accounts

ACC 1000 Accounting for Managers 2 Trimester 2015 - ASSIGNMENT

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Assessment Information – Trimester 2, 2015

Subject Code: ACC 1000

Subject Name: Accounting for Managers

Assessment Title: Individual assignment

Weighting: 25% of the overall mark for this subject

Total Marks: 25 Marks

Due Date:

Friday of Week 9 – 18 September 2015 by 11:59 PM (AEST). Note: The above time is AEST. Brisbane and Adelaide must allow for time difference.

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Assessment Description

You are required to answer the following three tasks.

The assignment must be completed individually and submitted before the due date noted above to avoid any late penalties. Please make sure you follow the guidelines noted in your subject outline especially those relating to presentation of written work, late policy and academic integrity.

Submission:

The assignment will need to be submitted electronically through the student portal – use the link under “Assessments overview and submission” to submit the information (The portal will close at 11:59 pm AEST – students in Adelaide and Brisbane please note to adjust for the time difference accordingly).

ACC 1000 Accounting for Managers 2 Trimester 2015 - ASSIGNMENT

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Task 1 (5 marks) Lucia works as an accountant for a motor vehicle engine parts manufacturer called Vroom Ltd, owned by an international car firm. Her manager, Freda Chuse, is paid a bonus depending on the profitability of the company. If Vroom Ltd makes $1 million profit, Freda receives a bonus of $20 000 that increases progressively to $30 000 for a $3 million profit. If the profit of Vroom Ltd exceeds $3 million, Freda receives the maximum bonus of $30 000. Vroom Ltd currently receives a grant from the government of $100 000 per year to employ and train apprentice mechanics. At the end of May, it appears that Vroom Ltd will make a profit of approximately $3.5 million for the year ending 30 June 2016. Freda approached Lucia and said that if the company made too much profit then the government may stop paying Vroom Ltd the grant for training apprentice mechanics, and it would lose the $100 000 tax-free cash inflow. Freda instructed Lucia to find ways of deferring recognition of as much revenue as possible until the following financial year, for which the forecasts for the industry were quite poor, and to accrue as many expenses as possible at the end of the current accounting period when it came to making the end-of-period adjustments. Although Lucia was not happy with this instruction, she did not want to risk her own opportunities for promotion by upsetting her manager. Required:

A. Who are the stakeholders in this situation? B. Why do you believe Freda asked Lucia to do this? C. What are the ethical issues involved here? D. Can Lucia defer revenues and accrue as many expenses as possible and still be

ethical?

Task 2 (5 marks) An accountant prepared a statement of financial position for a business using the horizontal layout. In this statement, the capital of the owner was shown next to the liabilities. This confused the owner, who argued: ‘My capital is my major asset and so should be shown as an asset on the statement of financial position.’ How would you explain this misunderstanding to the owner?

ACC 1000 Accounting for Managers 2 Trimester 2015 - ASSIGNMENT

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Task 3 (15 marks) Scott and Co. Ltd, in operation for three years, produces antique reproduction furniture for the export market. Its most recent set of accounts is set out below.

Scott and Co. Ltd Statement of financial position as at 30 November 2014

$’000 $’000 Current assets Accounts receivable 820 Inventory 600 1,420 Non-current assets Plant and machinery at cost 942 Less accumulated depreciation (180) 762 Freehold land and buildings 228

990 Total assets 2,410 Current liabilities Bank overdraft 385 Accounts payable 665 Taxation 95 1,145 Non-current liabilities 12% debentures 200 Shareholders’ equity Paid-up capital (issued at $1 each) 700 Retained profits 365

1,065 Total liabilities and shareholders’ equity 2,410

Scott and Co. Ltd Statement of comprehensive income for the year ended 30

November 2014

$’000 Sales 2,600 Less cost of sales (1,620) Gross profit 980 Less other expenses (660) Profit for the year 320 Income tax (95) Profit for the year after tax 225 Proposed dividends (160) Retained profit for the year 65

Notes: The debentures are secured on the freehold land and buildings.

ACC 1000 Accounting for Managers 2 Trimester 2015 - ASSIGNMENT

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The company has asked an investor to invest $200,000 by purchasing 50,000 new ordinary shares at $4 each. Scott wishes to use the funds to finance further expansion. Required:

A. Assess Scott’s financial position and performance, and comment on any features you consider to be significant (Hint: analyse the profitability, efficiency, liquidity and investment ratios) (8 marks)

B. State, with reasons, whether or not the investor should invest in the company on the terms outlined. (7 marks)

ACC 1000 Accounting for Managers 2 Trimester 2015 - ASSIGNMENT

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ACC 1000 Accounting for Managers Assessment: Assignment – 2 Trimester, 2015

Marking Allocation Sheet a.

b.

Marks

Available

Marks

Received

Task 1: Research - Ethics Question 5.00

A. Identify the stakeholders 1.00

B. Why do you believe Freda asked Lucia to do this? 1.00

C. What are the ethical issues involved here? 2.00

D. Can Lucia defer revenues and accrue as many expenses as

possible and still be ethical? 1.00

Task 2: Applied theory

5.00

Explanation to owner 5.00

Task 3: Analytical Review 15.00

A. Assess Scott’s financial position and performance 8.00

B. State, with reasons, whether or not the investor should

invest in the company on the terms outlined 7.00

Total marks 25.00

Assessable Value 25.00