Reference no: EM132323027 , Length: 1500 Words

Financial Accounting Assignment -

Case study background -

Assume that you are a graduate accountant working for McKenzie and Associates a public accounting firm situated at 668 Smith Street, Adelaide, SA 5000. The manager of your firm, Ms Jane McKenzie has asked you to draft a letter in response to an email received from a client - Mr Con Pewter, the Managing Director of Pewter Ltd, raising a few key accounting issues regarding his company - see the copy of the email in attached file.

The maximum length of the covering letter is 1 page. Please note that the business letter needs to be on the front page. You should then address all the technical issues/discussion after the letter, each on separate pages as attachments [3], followed by a Reference List. The maximum word limit for all parts of the assignment should be 2,500 words.

• Part A: Technical component - 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 - This mark covers the generic skills of business letter writing; layout, clear meaning, structure and organisation, appropriate tone and grammar, spelling and punctuation etc. throughout the whole assignment.

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.

Here are the three issues we are most concerned about:

1. On 1 July 2015, Con Pewter leased a motor vehicle that had an estimated life of 4 years. The lease period is also four years with annual rentals of $10,000 payable in advance from 1 July 2015. The machine is expected to have a nil residual value at the end of its life. The machine had a fair value of $35,000 at the inception of the lease. The lessor will also incur finance cost of 10% per annum when calculating annual rentals. It would be much appreciated if you could kindly advise the accounting team on how the lease should be accounted for in the financial statements of Con Pewter Ltd as at 30.06.2019 following the revised accounting standards which becomes effective on 1 January 2019.

2. The primary business activity of Con Pewter Ltd is developing accounting software packages. Con Pewter charges $2,000 as installation fees and a separate two- year technical support service for $1000. Otherwise, it also offers a combined goods and services contract which includes both elements for $3,400. Payment does not become outstanding until after 1 month of the accounting package being installed. The accounting team is uncertain as to how revenue should be recognised in the books post the changes to the accounting standards. Your advice on this matter would be greatly appreciated.

3. A number of employees who work on our strategic management team have been with us for a number of years - at least 12 of them have been with us since the company commenced operations in 2007.

In accordance with the Employee Bargaining Agreement (EBA), all employees are entitled to long service leave of 13 weeks if they remain in service for 10 years. They are also entitled to pro rata long service leave after 6 years of service. Our usual practice is to show the long service leave expense in the income statement when the employee actually takes leave and is paid. Of course, we maintain a memorandum record of the number of days each employee is entitled to.

Joseph, our Senior Accountant, has indicated to us that he thinks we should consider treating this expense in a different manner, which seems complicated. Something around accrual basis of recognising an expense. I cannot exactly remember what he said.

The directors are wondering why we should complicate a very simple way of calculating long service leave - why not "stick with" recognising the expense when we pay for it? What do you think we should do and why?

Required: Answer the questions/case studies below, in a maximum of 1,500 words.

Attachment:- Assignment File.rar