accounting

College of Business and Law Semester 1, 2018 Page 1 of 4 ACT204 Financial Accounting, Assessment item two: Assignment

UNIT CODE: ACT204 UNIT NAME: FINANCIAL ACCOUNTING

Assignment Information Semester 1 2018

Assessment 20% Submission Requirements. This assignment is to be submitted before 11.59pm F riday 18 th May in Week 11 Assignments are to be submitted by one of the following means; DO NOT LODGE BY FAX nor EMAIL nor at LECTURER'S OFF ICE KEEP A COPY

• The assignment must be lodged on or before the due date indicated in the assignment details.

Submit your Assignment using PDF file format . Only word docs and/or Excel converted to pdf will be acceptable. Handwritten answers will be rejected.

• The assignment must conform to the requirements set out in this assignment • The assignment must be lodged online via the ACT204 Learnline Assignment Lodgement link

on the ACT204 Learnline site . • Your file name should include your student number and your campus, for example

S123456WFDACT204.pdf, or S123456SYDACT204.pdf or S123456MELBACT204.pdf or S123456EXTACT204.pdf. Without your file number and campus location we won’t know to whom it belongs and it may result in your assignment lodgement being rejected.

• Include your name, student number and campus in a Footer for your assignment. • DO NOT LODGE VIA EMAILor FAX - assignments lodged by email or fax will not be accepted. • KEEP A COPY - Ensure you have a copy of the assignment lodged. If you have submitted

assessment work electronically please make sure you have a backup copy. • Assignment lodgements will be acknowledged automatically on the Learnline site, on submission.

Resubmission As a general rule resubmission of assessment items is NOT possible, however the Lecturer may ask for resubmission if it is deemed appropriate. Details for such resubmission will be made available by the Lecturer if and when the situation occurs. University Plagiarism policy Plagiarism is the unacknowledged use of material written or produced by others or a rework of your own material. All sources of information and ideas used in assignments must be referenced. This applies whether the information is from a book, journal article, the internet, or a previous essay you wrote or the assignment of a friend. Plagiarism policy is available at: http://learnline.cdu.edu.au/studyskills/studyskills/avoidingplagiarism.html and Student Breach of Academic Integrity Procedures https://www.cdu.edu.au/governance/doclibrary/pro-092.pdf LECTURERS MAY, AT THEIR DISCRETION, ASK STUDENTS TO VERBALLY PRESENT THEIR SUBMISSIONS OR WRITE SOME SELECTED PARTS OF THEIR A NSWERS IN A CONTROLLED SETTING.

College of Business and Law Semester 1, 2018 Page 2 of 4 ACT204 Financial Accounting, Assessment item two: Assignment

EXTENSIONS AND LATE LODGEMENTS LATE ASSIGNMENTS WILL GENERALLY NOT BE ACCEPTED UNL ESS AN EXTENSION TO THE DUE DATE HAS BEEN GRANTED. Exceptions will only be made where assignments are late due to special circumstances that are supported by documentary evidence, and may be subject to a penalty of 5% of assignment marks per day. Partially completed assignments will be accepted with appropriate loss of marks for the incomplete portion. Should students foresee potential difficulties with submission of assessment items, they should complete an Application for Assignment Extension or Special Consideration form and sent to [email protected] This application form, explanation and instructions is available on the ACT204 CDU Learnline course site or direct from http://learnline.cdu.edu.au/units/lb_school_templates/deployed/assignment_extension.docx Please note that it is now College policy that all extension requests must be approved by the Business School. The lecturer is no longer able to personally approve extension requests. Leaving a request for an extension, special assessment or special consideration until the last moment, based on grounds that students could have reasonably been able to foresee, may result in the application being rejected. ASSIGNMENT INFORMATION This Assignment is worth 20% of the total assessment for this unit. This assignment will be marked out of 100 and scaled down to being out of 20. Q1. The Wentnor Dairy Company Ltd has run for many years dairy farms in Tasmania. In addition to the

farms it has vertically integrated by purchasing factories that produce milk products. These products are then are further developed in other factories owned by the company by producing high grade yoghurts. The chief financial officer for the company has asked your advice on how AASB 136 Impairment of Assets, should be applied to the company’s various activities. In particular she wishes to correctly identify the cash-generating units (CGUs) for the company. One issue is whether the milk production section is a separate CGU even though the company does not sell milk directly to other entities but uses the products within its own vertically integrated structure or should it should be included in the milk-based products CGU. Required

Write a letter to the chief financial officer of The Wentnor Dairy Company Ltd, including the following: A. Define a CGU.

(2 marks)

B. Explain why impairment testing requires the use of CGUs, rather than being based on single assets.

(5 marks) C. Explain the factors that the chief financial officer should consider in determining the CGUs for

The Wentnor Dairy Company Ltd. (6 marks)

Pay particular attention to referencing your advice to the relevant paragraphs of the

accounting standard. (13 marks)

College of Business and Law Semester 1, 2018 Page 3 of 4 ACT204 Financial Accounting, Assessment item two: Assignment

Q2. When downloading the annual reports it’s a good idea not to print the whole report as they can be over 100 pages long.

From the following link download Woolworths Limited’s annual report for 2017

https://www.woolworthsgroup.com.au/icms_docs/188795_annual-report-2017.pdf Go to page 53 where you will find the financial statements. In the 2016 annual report the financial statements can be found on page 55. Here’s the link: https://www.woolworthsgroup.com.au/icms_docs/185865_annual-report-2016.pdf You will need the 2016 results when calculating average inventory and average receivables for the 2016 efficiency ratios. You can access the closing market price of Woolworth’s shares at https://au.finance.yahoo.com/quote/WOW.AX/history?period1=1492180200&period2=1498746600&in terval=1d&filter=history&frequency=1d Required

A Calculate the following ratios for 2017 and 2016: Current and Acid Test ratios Inventory turnover and days in inventory Gross profit percentage, accounts receivable turnover and days sales in receivables Debt ratio and debt to equity ratio Rate of return on net sales ratio and rate of return on total assets ratio Asset turnover ratio and the rate of return on ordinary shareholders equity Dividend yield and dividend payout. (24 marks)

B Using the ratios calculated in Part A and information gathered from elsewhere in the Annual Reports write a report to a potential investor with your recommendations as to whether Woolworths Limited would make a good investment.

(The report should not be just a re-statement of the ratio calculations but an interpretation of them.

Any calculations should be contained within an appendix and not in the body of the report. Remember the report is to a potential investor so the ratios must be of interest to them. Remember a business report will need: a report structure, title (including reference to whom the report is addressed), author, executive summary, introduction, findings, and a conclusion. Marks will also be awarded for presentation, business English, content, and where relevant, references.) (20 marks)

C As a rule of thumb the Current Ratio for businesses should be 2:1 and the Acid Test between1.5 to 1 How would you explain these ratios for Woolworths Limited when compared to this rule?

(4 marks)

(48 marks) Q3. In Note ii (p. 91) of the Qantas Annual Report 2017 it states:

ii. Foreign Operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into Australian Dollars at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into Australian Dollars at the exchange rates at the date of the transactions.

Foreign currency differences are recognised in the Consolidated Statement of Comprehensive Income and accumulated in the Foreign Currency Translation Reserve….

Required Explain this note to a reader of the Qantas report. Your explanation should deal with all the elements of a set of financial statements, with the translation methods adopted for each element, including all the component parts of equity, together with description of why foreign exchange differences arise, where they are recognized and where do they get transferred to. (13 marks)

College of Business and Law Semester 1, 2018 Page 4 of 4 ACT204 Financial Accounting, Assessment item two: Assignment

Q4.

Required

A Prepare a Statement of Cash Flows for Flash in the Pan Ltd for the year ended 30th June 2019 using the direct method.

(12 marks)

B The Statement should be accompanied by all the relevant notes (3 in total) including the indirect method.

(14 marks)

(26 marks)

Flash in the Pan Ltd Trial Balances as at 30 June

2018 2019 Dr $ Cr$ Dr $ Cr$ Cash 65 65 Accounts receivable 16996 28535 Allowance for doubtful debts 1300 2600 Inventory 47471 78751 Plant and machinery 64740 101920 Accumulated depn – p & m 7137 14482 Fixtures and fittings 13000 10140 Accumulated depn – f&f 3770 3900 Accounts payable 16258 15382 Bank overdraft 3614 21923 Current tax liability 7800 10400 Share capital 78000 117000 General reserve 13000 19500 Retained earnings (opening) 9290 11393 Sales revenue 221000 260000 Gain on sale of machinery 130 Cost of sales 78000 91000 Salaries and wages expenses 123035 129852 Doubtful debts expense 3900 4420 Depreciation expense 6630 7995 Income tax expense 7332 7132 Dividend declared and paid 10400 Transfer to general reserve 6500 361169 361169 476710 476710 Additional information 1)Fixtures and fittings which had cost $2860 and with accumulated depreciation of $520 were sold during the year in a cash sale. 2) Plant which cost $13,000 was purchased in exchange for the issue of 13,000 shares at a price of $1 each. 3) The bank overdraft is to be included in cash equivalents.