Assessment Information – Trimester 1, 2016
Subject Code: ACC 203
Subject Name: Financial Accounting 2
Assessment Title: Individual Assignment
Weighting:
Total Marks: 25% of overall assessment.
50 marks
Due Date:
Friday of Week 9 – 20th May 2016 by 11:59 PM (AEST). Note: The above time is AEST. Brisbane and Adelaide must allow for time difference.
Assessment Description
You are required to complete the assessment task noted below as a word document and submit your answer electronically through the subject portal; instructions are on the portal. Any work which has been copied or shared between students will result in a Fail grade for all students concerned. This assignment must be in your own words and not copied directly from any source
Please note:
• The assignment must be completed individually and submitted electronically on the portal before the due date.
• Please make sure you follow the guidelines noted especially those relating to the presentation of written work, late assignment policy and academic integrity.
• The assignment must be submitted as a single word document. You are not allowed to submit any spreadsheets.
CASE STUDY:
This research question consists of a case study: You are a graduate accountant working for McKenzie and Associates a public accounting firm. The address of the firm is 777 South Terrace, Adelaide SA 5000. The manager of your firm, Ms Maria McKenzie has asked you to draft a letter in response to an email received from a client – Mr Con Pewter, the managing director of Pewter Ltd, raising a number of issues regarding his company – see Assignment on the next page. Maximum Length is 1000 words (excluding calculations).
Technical component: 20 marks. Letter writing: 5 marks. (25 marks)
Mark Allocation Sheet – ACC 203 Financial Accounting 2: Trimester 1, 2016
Letter Writing Case Study Marks Available Marks Awarded
Technical content - Issue 1 10.00
Technical content - Issue 2 10.00
Technical content - Issue 3 10.00
Technical content – Statement of Cash Flows 10.00
Total Technical Content 40.00
Professional Competency Skills – Communication: Letter Writing 10.00
Total Assignment Marks 50.00
Weighted down to 25%
ACC 203 Financial Accounting 2: Assignment
Re: Accounting Issues: Year Ending 30 June 2016
From: Con Pewter (conpewter@pewterlimited.com.au)
Sent: Monday, 18th April 2016
To: Maria McKenzie (maria.mckenzie@mckenzieandassociates.com.au)
___________________________________________________________________________
Dear Maria
Thank you for your phone call this morning, as discussed I am emailing below the accounting issues we briefly discussed. By the way to assist the accounting team in our decision making process could you please make sure you reference any relevant sources relating to your advice, for example AASBs, Corporations Act, and relevant websites.
1. A customer has lodged a law suit against our company. We sold the customer a hard drive which was faulty and it has caused a huge loss of data for their business. The court decision to award damages to the customer was held on 26th March 2016; however the amount of the damages will not be decided until 30th September 2016. Our lawyer has advised the damages will be between $50,000 and $1 million. Please advise what steps we should take, in order to record this event in our financial statements for the year ending 30th June 2016.
2. Our sales team sells iPads and offers an interest-free period of 12 months to certain customers. These customers received the benefit of having their payment deferred for 12 months. The total amount owing by these customers is $250,000 and we use 7% as our discount rate in all financial transactions. Please advise what the correct accounting treatment would be to record these transactions.
3. As discussed I have attached the information in relation to the Statement of Cash Flows and I am so pleased that you agreed to prepare the Statement for us. I am still fairly confused though – do we really need a Statement of Cash Flows? What purpose does it serve? If it is so important why are we worrying about an Income Statement which is based on accrual accounting? Can’t we just combine the two statements and work out the profit on a cash basis? The cash balances in the cash flow statement are exactly the same as the one mentioned in the balance sheet. Wouldn’t that confuse everyone that we are repeating the same information?
Please respond by letter (not email) as I would like to present this to the Board. I look forward to hearing from you in the near future.
Regards Con Pewter
Con Pewter
Managing Director, Pewter Ltd
Level 6, 510 King William Street
Adelaide SA 5000
ACC203/ 1T2016/ FA2/SK//MR
ACC 203 Financial Accounting 2: Assignment
Pewter Ltd
Statement of Financial Position
30 June 2015 30 June 2016
Cash $ 12 0000 $ 21 8000
Trade receivables 184 000 204 000
Inventory 100 000 160 000
Land (at valuation) 50 000 62 000
Plant 46 0000 52 0000
Accumulated depreciation (90 000) (120 000)
TOTAL ASSETS $824 000 $1044 000
Accounts payable $150 000 $155 000
Accrued interest 12 000 16 000
Other accrued liabilities 45 000 43 000
Current tax payable 30 000 34 000
Provision for employee benefits 38 000 42 000
Dividend payable — 60 000
Borrowings 95 000 105 000
Deferred tax liability 58 000 39 000
Share capital 350 000 380 000
Revaluation surplus 12 000 20 000
Retained earnings 34 000 150 000
TOTAL LIABILITIES AND EQUITY $824 000 $1044 000
Pewter Ltd
Statement of Total comprehensive income
For the year ending 30 June 2016
Sales $3 580 000
Cost of sales (2 864 000)
Gross profit 716000
Gain on sale of plant 16 000
Dividend income 4 000
Distribution costs (185 000
Administrative costs (160 000)
Interest expense (8 000)
Other costs (40 000)
Profit before tax 343 000
Income tax expense (103 000)
Profit for the year 240 000
Other comprehensive income
Gain on asset revaluation (net of tax) 8 000
Total comprehensive income $248 000
Additional information
i. The increase to the revaluation surplus is net of deferred tax of $4000.
ii. Plant with a carrying amount of $60 000 (cost $85 000, accumulated depreciation $25 000) was sold for $76 000.
iii. Accounts payable at 30 June 2016 include $22 000 in respect of plant acquisitions. iv. There were borrowing repayments of $30 000 during the year.
v. The increase in share capital of $30 000 arose from the company’s dividend reinvestment scheme.
vi. Dividends declared out of profits for the year were: interim dividend $64 000, final dividend $60 000.
ACC203/ 1T2016/ FA2/SK//MR
GET ANSWERS / LIVE CHAT