantly reduced. The annual report of the company revealed that the auditors had qualified the accounts. The auditors noted that no deferred tax liability had been recognised, in contravention of the accounting standard.
Gravatt Ltd declared a profit of $54 million for the year, with no tax expense, but it admitted in the notes to the accounts that it would have had a notional income tax expense of $24.3 million if it had followed the accounting standard.
The company also would have had a deferred tax liability of $80 million if it had followed the standard. This compares with total equity of $570 million.
The directors believed that neither current tax liability nor a deferred tax liability was necessary as the company was making tax losses because of huge allowable deductions available for exploration and development costs. These exploration and development costs were treated as assets in the accounting records.
The directors stated that a deferred tax liability should be recorded only when it is probable that the company will be liable to pay income tax. At this stage it is unclear when that will be.

Required
1. Explain how exploration and development costs create a deferred tax liability.
2. Analyse the arguments presented by the directors in light of the AASB Framework
for the Preparation and Presentation of Financial Statements and the requirements of AASB 112 Income Taxes, and discuss the information utility to readers of Gravatt Ltd’s annual report of including/excluding the deferred tax liability.

Question 3:
On 1 July 2011, Kookaburra Ltd acquired an item of plant at a cost of $200 000. The machine has an expected useful life of eight years, and Kookaburra Ltd adopts the straight-line method of deprecation. The tax depreciation rate for this type of plant is 25%. The company tax rate is 30%.
Kookaburra Ltd measures plant at fair value. At 30 June 2012, Kookaburra Ltd determines the fair value of the plant to be $186 000, with a remaining useful life of three years. At 30 June 2013, the fair value of the plant is determined to be $112 000, with a remaining useful life of two years.

Required
1. For the year ending 30 June 2012:
a) Prepare the necessary journal entries to account for the depreciation and
revaluation of plant.
b) Determine the carrying amount and tax base of the plant after revaluation, and
prepare the necessary journal entries to account for any deferred tax effect
relating to the plant. Show all workings.
c) In relation to the plant, discuss why the temporary difference exists and explain
the adjustment required to the deferred tax account.

2. For the year ending 30 June 2013:
a) Prepare the necessary journal entries to account for the depreciation and
revaluation of plant.
b) Determine the carrying amount and tax base of the plant after revaluation, and
prepare the necessary journal entries to account for any deferred tax effect
relating to the plant. Show all workings.
c) In relation to the plant, explain the adjustment required to the deferred tax
account