Reference no: EM13135322

Learning Outcome 4: Develop information gathering (research) and communication strategies 
to enable the provision of professional advice to aclient. 
Background to case study: You are a graduate accountant working for W Rhodes and 
Associates a public accounting firm situated at 556677 George Street, Victoria. The Manager, 
of your firm, John Evans has asked you to follow upon an email sent by a client, namely; 
1. Peter Piper, the managing director of Pickled Peppers Ltd -his email has raised a 
number of issues regarding his company, and your manager would like you to research the 
issues and draft a response in the form of a letter- see information in Case Study Details 
below. Maximum Length is 1250 words (excluding anycalculations) 
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 and Questioning Skills(10%) - This mark 
covers the generic skills of business letter writing; layout, clear meaning, structure and 
organisation, appropriate tone and grammar, spelling and punctuation. 
The assignment is designed to test the following skills: 
1. Your knowledgeand your ability to researchthe issues and then applythe information 
appropriately using judgement 
2.Your communication skills- business letter writing. 
Please make sure you follow the guidelines noted inyour subject outline especially those 
relating to presentation of written work, late policy and academic integrity. 
You should also familiarise yourself with the assessment marking rubric (attached) to guide you 
in how you can score marks. 
ACCM 4200 
Financial Accounting 
& Reporting 1 
Assignment 
Trimester 1, 2014 
INDIVIDUAL CASE STUDY: Pickled Peppers Ltd - (15% technical) 
Kaplan Business School is part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 
098 181 947 is a registered higher education provider CRICOS Provider Codes SA/QLD 02426B, NSW 02913J and VIC 02887F 
ACCM4200/1TRIMESTER2014/MIR 
- 2 - 
Re: Numerous Accounting Issues 
From: Peter Piper [[email protected]] 
Sent: Monday, 31 March 2013 at 8.30am 
To: John. [email protected] 
Cc: Charade Flam[[email protected]] 
Attachment: Issues Raised by the Board 
Dear John, 
Thanks for your letter suggesting we meet to plan the year end accounting work for the 
financial year ending 30 June 2014. 
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 hasjust moved from being a proprietary 
company to a public company (with effect from 1 December 2013), and they think this 
changes matters. 
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, 
Charade Flam 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 in the same way as we did lastyear. That's correct isn't it? I will be 
overseas on a marketing trip until almost the end of May and look forward to hearing from you 
by the time I get back. 
Best wishes and regards 
Peter Piper 
Managing Director, 
Pickled Peppers Ltd 
Suite 2525, Level 28, Plaza Building 
525 Charles Street 
Adelaide SA 5000 
INDIVIDUAL CASE STUDY: Pickled Peppers Ltd - (15% technical) 
Kaplan Business School is part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 
098 181 947 is a registered higher education provider CRICOS Provider Codes SA/QLD 02426B, NSW 02913J and VIC 02887F 
ACCM4200/1TRIMESTER2014/MIR 
- 3 - 
ATTACHMENT 
Pickled Peppers Ltd 
Issues raised by the Board of Directors 
Issue 1: 
A large number of customers buy our products on a wholesale basis for their sales outlets and 
have set up credit facilities with us. As a companythat prides itself in preserving and pickling fresh 
produce we like to make sure that our products reach as many people as possible. So in addition 
to the retail customers (Customer Type A) and supplying wholesale distributors (Customer Type 
B), we also entered into agreements with a number of cafes, motels and souvenirs style shops that 
sell Australian made products to tourists (CustomerType C). These customers hold our products 
on their shelves and when our representative visitsthem on a monthly basis, they return any items 
that are unsold and accept another batch of products from us. They are then invoiced for the items 
sold by them and payment is made within a month after the date of the invoice. At present we 
record the sales entry on receipt of the money fromall types of customers as that seems to be the 
most consistent way to do this. The moment we receive the cash we enter the sale in our books 
and then bank the cash received. The newly appointed Finance Director has informed the board 
that he thinks this is incorrect and should be changed and Charade Flam the financial controller 
thinks he may be correct. Do we need to change the way in which we account for sales revenue 
and if so what does it involve? 
Issue 2: 
Jonny Appleton our manufacturing engineer designed and then manufactured an item of 
machinery which enables us to dry the fresh produce used in our pickling plant much more 
effectively. As this item of plant was manufacturedin-house the only costs associated with it was 
the additional materials we needed to purchase for the machine, which was $80 000. It works so 
effectively and efficiently that it cut our manufacturing time by about 2 hours per batch. The factory 
manager wants us to show this item at its fair value (estimated at $ 225 000 by him) and to 
recognise the gain as sales revenue. He thinks this is fair as he has been asked by two other 
businesses "Granny's Jam" and "Martha's Pies" if he would be interested in manufacturing a 
similar machine for them and is presently in the process of doing so. He says that this increases 
the goodwill of the company too, and wants us to show this asset in the financial statements for the 
year ending 30 June 2014. Can we do that? How should we treat this? We haven't had a 
transaction like this before. 
Issue 3: 
In calculating the allowance for doubtful debts last year (year ended 30 June 2013) the accounts 
clerk who did the calculation made a big error is his excel spreadsheet and understated the 
amount significantly. Instead of allowing for 2% sales revenue ($2.5 million last year and $2.9 
million estimated for the current year) which is the company's accounting policy, the amount 
allowed was just 0.02%. How should we treat this inthe current year's financial statements? I have 
said that the board could decide on how we deal with this but unfortunately we are equally divided 
and Charade said that as the problem is less than 5% of sales revenue it is not material. The sales 
director is concerned that his sales figures will be impacted by this. How should we treat this? Can 
the board just decide? 
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!