ACC2200
Financial Accounting
Assignment
Trimester 2, 2013
DUE DATE: Monday, 9th September 2013
VALUE: 15% of OVERALL ASSESSMENT
REQUIRED:
(1) This research question consists of a case study: You are a graduate accountant working for White and Associates a public accounting firm. The address the firm is 777 South Terrace, Adelaide SA 5000. The manager of your firm, Mr Paul Jones has asked you to draft a letter in response to an email received from a client – Mr Steven Evans, the managing director of Pacific Ltd, raising a number of issues regarding his company. Maximum Length is 850 words (excluding calculations). Technical component: 10 marks. Letter writing: 5 marks. (Total: 15 marks)
(2) Liquidation question (16 marks)
(3) Company financial statements question – Torquay Limited (35 marks)
You are required to hand in one hard copy of your assignment to the campus administration/front office with a completed and signed assignment cover sheet attached. Assignments with no cover sheets WILL NOT BE MARKED.
Any work which has been copied or shared between students will result in a Fail grade. This assignment must be in your own words and not copied directly from any source.
Question 1 15
Question 2 16
Question 3 35
Total 66
Percentage: 100
Weighted Mark: 15
CASE STUDY: Pacific Ltd
Re: Accounting Issues: Year Ending 30 June 2014
From: Steven Evans ()
Sent: Monday, 8th August 2013
To: Paul Jones ()
__________________________________________________________________________________
Dear Paul
Thank you for your phone call this morning, as discussed I am emailing below the accounting issues we briefly discussed.
To assist us 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. Pacific Limited is seeking a large sum of money to invest in a couple of large projects and was considering issuing a prospectus offering shares to the public. Brad Condor, the finance director suggested we issue debentures instead. He says it is cheaper than issuing shares and that all costs of issuing debentures, unlike shares, would be expensed. Is this correct? Also, how is it cheaper than increasing share capital?
2. We have entered into a long term contract to construct and supply plant and machinery to our mining customers. This means that we often receive a confirmed order from a customer in one financial year but due to the time taken to construct the item, deliver it to the customer about 18 months later. At present we recognise the sale as revenue on delivery of the item although the cost of constructing the item for sale is expensed as and when it is incurred. Is this correct treatment for revenue? Are there any other matters we need to consider regarding revenue?
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
S Evans
Steven Evans
Managing Director, Pacific Ltd
Level 6, 510 King William Street
Adelaide SA 5000
Question 2 (16 marks)
The following is a balance sheet for Happy Feet Ltd as at 30 June 2013. On that date the company went into voluntary liquidation.
Happy Feet Ltd
Balance Sheet as at 30th June 2013
Current Assets $ $
Cash at bank 14,500
Receivables 16,000
Inventory 14,500 45,000
Non-Current Assets
Plant and Equipment 164,000
Less: Accumulated Depreciation 135,000
29,000
Land 86,000 115,000
Total Assets 160,000
Current Liabilities
Accounts Payable 72,000
NET ASSETS 88,000
Equity
Share capital
95,000 Shares issued at $1 and called to $0.50 47,500
Less: Calls in arrears (5 000 shares at $0.25 each) 1,250 46,250
Reserves 22,000
Retained Profits 19,750
EQUITY 88,000
Additional Information:
1. All assets were sold and realized cash of $215,500 and calls in arrears were collected/
2. The cost of liquidation was $3,235 and this was paid in cash to the liquidator.
3. Accounts Payables allowed us a discount of $3,200 and the outstanding debts were paid.
4. The electricity bill/invoice for June 2013 amounted to $675. This was received on 3 July 2013 and was paid by the company. It had not been recorded in the accounts previously.
Required:
Using the information above, prepare the attached general ledger T-accounts: (16 marks)
Happy Feet Limited – General Ledger
Cash at Bank Account (6 marks)
Date $ Date $
Liquidation Account (8)
Date $ Date $
Shareholders’ Distribution Account (2 marks)
Date $ Date $
Question 3 (35 marks)
Refer to the prescribed text book Company Accounting 9th Edition 2012 (CA)
Leo K., Hoggett J., and Sweeting J: Question 13.10. Pages 666–667.
Prepare the statement of financial position and Notes to the accounts at 30th June 2013 in accordance with the requirements of AASB101. You are not required to prepare the Statement of changes in equity.
Earth Limited (14 marks)
Statement of Financial Position as at 30th June 2013
Note $
(1) Using the information relating to Earth Limited, prepare the Notes to the Statement of Financial Position at 30th June 2013 in accordance with the requirements of AASB101 (for external users). (21 marks)
EARTH LTD
Notes to and forming part of the financial statements for the year ending 30 June 2013.
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