Subject Code : ACC5200
Assignment Task:

Question 1:

1. What is the relationship between corporate governance responsibility, accountability, and financial reporting. (4 Marks)

2. Refer to the corporate governance statement of Virgin Australia and outline four of the principles that the organisation complies with to ensure good governance.

3. In relation to international standardisation of financial reporting, is a ‘one size fits all’ approach appropriate? Give 2 reasons. 

Question 2:

Jac Flyhigh is Chair of the Board of Exeed Company. The company has been experiencing growth placing a strain on finances and increasing levels of risk. Despite having put in place a budget that predicted a profit of $1m, expenditure has blown out over the year and the company is potentially going to record a loss of $360,000. In order to be able to report a profit to shareholders the Chief Financial Officer is proposing that the company recognise additional revenue of $658,000 ($205,000 and $453,00) after taking in consideration what is outlined in a and b below. a. the company recognise all of an amount of revenue of $205,000 received as sponsorship from a company called Mainrite Ltd. The contract with Mainrite specifies that Exeed will incur expenditure to acknowledge, through signage and promotional materials at company activities and events, the Mainrite contribution. At end of financial year services to the value of $125,000 have been delivered on this contract. b. the company recognises a gain on the sale of an asset (under contract) of $453,000 even though the sale had not been completed by the end of the financial year. He states that recognising the gain now is relevant since the contract is in place. The CFO states that recognising the extra revenue now is relevant and convinces Jac Flyhigh to sign a director’s declaration indicating that the financial statements ‘are true and fair’.

1. In relation to accounting standard AASB15, is the CFO correct in recognising the amount of $205,000 as revenue in the current period and why?

2. Does a conflict exist between relevance and faithful representation in situation b and why? 

3. What does it mean to say that the financial statements are ‘true and fair’?

4. What final profit or loss figure would you think should be recognised and why? 

5. Reflect on what you would have done to ensure good corporate governance in relation to the director’s declaration in this case if you were Jac Flyhigh.

Question 3 

A. Examine the 2019 financial reports of the following companies under the Notes to Financial statements section and report on the method used to recognise and measure inventories. 

(i) BHP 

(ii) Wesfarmers 

(iii) JB Hifi 

B. GoGolf Ltd sells one type of golf cart. Its financial year ends on the 30 June and it commenced the financial year with 40 golf carts that cost $2200 each. GoGolf uses the FIFO method and had the following transactions throughout the financial year.

(i) On 30 July it acquired 35 golf carts on credit at $2250 each.

(ii) On 4 August it paid for the purchase made on 30 July and received a 2.5% discount for early payment. (iii) On 28 August it sold 50 golf carts for $2900 each on credit terms 2/10, n/30.

(iv) On 5th September received payment for the golf carts sold on 28th August. (v) On 23 September it acquired on credit 40 golf carts for $2260 each, less trade discount 3%.

(vi) On 1 November GoGolf paid for the purchases made on 23 September. Because of the late payment they were charged an administration fee of 1.5%.

(vii) On 24 December 25 golf carts were sold for cash for $2875 each.

(viii) On 2nd January 1 of the golf carts sold on 24 December was returned because it as the wrong colour. No replacement was made and it was returned to stock.

(ix) On 1 March GoGolf purchased on credit another 50 golf carts for $2000 each from a new supplier in China. No trade discount was received.

(x) On 5 March 4 of the carts purchased on 1 March were returned when the wheels fell off. No replacements were ordered.

(xi) On 30 June it was assessed that there was downturn in the demand for these golf carts and the net realisable value of the golf carts on hand was assessed as $1900.

Required:

(a) Why might GoGolf Ltd have chosen to use the net realisable value of the lounges in the transaction (xi) rather than lower of cost? 

(b) Using the periodic system of accounting, provide the journal entries for the above transactions and determine the balance of cost of goods sold and value of closing inventory for the year. 

(c) Using the perpetual system of accounting, provide the journal entries for the above transactions and determine the balance of cost of goods and value of closing inventory for the year if a stocktake revealed that 5 golf carts from the last order purchased were missing from the warehouse presumed stolen. 

(d) Which inventory method (periodic or perpetual) is preferable and why?


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  • Posted on : June 29th, 2019

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