FINANCIAL ACCOUNTING

6. You are not required to upload an Assignment Cover Sheet. You will complete a Plagiarism declaration when you access the Dropbox.

7. Once submitted you cannot take your assignment back BUT you CAN SUBMIT another version. The most recent version submitted will be marked, however this must be submitted before the

DUE DATE.

You must keep a backup copy of every assignment you submit, until the marked assignment has been returned to you. In the unlikely event that one of your assignments is misplaced, you will need to submit your backup copy.

Any work you submit may be checked by electronic or other means for the purposes of detecting collusion and/or plagiarism.

When you are required to submit an assignment through your CloudDeakin unit site, you will receive an email to your Deakin email address confirming that it has been submitted. You should check that you can see your assignment in the Submissions view of the Assignment Dropbox folder after upload, and check for, and keep, the email receipt for the submission.

Objective

The objective of this assignment is to evaluate and assess recording, expensing and reporting of non-current assets and revenue as well as examining the impact of accounting standards on the recording and reporting of financial information.

You are required to form groups of four for this assignment. Your group must be set up on CloudDeakin as per the instructions found in the document called ‘instructions on how to form a group.’ This document is available in the resource folder under Group Assignment: Part B. Once you form your group the next stage is to all meet up either in person or online using skype, FaceTime or a method of your choice. It is advised that the group keep a record of what was said at the meeting. We will provide you with an initial action template that you can use in your first group meeting to record details such as, who attended, deadlines for having part B completed, who will provide feedback to who for part B, etc. This will be available in the assessment folder for Assessment 2 Part B and is called ‘Action Plan Template.’ Every time you meet you should document the meeting, so that if there is any disagreement within the group you can refer back to the template.

When working in a group it is very important to communicate. This assignment requires students to share their answers as some answers are dependent on the answer given to a previous question. Therefore students are encouraged to use tools which allow them to share information and create documents collaboratively. Examples of these include: Google Docs, OneDrive (provided by Deakin) and Slack. Students are not limited to these and can choose their own tool.

At your first meeting decide within your group which student will complete which question. It is a good idea that before your first meeting that each group member reads the case study so that they are able to present their point of view about the case study. It is recommended that each group member is allocated a question, you should then allocate a different group member to provide feedback on the answer given for each question. This is a suggestion only and you can allocate the work differently but keep in mind that every student in your group must participate and answer questions as well as provide feedback to others. Students should be allocated a questions based on their strengths. Please record details of your first meeting using the document titled ‘Action Plan Template.’ You should also document who is answering which question and who is providing feedback on that question. Set deadlines that group members agree to have their questions and feedback finished and record these details. Provide a copy to each group member to ensure they all agree on what was said.

Group Task 1,500 words (10 marks)

The case data (Gym Life Pty Ltd) is given in a separate file.

Imagine that you are a graduate analyst working in the consulting service line of the accounting firm, Trendy Accountants. The department provides consulting services to small businesses around Australia and has recently received a new client, Gym Life Pty Ltd. As part of the engagement, Trendy Accountants needs to assess Gym Life’s recording, expensing and reporting of non-current assets and revenue as well as examine the impact of accounting standards on the recording and reporting of financial information because the owners are concerned about the choices being made. As part of these assessment, Trendy Accountants needs to consider how Gym Life has recorded assets and revenue in previous and current financial years.

Your supervisor would like you to work as a group (team) with three other graduate analysts from the firm and meet with the concerned client next week (Gym Life Pty Ltd). In preparation, your supervisor has provided you with some background information regarding the company’s non-current assets and revenue from customers. The group is required to prepare a brief report prior to the upcoming meeting. Your group is encouraged to refer to AASB 116 Property, Plant and

Equipment , AASB 136 Impairment of Assets and AASB 15 Revenue from Contracts with Customers and the Conceptual Framework to justify your answers. When referring to the accounting standards to justify your answer, you may reference the paragraph number within the text. See the following example below:

In this scenario, the revaluation increase should be recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus (para 39, AASB 116).

Marks will not be awarded for simply copying the accounting standards. Your group needs to explain the relevant concepts from the accounting standards in your own words.

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Required

Your group is required to refer to the case data for Gym Life Pty Ltd, and produce a report. The report should address the following:

1. Determine the amounts to be recorded in the balance sheet for the newly acquired land, building and machinery. Consider any additional amounts that need to be included in the cost of the land, building and machinery and justify why or why not they should be included. Include in your answer journal entry required to record the lump-sum acquisition. Show your calculations.

2. Calculate the annual depreciation expense to be charged in the accounts of Gym Life Pty Ltd, with respect to the building and machinery for each of the years ending 30 June 2011, 2012, 2013, 2014. Please display your results in a table. Explain whether Rebecca and Dario are permitted to change depreciation method for the machinery for the 30 June 2014. Provide a reason as to why Rebecca and Dario would want to change depreciation methods and include a calculation of the depreciation expense for 2014 financial year under the units of production method to justify your answer.

3. Explain how under the revaluation model, revaluation increases and decreases should be accounted for. Record the general journal entries to recognise the revaluations of the building and land. Show your calculations.

4. Prepare an excerpt of the balance sheet which shows the non-current assets that Gym Life Pty Ltd has on hand as at 30 June 2014. Show any relevant calculations.

5a. Briefly explain why, after the fire, Rebecca and Dario do not want to record the revaluation for the building and impairment loss for the machinery and whether they can change from the revaluation to the cost model for the building. Identify and discuss which qualitative characteristics of financial reporting would be violated if the revaluation and impairment loss are not recorded.

b. Assuming that the revaluation reversal for the building and impairment loss for the machinery are recorded, calculate the revised amount that the building and machinery should be recorded for 30 June 2016 and record the general journal entries to recognise the revaluation and impairment of these non-current assets. In your answer, justify how you determined the machine’s recoverable amount. Show your calculations.

6. Following the change in Gym Life’s business operations to a gym services providers, advise Rebecca and Dario whether Gym Life Pty Ltd needs prepare general-purpose financial reports. Use the Conceptual Framework to justify to your answer.

7. With reference to AASB 15 Revenue from Contracts with Customers, apply the five-step process for revenue recognition in regards to the non-refundable joining fee and monthly membership fee. Students need to consider whether the joining fee and membership fee are separate performance obligations. Include in your answer the general journal entries that need to be recorded to recognise the revenue from gym members for the 30 June 2017 financial year. Show any calculations.

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Heading 4: Revaluation and Impairment (questions 3, 4 and 5)

Heading 5: Revenue Recognition (question 6)

Heading 6: Preparation of Financial Reports (question 7)

These headings are only a suggestion.

The sooner you form a group (team) and register the group you can get started. Please don’t forget to include the names of your group members and group number on the title page when you submit.

Important Notes

Discussion area for this assignment: There is a discussion area on CloudDeakin entitled

‘Assignment Discussion’. This area is for you to discuss the assignment. It is an area to help each other – it is NOT an area for the answer to be provided to each other. Each group has also been

provided with a discussion folder that only their group members can see and access.

Penalties for late submission: The following marking penalties will apply if you submit an assessment task after the due date without an approved extension: 5% will be deducted from available marks for each day up to five days, and work that is submitted more than five days after the due date will not be marked. You will receive 0% for the task. 'Day' means working day for paper submissions and calendar day for electronic submissions. The Unit Chair may refuse to accept a late submission where it is unreasonable or impracticable to assess the task after the due date. Requests for special consideration will be considered only in extenuating circumstances and