ACFI2011 Major Assignment Sem 1 2020-D PDF

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ASSESSMENT 3: MAJOR ASSIGNMENT ACFI2011 SEMESTER 1, 2020

Due Date Submission Weighting

5 PM, Thursday, 28th May 2020 Submit a copy of the assignment through Turnitin 20% of the final mark

PART A

Tahlia Corporation is one of the prominent and fastest-growing event management company based in Sydney, Australia. This company has clients from Australia, Hong Kong, U.S.A, Singapore, England, Malaysia, Russia and Europe. In 2019, this company appointed Miss Tahlia as the CEO of Tahlia Corporation to look after the business. Tahlia has appointed you as the company's chief financial officer (CFO) to look after the company's financial matters and help Tahlia to make strategic decisions. As per the corporation act 2001, this company is required to comply with Australian accounting standards. Hence, Tahlia called for a business meeting with you to discuss the financial compliance matters with you. As a CFO, you have advised the Tahlia that to comply with accounting standards, the company is required to prepare a complete set of financial statement which includes a statement of financial performance, statement of change of equity, statement of financial position, statement of cash flows as well as notes to the accounts. The CEO (Thalia) questions the usefulness of the cash flow statement as she has stated that all she needs to know is if the company has made a profit and has a healthy balance sheet. However, Tahlia has asked you prepare a full set of financial statements including the statement of cash flows. After you prepare the cash flows statement, it revealed a poor cash position, whereas the statement of financial performance was showing a profitable result for the year. The CEO restated his opinion that the cash flow statement did not give a good indication of the activities of the company. Tahlia also heavily depends on statement of financial position and statement of financial performance to make most of her business decisions.

Required: 1. Prepare a response (no more than 500 words) for Tahlia (CEO) explaining the purpose and usefulness of the cash flow statement and why it can report a negative cash flow position while the company is making a profit. (6 Marks) 2. Write a report (no more than 300 words) to the CEO about the limitation of a statement of financial position and financial performance as a source of information for users of general-purpose financial statements (discuss at least two major limitations in your report (4 marks).

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PART B Newcastle Ltd, has been manufacturing and selling swimming suits for men and women for the last two years. The company commenced its operations on 1 July 2018 by issuing 350 000, $5 shares fully paid. There was no other cost related to the share issue. For the year ending 30 June 2020, the company recorded the following aggregate transactions: Accounts Sales (90 % credit and 10 % cash sales) Cost of Sales Interest income Rent Revenue Gain on sale of plant Employee benefit expenses - Admin Utilities expenses (1/3 selling & 2/3 admin) Depreciation expense- Admin Selling & Distribution Expenses Insurance expense - Admin Doubtful debts expense Interest expense Other borrowing expenses Income tax expense

$ 6 395 000 4 419 000 6 000 8 000 22 000 100 000 36 000 54 000 932 000 58 000 7 000 30 000 12 000 268 000

The following additional information was noted during the preparation of financial statements for the year ended 30 June 2020:  Additional 80 000 @ $5 fully paid shares were issued On 1 July 2019.  A cash dividend of $180 000 was declared and paid during the 2020 financial year and a final dividend for 2020 of $75 000 was proposed but not recognised in the financial statements.  Inventory was measured at the lower of cost and net realizable value.  Buildings, plant and equipment were measured at cost. The benefits were expected to be received evenly over the useful life of the asset.  Land was revalued upward by $100 000 (related income tax for this transaction was $30 000). The revaluation gain will not be reclassified and has been recorded in the 'Land Revaluation Surplus'. The valuation was conducted by the registered valuer, Abbey Valuations Pty Ltd.  Financial assets held for trading are equity investments that are held for the purpose of selling and short-term profit taking.  $127 000 of other loans are repayable within six months. The remaining amount is payable in full at the end of 2022  $30 000 of bank loans are repayable within one year. The remaining amount is payable in full at the end of 2024.  The provision for employee benefits includes $47 000 payable within one year.  The warranty provision is in respect of a 12-month warranty given on certain goods sold. 2

 The bank loan is for 5 years and repayable in full at the end of the term. The interest rate is 9% and it is secured over the land.  Newcastle Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and classifies expenses by function within the statement.

Summarised account balances are provided below: Year-end balances, 30 June 2020

Cash on Hand Bank Bank Overdraft Trade receivable Allowance for doubtful debts Other receivables Inventories Prepaid insurance Financial assets held for trading Plant and equipment Accumulated depreciation – plant and equipment Land Buildings Accumulated depreciation – buildings Patents Accumulated amortisation of patent Furniture Accumulated depreciation – furniture Goodwill Trade payable Provision for employee benefits Provision for warranty Bank loans Other loans Share Capital Retained earnings, 30 June 201 9 Dividends paid Land revaluation surplus Current tax liability Deferred tax asset

$

22 000 450 000 86 000 969 000 12 000 70 000 900 000 2 000 215 000 1 350 000 495 000 416 000 132 000 40 000 46 000 5 000 33 000 10 000 910 000 535 000 88 000 67 000 110 000 527 000 2 150 000 796 000 180 000 228 000 65 000 34 000

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Required: For the year ending 30 June 2020 (Note: comparative financial statements are not required), 1. Using the pro forma table supplied in appendix B, prepare a preliminary trial balance for Newcastle Ltd; (5 Marks) 2. Prepare a statement of comprehensive income for Newcastle Ltd in accordance with the requirements of AASB 101. Newcastle Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and classifies expenses by function within the statement; (15 marks) 3. Prepare a statement of changes in equity for Newcastle Ltd in accordance with the requirements of AASB 101; (8 marks) 4. Prepare a statement of financial position for Newcastle Ltd in accordance with AASB 101. Use the current/non-current presentation format; (12 marks) 5. Prepare appropriate notes to the accounts. (You do not need to prepare notes related to income taxes. Include the following note as note 1. You may optionally add accounting policies to this note): (20 marks). "1. Summary of significant accounting policies Basis of accounting The financial report is a general-purpose financial report which has been prepared on the The financial statements have been prepared in accordance with the requirements of the

6. After preparing and analysing the Newcastle Ltd.'s financial statements, prepare a brief report (no more than 500 words) for the CEO explaining the company's financial performance and position. (5 marks) 7. Many investors as well as public are now concerned about organisation's social and environmental impacts. Therefore, more and more organisations are now providing various social and environmental information. Tahlia has asked you to identify what types of social and environmental information Newcastle ltd should provide to their stakeholders? Identify five important types of social and environment information/indicators (such as "Total amount of GHG emissions") related Newcastle Ltd and explain briefly the reason for selecting each of them (no more than 500 words). (5 marks). You may refer to the Global Reporting Initiative (GRI) website. https://www.globalreporting.org/Pages/default.aspx

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APPENDIX A: PRESENTATION REQUIREMENTS (Departures may attract a penalty) 1. The assignment is required to be submitted through Turnitin by the due date; 2. 15% penalty marks per day will apply for late submission; 3. It is worth 20% of the final grade but will be marked out of 80; 4. The assignment will be marked on the basis of a requirement of "suitable for publication", that is, the relevant statements/notes comprise an external report; 5. The assignment must be performed individually; 6. You are to employ an aggregated format whenever appropriate and consistent with provision of minimum line items prescribed in AASB101; 7. The financial statements and the notes are to be typed or word processed in 12 point font; 8. You are not to use specialized accounting software packages, such as are employed by professional accounting firms, to produce your financial reports. The assignment is to give you an understanding of the processes, principles and customisation required in preparing a set of financial statements and the notes to the accounts. 9. You are to apply the 'function of expense' or 'cost of sales' method to the classification of expenses in the income statement (see AASB101 paras 97-105); 10. You are directed to use the current/non-current format for the statement of financial position (balance sheet) and supply a "net assets" line item; 11. The notes are to be simplified equivalences to published reports; that means a list of constituent components of a given line item with their respective dollar amounts, not footnotes; for Part B there is one set of notes to cover all statements, numbered sequentially from 1 (as supplied); 12. The coversheet must have student id and name and will be considered as your signature

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APPENDIX B Newcastle Ltd - Trial Balance as at 30 June 2020 Accounts DR

CR

Sales Interest income Gain on sale of plant Rent revenue Cost of sales Employee benefit expenses- Administration Depreciation expense - Administration Selling & Distribution expenses Insurance expenses Doubtful debts expense Interest expense Utilities expenses Other borrowing expenses Income tax expense Bank Overdraft Cash on hand Bank Trade receivable Allowance for doubtful debts/ impairment Other receivables Inventories Prepaid insurance Land Buildings Plant and equipment Furniture Accumulated depreciation – plant & equipment Accumulated depreciation – buildings Accumulated depreciation – Furniture Patents Accumulated amortisation of patent Goodwill Financial assets held for trading Bank loans Other loans Accounts payable -Trade Provision for employee benefits Provision for warranty Current tax liability Deferred tax asset Retained earnings, 30 June 2019 Dividends paid Land revaluation surplus Share capital Totals

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APPENDIX C: General Marking Criteria for theoretical/essay questions 10 Accounting Excellent Knowledge analysis and discussion of accounting concepts and the relevant standard

Critical evaluation

Fully developed and supported assertions and analysis

Structure /Language

Particularly clear with logical transitions throughout

8 Clear analysis and competent use of accounting concepts accounting concepts and the relevant standard Developed and supported assertions and analysis

Consistent focus and good transition

6 Accurate but limited knowledge regarding accounting concepts and the relevant standard

4 Limited grasp of accounting concepts and the relevant standard

2 inaccurate understanding of accounting concepts and the relevant standard

Assertions and analysis exist but are not developed or supported adequately Paragraph flow and transitions are adequate

Assertions and analysis exist but are not developed or supported accurately Weak paragraph structure and illogical transitions

Lack of assertions and analysis, development and/or support

Lack of focus

7...