Assessment Information – Trimester 2, 2015
Subject Code: ACCM 4200
Subject Name: Financial Accounting & Reporting 1
Assessment Title: Individual Assignment (Technical 15%) and (Communication skills10%)
Weighting: 25%
Due Date:
Friday of Week 9 – 18th September 2015 by 11:59 PM (AEST). Electronic submission. Note: Brisbane and Adelaide students must allow for time difference
.
Assessment Description
Learning Outcome 4: Develop information gathering (research) and communication strategies to enable the provision of professional advice to a client.
Objective: The objective of this assignment is to learn to effectively research a technical aspect of accounting and communicate professional advice to a client, via a business letter.
Background to the case study:
You are a graduate accountant working for Anderson and Associates, a public accounting firm, situated at 998 Aurora Street, Docklands, Victoria. The senior manager of your firm, Annie Lofter has asked you to follow up on an email sent by a client, namely -
1. Jennifer Jenson the managing director of Jenson & Jarman Pty Ltd – her email has raised a number of issues regarding her company and your manager would like you to research the issues and draft a response in the form of a business letter – see email information in case study details below. The maximum length of the letter is 1,250 words (excluding any calculations).
Part A: Technical component 15% - This mark covers the technical content of your advice and the explanation on each of the issues, the calculations and the sources used.
Part B: Communication Skills – Letter Writing 10% - This mark covers the generic skills of business letter writing; layout, clear meaning, structure and organisation, appropriate tone and grammar, spelling and punctuation etc.
The assignment is designed to test the following skills:
1. Your knowledge and your ability to research the issues and then apply the information appropriately using judgement to correctly identify the relevant standards and legislation that relate to the issues raised by the client.
2. Your written communication skills – business letter writing
Any work which has been copied or shared between students will result in a Fail grade for both students concerned. So please make sure that the answer to this individual assignment is your own work and not copied from any source. Please make sure you follow the guidelines noted in your subject outline especially those relating to the presentation of written work, late assignment policy and academic integrity.
Please check the marking rubric for each part to ensure that you have followed all the guidelines for presenting your work.
Re: Numerous Accounting Issues
From: Jennifer Jenson [jjenson@jensonjarmen.com.au]
Sent: Monday, 17 August 2015 at 8.30am
To: Annie.Lofter@Anderson.com.au
Cc: Margaret Mitchell [mmitchell@jensonjarmen.com.au]
Attachment: Issues Raised by the Board
Dear Annie,
Thanks for your call suggesting we meet to plan the year end accounting work for the financial year ending 30 September 2015. It was a pleasant surprise to find out that you had remembered that our company year-end was September and not June!
There are quite a few issues that the board of directors has raised with me in relation to the financial statements and I have noted them below for your response. Some of the directors are concerned about these issues as the company has just moved from being a small proprietary company to a large one (with effect from 1 December 2014), and they think this changes matters. As suggested I have also attached the information relating to the calculation of income tax and deferred tax as discussed.
To assist us in our decision making process could you please make sure that any relevant sources such as the AASBs, Corporations Act, reference books, journal articles, and/or websites are referenced so that the accounting team here could check them out when evaluating your answer. If you could kindly copy the newly appointed Financial Controller, Margaret Mitchell in on your response she could start the review process.
I must confess I am not too worried about it as I am sure that all we need to do is to prepare the financial statements as we did last year. That’s correct isn’t it? I will be overseas on a marketing trip until early September but look forward to hearing from you by the time I get back.
Best wishes and regards
Jennifer Jenson
Managing Director,
Jenson & Jarman Pty Ltd
Suite 6258, Level 29, Plaza Building
630 Charles Street
Adelaide SA 5000
ATTACHMENT 1
Jenson and Jarman Pty Ltd Issues raised by the Board of Directors Issue 1:
Martin Kellick, the marketing director on our board of directors, is also on a number of other company boards. He heard the other companies refer to a new standard on fair values and was very anxious to work out whether Jenson and Jarman Pty Ltd had accounted for all their assets based on “fair value”. This had all the other directors quite confused. Is there such a standard? Does it apply to our company or only to the public listed ones? Should we be making a change to fair values for all our assets? I thought we had to show them at cost? In fact I think we had to lower the value of inventory last year as the net realisable value of a number of items were less than the original cost. We would love to get your opinion on this so that everyone on the board is clear as to what needs to be done.
Issue 2:
There are a number of events happening towards the end of September which we are not too sure about; that is should we treat them in the current period or the next. Margaret seems to think we may have to accrue the expenses for the following events as they will happen before the year-end:
(a) We will be calling for tenders from construction companies to construct the new office building and retail outlets on 10 September 2015. This will close on 25 September and will be evaluated by us. We hope to be able to finalise the contractor by Monday 5 October and work will commence soon after.
(b) Another block of land purchased over 30 years ago for $30 000 is still shown at that value in our books. We think that the directors will decide to sell it when they meet on 7 October. The net realizable value of the land is $ 3.45 million (and there is a development company interested in buying it from us) and the money will be used to construct the new office building and retail outlets.
(c) There is some argument over the invoices received in October; I think we should let invoices received in October be accounted for in October as payment will be made in that month. I am sure that the previous financial controller did just that. We did make payment for last September (2014) invoices in October 2014 so I think it will adjust itself, don’t you?
Issue 3:
Thank you for agreeing to calculate the company tax and deferred tax liabilities for the year ending 30 June 2015 for Jarman Pty Ltd, our subsidiary company. See attachment 2 for details. Could you please give us the journal entries required, to give effect to both the current tax liability and deferred tax calculation done by you? The board would also like a brief summary of the logic behind calculating deferred tax; why we have to provide for deferred tax at all. There is also a possibility that the company tax rate may drop to 25%; would this impact on the deferred tax calculation; and if so how? I suggest you attach the tax calculation worksheets to your letter in support of the journal entry as our auditors will require it.
Hint: Remember that your firm plans to charge the client for your advice; as a check ask yourself if you would pay for the advice you have drafted!
ATTACHMENT 2
Jarman Pty Ltd has calculated their accounting profit before tax for the year ended 30 June 2015 to be $225,450. The company tax rate at present is 30%. Included in this profit are items of revenue and expenses relevant to the calculation of company income tax and are shown below:
Depreciation expense – motor vehicles (25%) 4 500
Depreciation expense – equipment (20%) 20 000
Rent revenue 16 000
Doubtful debt expense 2 300
Carrying amount of equipment sold 18 000
Entertainment expense 1 500
Annual leave expense 5 000
Proceeds on sale of equipment $ 19 000
Royalty revenue (non-taxable exempt income) $ 10 000
The company’s draft trial balance (an extract) for the year ended 30 June 2015 (with comparative figures) showed the following assets and liabilities (prior to the tax provisions):
2015 2014
Cash 11 500 9 500
Accounts receivable 12 000 14 000
Allowance for doubtful debts (3 000) (2 500)
Inventories 19 000 21 500
Rent receivable 2 800 2 400
Motor vehicle 18 000 18 000
Accumulated depreciation – motor vehicle (15 750) (11 250)
Equipment 100 000 130 000
Accumulated depreciation - equipment (60 000) (52 000)
Deferred tax assets ? 6 450
Accounts payable 15 655 21 500
Provision for annual leave 4 500 6 000
Current tax liability ? 7 600
Deferred tax liability (opening balance) ? 2 745
Additional Information:
1. The motor vehicle is fully depreciated for tax purposes; the company can claim 15% depreciation on equipment.
2. The equipment sold during the year was purchased 2 years before the date of sale for $30 000
Prepare two worksheets showing:
(1) The current tax calculation
(2) The deferred tax calculation
Prepare the journal entries that Jarman Pty Ltd would need to recognise the current tax for the year ended 30 June 2015 and the deferred tax as at 30 June 2015.
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