Assessment Information – Trimester 3, 2017
Subject Code: ACC 203
Subject Name: Financial Accounting 2
Assessment Title: Individual Assignment
Weighting: 25% of the overall assessment.
Monday 22/1/2018, Week 10 – 3:55 pm (AEST). Note: The above time is AEST. Brisbane and Adelaide must allow for the time difference.
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:
Assume that you are a graduate accountant working for Magenta and Associates a public accounting firm situated at 718 Geelong Street, Melbourne, VIC 3000. The manager of your firm, Ms. Lisa Magenta has asked you to draft a letter in response to an email received from a client – Mr. Christopher Sampson, the Managing Director of Beachlife Ltd, raising a number of issues regarding his company – see the copy of the email on the next page.
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
Please note: Any work which has been copied or shared between students will result in a Fail grade for both students concerned. Therefore, please make sure that the answer to this individual assignment is your own work and not copied or bought from any source. In completing this assignment make sure you follow the guidelines for assignments 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: Accounting Issues: Year Ending 30 June 2018
From: Christopher Sampson (chrissampson@beachlifeLtd.com.au)
Sent: 13 November 2017
To: Lisa Magenta (email@example.com)
Thank you for your phone call this morning, as agreed I am emailing you regarding the accounting issues we briefly discussed. By the way to assist the accounting team in our decision-making process could you please make sure you reference any relevant sources relating to your advice, for example, AASBs, Corporations Act, and relevant websites.
1. At our recent board meeting, several directors raised concerns about a pending legal claim against Beachlife Ltd. While Beachlife Ltd was in a strong financial position at 30 June 2017, one of its competitors is suing for patent infringement as at October 2017. The compensation claimed in relation to the patent infringement is $87 million. The hearing for the dispute had not been scheduled until July 2018. The legal adviser of Beachlife Ltd was of opinion that there was 30% chance that Beachlife Ltd would be found guilty. There was 60% chance that Beachlife Ltd would need to pay $50 million as compensation to the plaintiff, if it is found guilty, and 40% chance for $30 million compensation. Can you please provide advice regarding the correct accounting and disclosure of this legal claim?
2. Our company has recently entered into an agreement to sell equipment to Alpine Ltd for $180,000 on 12 December 2017. Beachlife Ltd will deliver the equipment on 22 December 2017, with payment due on 31 December 2017.
The agreement states that, from the date of delivery, Beachlife Ltd must provide maintenance for this equipment for the first 12 months. Alpine Ltd is entitled to a refund of 15% of the amount paid if Beachlife Ltd does not satisfactorily maintain the equipment for the year as required. Beachlife Ltd estimates the fair value of maintaining the equipment throughout the year to be $15,000.
The board cannot agree on the appropriate accounting treatment for this sale agreement. Could you please provide advice on the correct presentation of the revenue and related costs?
Please respond by letter (not email) as I would like to present this to the Board. I look forward to hearing from you in the near future.
Managing Director, Beachlife Ltd
Level 7, 927 William Street,
Brisbane QLD 4000
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!