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BAO5535 Issues in Contemporary Accounting

Questions:

Some questions for practice to prepare for the final exam. 

1. Explain why entities decide to report sustainability and corporate social reporting if they are not legally required to do so.

2. Discuss issues relating to the voluntary reporting from the perspective of the usefulness of information to the users.

3. Describe what of-balance sheet transactions are and how big data will reduce some of the issues associated with it in terms of presentation and disclosure of the information.

4. Koala Ltd is a company registered in Australia. It controls a subsidiary company residing in India. The subsidiary operates within India and sells its goods and purchases its raw materials in India. It is estimated that 80% of Koala’s sales are generated by its subsidiary based in India.  The remaining balance of sales is generated by their operations based in Australia.  70% of the shareholders of Koala Ltd are based in Australia.

Required
      a. Determine the functional currency of Koala Ltd. Justify your decision.

      b. Determine the presentation currency of Koala Ltd. Justify your decisions

5. All Fair Land (AFL) Ltd explores two sites (Hawk and Magpie). The following costs were incurred during 2018 at each site.

Site          Costs (A$)

Hawk       2,000,000

Magpie   1,000,000

In 2019, Hawk was assessed to have economically recoverable oil reserves. However, Magpie was discontinued as a result of further evidence indicating that the site was not worth further development.  

Of the costs incurred at Hawk, 80 per cent relates to property plant and equipment (PP&E) and the balance relates to intangible assets.

An oil rig, with a cost of $2 million, was erected at Hawk site at the beginning of 2019 (1 January 2019). The oil rig has an estimated useful life of 10 years. At the end of its useful life, AFL Ltd is required to dismantle the oil rig, remove it, and return the site to its original condition. AFL Ltd estimates that if such work (restoration) was required to be done at the present time, it would cost $1 million. The costs of this work are expected to increase by an average of 3% per year over the next 10 years.

The rate on ten (10) year government bonds reflects the relevant time value of money, and the rate is 4 per cent.

It is estimated that Hawk has 30, 000, 000 barrels of oil. The company has extracted 5,000, 000 barrels during the year 2019. The direct production cost of the oil is $500, 000. The company has sold 4,000, 000 barrels during the year at $30 per barrel.

Required

Prepare the journal entries to record the above transactions in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources. Show all necessary calculations under each journal entry.

6. During the reporting period ending 30 June 2014, Nichol Limited erected an oil rig in Noosa River. The cost of the rig and associated technology amounted to $99500 
7. The oil rig commenced production on 1 July 2014. At the end of the rig’s useful life, which is expected to be five years, Nichol Limited is required by its resource consent to dismantle the oil rig, remove it, and return the site to its original condition.

   After consulting its own engineers and environmentalists, Nichol Limited estimates that if such work was required to be done at the present time it would cost $15000  Anticipating that inflation will average 3 per cent over the next 5 years, the adjusted cost is expected to be $15 000 000 ´ (1.03)⁵, which equals $17 389 110.

   If we accept that the rate on 5 year government bonds reflects the relevant time value of money, and if the rate is 4 per cent, then the present value of the restoration provision will be? would be $17 389 105 ¸ (1.04)⁵ which equals $14 292 577 

Required

(Prepare the journal entries necessary to account for the establishment of the rig and the changing balance of the restoration provision for the years ended 30 June 2014, 30 June 2015 and 30 June 2016. Ignore depreciation. 

8. On 1 July 2019, OZ Ltd, an Australian company, enters into an agreement to borrow

US$2 million from Washington Ltd, a US company. Washington Ltd sends the loan money to OZ Ltd’s US bank account. The loan is for three years and requires the payment of interest at the rate of 8 per cent on 30 June each year. OZ Ltd’s reporting date is 30 June.  OZ Ltd’s presentation currency is Australia dollars.

The relevant exchange rates are:

Required 

Provide journal entries in the books of OZ Ltd to account for the above transaction on 1 July 2019 and 30 June 2020.   

9. Lynne-Melinda Ltd operates a large scale lavender farm supplying companies producing high quality essential oils in the Riverina region. On 30 June 2022 the farm was independently appraised and the lavender farm valued at $1 500 000. On 31 October 2022 lavender seed flowers that had a fair value less costs to sell of $300 000 were harvested and sold on the same day for the same amount. Picking costs and delivery charges was $40 000. On 30 June 2023 the farm was valued at $1 550 000.

• How are the lavender plants and harvested lavender seeds classified on Melinda’s financial report on 30 June 2023 according to IAS 41/AASB 41Agriculture?
• How to account for the lavender plants and harvested lavender?
• What is the net profit for Melinda and Lynne Ltd on 30 June 2023?
• Will your answer to the above three questions be different if Lynne- Melinda chooses the cost model, and assume all other information remains unchanged?

10. The Commonwealth Scientific and Industrial Research Organisation(CSIRO) Australia is an Australian Government controlled not-for-profit entity and is classified as a Corporate Commonwealth entity under the Public Governance, Performance and Accountability Act 2013. CSIRO is a research enterprise that delivers science and innovative solutions for industry, society and the environment.

    The organisation has more than 5000 experts, and its innovations contribute billions of dollars to the Australian economy every year. As the largest patent holder in the nation, CSIRO’s vast wealth of intellectual property has led to more than 150 spin-off companies.

CSIRO is reported to face a clean-up bill after barrels of radioactive waste at a major facility were found to be “deteriorating rapidly” and possibly leaking.

An inspection found “significant rusting” on many of the 9725 drums, which are understood to contain radioactive waste and other toxic chemicals. CSIRO flagged a $29.7 million budget provision for “remediation works” at a remote location in its latest annual report (see the extracted text below)

Required 

Refer to the AASB Framework and answer the following questions

1. Is CSIRO a reporting entity? Justify your answer
2. According to the definition and recognition criteria of liability in the AASB Framework, evaluate if CSIRO’s accounting treatment of the remediation works is appropriate 

BAO5535 Issues in Contemporary Accounting

Fin202 accounting and finance

1. Suppose you are a portfolio manager using the capital asset pricing model for making recommendations to her clients. You have the information shown in the following table.
 
Actual/realised return
Standard deviation
Beta
Stock A
14.1%
36.1%
…

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BAO5524 PROFESSIONAL AUDITING

With reference to Chapters 3 and 4 of the textbook, prepare a document for your
Audit Manager. Your document must include the followings:
1. Executive summary
2. Introduction
3. Key information:
a) Gain an understanding the client
b) Identify five (5) significant accounts most at risk of being …

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CISM4000 Accounting Information Systems

Your Task
The Assignment consists of these questions:
1. Students are to formulate possible solutions in practical scenarios using appropriate software like Excel, with a range of formulae and functions for basic income, expense and profitability analysis.
2. A brief Research Report to explore th …

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UGB253-Management Accounting for Business

Assignment brief
A.Critically investigate the benefits and limitations of marginal costing compared to absorption costing as an aid to management decision making by considering the following areas:
a) Demonstrate and discuss the underlying differences between the marginal costing and absorption co …

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