Reference no: EM132656327

HI6025 Accounting Theory and Current Issues - Holmes Institute

Learning Outcome 1: Examine conceptual issues and the sources of authority for the accounting requirements which apply to reporting by Australian companies, including Company Law, International and Australian Accounting Standards, and Stock Exchange requirements;

Learning Outcome 2: Understand and evaluate different theories of accounting such as positive accounting theory, normative accounting theory, stakeholders' theory, legitimacy theory, institutional theory, and different initiatives of relevant global organisations such as GRI, IR;

Learning Outcome 3: Apply Australian Accounting Standards and Corporate Legislation to the financial reporting processes;

Learning Outcome 4: Evaluate advanced level financial accounting problems and select appropriate accounting strategies for the accounting entity;

Learning Outcome 5: Understand different provisions of accounting standards and the compliance requirements of the professional and legal bodies in Australia;

Learning Outcome 6: Make judgments about appropriate use of accounting standards and accurately apply appropriate treatments for different advanced level accounting issues;

Question 1:

TAKULAH Traders Ltd purchased a machine for $650 000 and there was an accumulated depreciation balance of $110 000 at 30 June 2022. Its fair value is assessed at this time, with its first revaluation as $450 000. The machine's useful life is expected to be 5 more years and the residual value to be $50 000. On 1 July 2023 the asset's fair value is $460 000 and the residual value and useful life are expected to be unchanged (that is, there is 4 years of remaining life).

Required:

Provide the journal entries necessary to account for all the above transactions and events up to 1 July 2023, in accordance with AASB 116 if the revaluation is undertaken.

Question 2:

Fitbit Ltd has leased a machine on the following terms:

Date of entering lease	1 July 2019
Duration of lease	5 years
Life of asset	6 years
Unguaranteed residual value	$40,000
Lease payments inception (at the start)	$60,000
Annual payments (5)	$65,000
Implied rate 11.0 %

Required:
Determine the Fair Value (rounded off) of the leased asset.

Question 3

Dainty Ltd has an average weekly payroll of $200 000. The employees are entitled to 2 weeks', non- vesting sick leave per annum. Past experience suggests that 56% of employees will take the full 2 weeks' sick leave and 22% will take 1 week's leave each year. The rest of the employees take no sick leave.

Required:
a) Calculate the expected annual sick-leave expense for Dainty Ltd (on the basis of average salaries).
b) Provide the journal entry necessary to recognise the sick-leave entitlement expense as it accrues each week.
c) In the current week an employee with a weekly salary of $600 has been off sick for the first time this year. The employee took 2 days off out of her normal 5-day working week. Assuming that PAYG tax is deducted at 30%, what would the entry be to record the employee's weekly salary (round amounts to the nearest dollar)?

Question 4

Compaq Ltd has a net income after tax of $2 000 000 for the year ended 30 June 2018. At the beginning of the period Compaq Ltd has 900 000 fully paid-up ordinary shares on issue. On 1 January 2018 Compaq Ltd had issued a further 300 000 fully paid-up ordinary shares at an issue price of $2.00. On 1 March 2018 Compaq Ltd made a one-for-five bonus issue of ordinary shares out of retained earnings. The last sale price of an ordinary share before the bonus issue was $2.50. At the beginning of the current period Compaq Ltd also had 500 000, $1.00, 5% cumulative preference shares on issue. The dividends on the preference shares are not treated as expenses in the statement of comprehensive income. The basic earnings per share for the period ended 30 June 2017 was $1.50 per share.

Required:
a) Calculate the basic EPS amount for 2018.
b) Explain what is diluted EPS. Give one example of a security that can dilute the basic EPS.

Question 5
On 1 March 2020 Holmes Ltd enters into a binding agreement with a New Zealand company, which requires the New Zealand Company to construct an item of machinery for Holmes Ltd. The cost of the machinery is NZ$750,000. The machinery is completed on 1 June 2021 and shipped FOB Auckland on that date. The debt is unpaid at 30 June 2020, which is also Holmes Ltd's reporting date.
The exchange rates at the relevant dates are:

1 March 2020 A$1.00 = NZ$1.20
1 June 2020 A$1.00 = NZ$1.30
30 June 2020 A$1.00 = NZ$1.25

Required:
a) Determine the amount in AUD, as at:
• 1 March 2020; and
• 30 June 2020.
b) Prepare the journal entries for the above dates, up to 1 June 2021, showing the amount of exchange gain or loss (5 marks).

Question 6

The following quote appeared in an article entitled ‘Business and society in the coming decades', which was available on the website of McKinsey & Company (accessed in October 2015).

"There are compelling reasons companies should seize the initiative to drive social and business benefits. First, in an interconnected world facing unprecedented environmental and social challenges, society will demand it. Increasingly, a basic expectation among customers, governments, and communities will be that the companies they do business with provide a significant net positive return for society at large, not just for investors. This will be part of the implicit contract or license to operate".
Required:
a) Explain the above statement in the context of corporate social responsibility. [Word limit 150-200 words]
b) Further, do you think such a statement would impact the perceived ‘legitimacy' of companies? Explain. [Word limit 200 - 250]

Attachment:- Accounting Theory and Current Issues.rar