Assessment Task – Tutorial Questions Unit Code: HI6025 Unit Name: Accounting Theory and Current Issues Assignment: Tutorial Questions 1 Due: 11:30pm 22nd May 2020 Weighting: 25% Total Assignment...

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Assessment Task – Tutorial Questions

Unit Code: HI6025

Unit Name: Accounting Theory and Cu
ent Issues

Assignment: Tutorial Questions 1

Due: 11:30pm 22nd May 2020

Weighting: 25%

Total Assignment Marks: 50 marks

Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in
this unit

Unit Learning Outcomes Assessed:

1. Examine conceptual issues and the sources of authority for the accounting requirements which
apply to reporting by Australian companies, including Company Law, International and Australian
Accounting Standards, and Stock Exchange requirements;
2. Understand and evaluate different theories of accounting such as positive accounting theory,
normative accounting theory, stakeholders’ theory, legitimacy theory, institutional theory, and
different initiatives of relevant global organisations such as GRI, IR;
3. Apply Australian Accounting Standards and Corporate Legislation to the financial reporting
processes;
4. Evaluate advanced level financial accounting problems and select appropriate accounting
strategies for the accounting entity;
5. Understand different provisions of accounting standards and the compliance requirements of the
professional and legal bodies in Australia;
6. Make judgments about appropriate use of accounting standards and accurately apply appropriate
treatments for different advanced level accounting issues;

Description: Each week students were provided with three tutorial questions of varying degrees of
difficulty. These tutorial questions are available in the Tutorial Folder for each week on Blackboard.
The Interactive Tutorials are designed to assist students with the process, skills and knowledge to
answer the provided tutorial questions. Your task is to answer a selection of tutorial questions for
weeks 1 to 5 inclusive and submit these answers in a single document.



The questions to be answered are:

Week 1
The fundamental qualitative characteristics that financial information must possess to be useful to the
primary users of general purpose financial reports—identified in the Conceptual Framework are
‘relevance’ and ‘faithful representation’.

Required:
a) Provide one example where information is relevant but not faithfully represented. (3 marks,
maximum 100 words)
) Provide one example where information is not relevant but is faithfully represented. (3 marks,
maximum 100 words)
c) Provide one example where information is relevant and faithfully represented. (4 marks,
maximum 150 words)


Week 2
a) What is a social contract and how does it relate to organisational legitimacy? (6 marks, maximum
300 words)
) Explain two ways organisations can use corporate disclosure policy to maintain or regain
organisational legitimacy? (4 marks, maximum 200 words)


Week 3
Diamond Ltd acquired an item of polishing equipment on 1 July 2015 for $440,000. The equipment is
expected to have a useful life of 10 years and the straight-line method of depreciation is to be used.
It has salvage value of $40,000. On 1 July 2017, the equipment is deemed to have a fair value of
$424,000 and revaluation is undertaken in accordance with the Diamond Ltd policy of measuring
property, plant and equipment at fair value. The asset is still usable for next 8 years but the salvage
value is determined to be zero. The asset is sold for $356,000 on 1 July 2019.

Required:
Provide the journal entries necessary at the following dates to account for the above transactions and
events. (Ignore na
ations). Show your working. (10 marks)
• 01/07/2015
• 01/07/2017
• 01/07/2019




Week 4
Snowy Ltd acquires Pax Ltd on 1 July 2018 for $5,000,000 being the fair value of the consideration
transfe
ed. At that date, Pax Ltd’s net identifiable assets have a fair value of $4,400,000. Goodwill of
$600,000 is therefore the difference between the aggregate of the consideration transfe
ed and the
net identifiable assets acquired.

The fair value of the net identifiable assets of Pax Limited are determined as follows:
($000)
Patent rights 200
Machinery 1,000
Buildings 1,500
Land 2,300
5,000
Less: Bank loan 600
Net assets 4,400

At the end of the reporting period of 30 June 2019, the management of Snowy Ltd determines that
the recoverable amount of the cash-generating unit, which is considered to be Pax Ltd, totals
$4,500,000. The ca
ying amount of the net identifiable assets of Pax Ltd, excluding goodwill, is
unchanged and remains at $4,400,000.

Required:
a) Prepare the journal entry to account for any impairment of goodwill. (6 marks)
) Assume instead that at the end of the reporting period the management of Snowy Ltd determines
that the recoverable amount of the cash-generating unit, which is considered to be Pax Ltd, totals
$4,200,000. Determine the impairment of goodwill amount. (No journal entries required) (4
marks)


Week 5
On 1 July 2019, Fisher Ltd decides to lease a cargo ship from XFinance Ltd. The term of the lease is 20
years. The implicit interest rate in the lease is 10 per cent. The fair value of the cargo ship at the
commencement of the lease is $2,215,560. The lease is non-cancellable, and requires a lease payment
of $300,000 on inception of the lease (on 1 July 2019) and lease payments of $250,000 on 30 June
each year (starting 30 June XXXXXXXXXXIncluded within the $250,000 lease payments is an amount of
$25,000 representing payment to the lessor for the insurance and maintenance of the cargo ship.
There is no residual payment required. Annuity factor, n=20; r = 10% is 8.5136.

Required:
a) Prove that the interest rate implicit in the lease is 10 per cent. (2 marks)
) Provide the entries for the lease in the books of Fisher Ltd as at 1 July 2019, and 30 June XXXXXXXXXX
marks)
c) Provide the entries for the lease in the books of XFinance Ltd as at 1 July 2019, and 30 June 2020.
(4 marks)




Submission Directions:

The assignment has to be submitted via Blackboard. Each student will be permitted one
submission to Blackboard only. Each student needs to ensure that the document submitted
is the co
ect one.

Academic Integrity
Academic honesty is highly valued at Holmes Institute. Students must always submit work
that represents their original words or ideas. If any words or ideas used in a class posting or
assignment submission do not represent the student’s original words or ideas, the student
must cite all relevant sources and make clear the extent to which such sources were used.
Written assignments that include material similar to course reading materials or other
sources should include a citation including source, author, and page number.
In addition, written assignments that are similar or identical to those of another student in
the class is also a violation of the Holmes Institute’s Academic Conduct and Integrity Policy.
The consequence for a violation of this policy can incur a range of penalties varying from a
50% penalty through to suspension of enrolment. The penalty would be dependent on the
extent of academic misconduct and the student’s history of academic misconduct issues.
All assessments will be automatically submitted to SafeAssign to assess their originality.

Further Information:
For further information and additional learning resources, students should refer to their Discussion
Board for the unit.
Answered Same DayMay 16, 2021HI6025

Solution

Chirag answered on May 18 2021
60 Votes
Week 1
The fundamental qualitative characteristics that financial information must possess to be useful to the primary users of general purpose financial reports—identified in the Conceptual Framework are ‘relevance’ and ‘faithful representation’.
Required:
a) Provide one example where information is relevant but not faithfully represented. (3 marks, maximum 100 words)
) Provide one example where information is not relevant but is faithfully represented. (3 marks,
maximum 100 words)
c) Provide one example where information is relevant and faithfully represented. (4 marks,
maximum 150 words)
ANSWERS
a) The pervasive use of accounting estimates (depreciation, bad debt expense, pension estimates) is an example of emphasizing relevance over faithful representation.
Firms are providing estimates ,rather than certain amounts.
Reasonable approximations, although they cannot be perfectly reliable, are prefe
ed by financial statement users to either
1) perfect information issued too late to make a difference, or 2) no information at all.
) In the opinion of many, the use of historical cost as a valuation base is an example of emphasizing faithful representation over relevance.
Historical cost is very reliable because it is based on objectively verifiable past information.
However, historical cost is considered to be less cu
ent and, therfore, less relevant than market value.
c) The company has earned profits during the year from operating activities and from non operating activities.
The profits from non operating activities are more than the profits earned from operating activities.
The company has appropriately disclosed the profits earned from operating activities and non operating activities separately.
Therefore the information about earning more profits from non-operating activities than operating activities is relevant as well as faithfully represented by the company.
Week 2
a) What is a social contract and how does it relate to organizational legitimacy? (6 marks, maximum
300 words)
) Explain two ways organizations can use corporate disclosure policy to maintain or regain
organizational legitimacy? (4 marks, maximum 200 words)
ANSWERS
a) Social Contract
Social Contract is refer as the how business interact with the society.
Social Contract is related to organizational legitimacy:
Organizational legitimacy relates to implicit and explicit expectations society has about how business should act to ensure for survive in the...
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