Assessment 3 Information
Subject Code: ACCM4300
Subject Name: Financial Reporting
Assessment Title: Assessment 3
Assessment Type: Statement of Advice
Weighting: 30%
Total Marks: 30
Submission: Via Turnitin on MyKBS
Due Date: Tuesday of Week 13 at 7:55 pm (AEST)
Your Task
Your task is to analyse client information using the information and questions raised by the CEO, and present the findings in a Statement of Advice with a covering Business Letter.
For each issue, you are expected to:
1) Identify the facts and accounting topic
2) Apply the relevant legislation, accounting standard and/or process
3) Make a recommendation and/or summary of the correct accounting treatment
Learning Objectives
After completing this Individual Assignment, you will be able to:
1) Research information about each issue using legislation and accounting standards
2) Identify the main issues and make recommendations for accounting treatment
3) Provide a clear statement of advice to a potential client
Assessment Description
Assume that you are part of a team of graduate accountants working for an independent consulting & accounting firm. The Manager of your firm has asked you to draft a letter in response to an email received from a client, raising accounting issues – (a copy of the email will be released in Week 11 after the assessment webinar).
The maximum length for the body of the letter is 1,500 words. You should address all the technical issues/discussion in the statement of advice, followed by a Reference List.
Assessment Instructions
• The assignment will need to be submitted electronically through the student portal –
use the link under “Assessments”.
Referencing
• Any sources that you use need to be acknowledged in order to avoid plagiarism. Information on referencing can be found in the Guidelines for Referencing and Presentation at the Kaplan website using the following address: (https://elearning.kbs.edu.au/mod/page/view.php?id=128881).
In-Text Referencing and the Reference List
• Sources of information must be cited both in the body of the text (in-text referencing) and the end of the assignment (reference list). Failure to do so will result in penalties. Remember that when referencing an Annual Report, it is a corporate document that does not have a particular author but it will still require referencing any time you use information from it. Any other documents or books or other references you use will also require referencing.
Please note
• Any work which has been copied or shared between students will result in a Fail grade for all students concerned. Therefore, please make sure that the answer to this assignment is your work and not copied or bought from any source. In completing this assignment make sure you follow the guidelines for assignments especially those relating to the presentation of written work, late assignment policy and academic integrity.
Important Study Information
Academic Integrity Policy
KBS values academic integrity. All students must understand the meaning and consequences of cheating, plagiarism and other academic offences under the Academic Integrity and Conduct Policy.
What is academic integrity and misconduct?
What are the penalties for academic misconduct?
What are the late penalties?
How can I appeal my grade?
Click here for answers to these questions:
http://www.kbs.edu.au/current-students/student-policies/.
Word Limits for Written Assessments
Submissions that exceed the word limit by more than 10% will cease to be marked from the point at which that limit is exceeded.
Study Assistance
Students may seek study assistance from their local Academic Learning Advisor or refer to the resources on the MyKBS Academic Success Centre page. Click here for this information.
Assessment 3 Information
Subject Code: ACCM4300
Subject Name: Financial Reporting
Assessment Title: Assessment 3
Assessment Type: Individual Assignment
Weighting: 30 %
Total Marks: 30
Submission: Via Turnitin-written report
Due Date: Tuesday of Week 13 at 19:55 (AEST)
Your Task
You are required to prepare a business letter to answer key accounting issues in regards to an acquisition analysis of a wholly owned subsidiary and various inter-company transactions.
Assessment Description
Assume that you are a team of graduate accountants working for Wolfram & Hart, a public accounting firm situated at 123 Collins Street, Melbourne, VIC 3000. The Manager of your firm, Mr. David Hart, has asked you to prepare a statement of advice in response to an email received from a client, Mr. John Bigg, the Managing Director of Largey Ltd, raising several accounting issues. Largey Ltd is a public company with shares listed on the ASX. Please refer to the email on the next page.
The maximum length for the body of the letter is 1,500 words. You should address all the technical issues and discussion in your advice, followed by a Reference List.
• Part A: Technical component 25% - This mark covers the technical content of your advice and the explanation of each of the issues, the calculations, journal entries (where applicable) and the sources used.
• Part B: Communication Skills – Letter writing 5% - This mark covers the generic skills of letter writing; layout, clear meaning, structure and organisation, appropriate tone and grammar, spelling, and punctuation, etc., throughout the whole assignment.
Case Study
One of your clients has emailed your firm with several queries. Draft a business letter in reply and make sure you reference any relevant sources relating to your advice, for example, AASBs, Corporations Act, and relevant websites. See the email below.
Re: Accounting Issues for year ended 30 June 2022
From: John Bigg (J.Bigg@Largey.com.au)
Sent: 19 August 2022
To: David Hart (D.Hart@wolframhart.com.au)
Dear David,
I am reaching out to you for assistance as our Chief Accountant is currently on long service leave. I need to understand the accounting implications of our recent takeover of Smally Ltd so that I can present the financial statements to the Board of directors and respond to any further questions they may have concerning the accounts for the year ended 30 June 2022. The Board of directors and I have limited accounting knowledge, so please limit the use of technical accounting terms.
As you know, we acquired 100% of the issued shares of Smally Ltd on 1 July 2021 for $4,570,000. Our accountant says we need to prepare consolidated accounts. I don’t understand why as we have already accounted for this transaction by recording it as an “Investment in Smally Ltd” account shown on our balance sheet. Recording it again, would just lead to an overstatement in the accounts. Smally Ltd is also a separate legal entity, pays its own taxes and has its own Board of Directors and senior managerial personnel. This is just an investment, as we are not intending to integrate their business with ours. Therefore, separate accounts makes way more sense. I think our accountant is wrong and I can’t see any reason why we would want to prepare consolidated accounts given our situation. What do you think of this? Why do we need to prepare consolidated accounts?
Our Chief Accountant has confirmed that at the date of acquisition Smally Ltd had share capital of $2,500,000 and retained earnings of $1,350,000 . All the assets of Smally were recorded at fair value in Smally Ltd’s balance sheet, except for land which had a fair value of $600,000. The land was bought many years ago and has been recorded in Smally Ltd’s books at cost of $50,000. Smally Ltd also had reported via note a contingent liability at 30 June 2021 in relation to claims by customers for damaged goods. Largey Ltd placed a fair value of $30,000 on these claims. Largey Ltd incurred legal fees of $15,000 related to the acquisition.
The accountant prepared the acquisition analysis as part of preparing the consolidated financial statements for Largey Ltd and calculated goodwill of $720,000 (being $4,570,000 less $3,850,000). Is this correct? If this is incorrect, can you please explain why?
The Chief Accountant told me that he has tried to work out the journal entries to eliminate two intercompany transactions that occurred during the year, but was unsure of what to do. As the transactions are all legitimate and have already taken place, why do we need to reverse the transactions? Specific details of these transactions are shown below:
1. At the beginning of the current period, Largey Ltd sold some machinery to Smally for $720,000. The machinery originally cost Largey Ltd $900,000 is four years old and had accumulated depreciation of $360,000 at the date of the sale. The remaining useful life of the machinery is assessed by Smally as 6 years and the tax rate is 30%. The Chief Accountant was unsure what consolidation entries were necessary. Can you please provide me with the journal entries and explain why these are necessary.
2. During the year Smally Ltd sold goods to Largey Ltd for $410,000. These goods originally cost Smally Ltd $310,000. At year-end 25% of these goods remained in Largey Ltd’s closing inventory. Can we debit sales revenue $410,000 and credit inventory $25,000 on 30 June 2022? Do we need to do anything else? Again, please provide me with the journal entries and explain why these are necessary.
Please respond by letter (not email) as I would like to present this to the Board. I look forward to hearing from you shortly.
Regards,
John Bigg
Managing Director, Largey Ltd
100 Grand St,
Melbourne Vic 3000
Assessment Instructions
• The assignment will need to be submitted electronically through the student portal – use the link under “Assessments”.
Referencing
• Any sources that you use need to be acknowledged in order to avoid plagiarism. Information on referencing can be found in the Guidelines for Referencing and Presentation at the Kaplan website using the following address: (https://elearning.kbs.edu.au/mod/page/view.php?id=128881).
In-Text Referencing and the Reference List
• Sources of information must be cited both in the body of the text (in-text referencing) and the end of the assignment (reference list). Failure to do so will result in penalties. Remember that when referencing an Annual Report, it is a corporate document that does not have a particular author but it will still require referencing any time you use information from it. Any other documents or books or other references you use will also require referencing.
Please note
• Any work which has been copied or shared between students will result in a Fail grade for all students concerned. Therefore, please make sure that the answer to this assignment is your work and not copied or bought from any source. In completing this assignment make sure you follow the guidelines for assignments especially those relating to the presentation of written work, late assignment policy and academic integrity.
Important Study Information
Academic Integrity Policy
KBS values academic integrity. All students must understand the meaning and consequences of cheating, plagiarism and other academic offences under the Academic Integrity and Conduct Policy.
What is academic integrity and misconduct? What are the penalties for academic misconduct? What are the late penalties?
How can I appeal my grade?
Click here for answers to these questions:
http://www.kbs.edu.au/current-students/studentpolicies/.
Word Limits for Written Assessments
Submissions that exceed the word limit by more than 10% will cease to be marked from the point at which that limit is exceeded.
Study Assistance
Students may seek study assistance from their local Academic Learning Advisor or refer to the resources on the MyKBS Academic Success Centre page. Click here for this information.