The Hong Kong University of Science and Technology School Sample Essay

Question 1
a ) Identify three histories on the balance sheet of Sun Hung Kai that represent touchable assets? Fixed assets. Investing belongingss. Properties for sale.
B ) What are the differences among these histories?
Fixed assets: Known as a non-current plus or as belongings. works. and equipment. is a term used in accounting for assets and belongings which can non easy be converted into hard currency. This can be compared with current assets such as hard currency or bank histories. which are described as liquid assets. In most instances. merely touchable assets are referred to as fixed. Investing belongingss: Investing belongingss are land and/or edifices held under a leasehold involvement to gain long-run rental income and/or for capital grasp. These include completed belongingss and land under development for future usage as investing belongingss. Investing belongingss are stated in the balance sheet at just value and are valued at least yearly by independent valuer. Increase or diminish in just value of investing belongingss is recognized in the net income and loss history. Upon disposal of an investing belongings. any addition or loss on disposal is recognized in the net income and loss history. Properties for sale: It belongs to the trade good. be treated as an stock list history for existent estate industry. It can convey gross revenues gross after be sold.

Question 2
a ) What is intent of amortisation / depreciation? What is the difference between depreciation and amortisation? Amortization: Amortization is the procedure of diminishing. or accounting for. an sum over a period. Amortization is by and large known as depreciation of intangible assets of a house. Depreciation: Depreciation is a term used in accounting. economic sciences and finance to distribute the cost of an plus over the span of several old ages. Difference between depreciation and amortisation:

* Depreciation is used for fixed assets and last for more than one twelvemonth. * Amortization is used for intangible assets and disbursals. usually last less than one twelvemonth.

B ) Harmonizing to observe 36. what is the entire sum of depreciation and amortisation for 2006? =1035 million degree Celsius ) Harmonizing to observe 16. what is the depreciation disbursal for the twelvemonth? =4517-3679=838 million

What is your best conjecture of the amortisation disbursal?
=1035-838=197 million

Question 3
What is the sum of fixed assets reported on the balance sheet? On note 16. it is net book value at 30 Jun 2006 which is 17. 173M which is in line with that sum on balance sheet =17173 How do you accommodate this with note 16?

=Hotel belongingss + Property under development + other belongingss + Network Equipment + Toll Road + Other fixed assets =2090+5950+1618+1783+4882+850=17173 million

Question 4
a ) What was the sum of fixed assets acquired in 2006?
2005 fixed assets – depreciation in 2006 + acquired assets in 2006= 2006
fixed assets. hence acquired assets= 2006 fixed assets- 2005 fixed assets+ depreciation in 2006 =17173-15447+838=2564 million

What was the sum of hard currency paid to get these fixed assets? From statement of hard currency flow: =1839 million
B ) Are belongingss under development depreciated? —No
degree Celsius ) Assume that the remainder of the freshly acquired fixed assets have a utile life of 5 old ages and a residuary value of 2 million HKD. Fix a table demoing the depreciation disbursal and net book value of these assets over its expected life presuming that a full twelvemonth of depreciation is taken in financial twelvemonth 2006 and that the company uses a straight-line footing. Note No. 16.

= ( 43+281+178-2 ) /5=500/5=100 million
Year | Net book value at beginning of twelvemonth | Depreciation disbursal for the twelvemonth | Accumulated depreciation | Net book value at terminal of twelvemonth | 2006| 502| 100| 100| 402|
2007| 402| 100| 200| 302|
2008| 302| 100| 300| 202|
2009| 202| 100| 400| 102|
2010| 102| 100| 500| 2|

What is the journal entry to enter depreciation in the first twelvemonth? Dr: Depreciation disbursal ( expense history ) 100 M HKD
Chromium: Accumulated depreciation ( plus tax write-off history ) 100M HKD

vitamin D ) Redo portion degree Celsius ) presuming the company is utilizing a double-declining-balance depreciation. Depreciation rate = 2* ( 1/5 ) = 40 %

The diary entry to enter depreciation in the first twelvemonth?

Dr: Depreciation disbursal ( expense history ) 200. 8M HKD
Chromium: Accumulated depreciation ( plus tax write-off history ) 200. 8M HKD

Question 5
Assume that all the fixed assets of ( 4c ) were sold one twelvemonth after the acquisition for $ 400 Million HKD. a ) Calculate any addition or loss on this dealing presuming that the company uses straight-line depreciation. Fix the journal entry to enter the dealing. Answer: loss is 2M

400- ( 502-100 ) =-2 M
Dr: Non operation loss ( sale fixed plus ) 2 M
Dr: Cash 400 M
Dr: Accumulated depreciation 100 M
Chromium: Fixed plus 502 M

What is the entire income statement impact of these assets over their life? See both addition and loss on disposal every bit good as the entire depreciation recorded on these assets. If the company does non sell fixed assets. it will hold 500 depreciation disbursal wholly. If there is addition or loss during the life clip of the assets. so the entire sum peers 500 plus derive less loss

B ) Redo portion ( 5a ) but presuming that the company uses a double-declining-balance depreciation ( as in 4d ) . Answer: addition 98. 8M
400- ( 502-200. 8 ) = 98. 8 Meter

Dr: Cash 400 M
Dr: Accumulated depreciation 200. 8 Meter
Chromium: Fixed plus 502 M
Chromium: Non-operational addition ( sale fixed plus ) 98. 8 Meter

degree Celsius ) What was the diary entry made by Sun Hung Kai to enter the sale of fixed assets in 2006? Treat all gross revenues as one individual sale.

* Returns from disposal of investing belongingss – 14 * Returns from disposal of associates and jointly controlled entities – 193 * Returns from disposal of long-run investings – 5663 * Returns from disposal of other fixed assets- 9

Entire gross revenues is 14+193+5663+9 = 5879 M HKD