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Discuss the principles and practices which should be used in the financial year to 30 November 2008 to account
for:(c) the purchase of handsets and the recognition of revenue from customers and dealers. (8 marks)
Appropriateness and quality of discussion. (2 marks)
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更多 “ Discuss the principles and practices which should be used in the financial year to 30 November 2008 to accountfor:(c) the purchase of handsets and the recognition of revenue from customers and dealers. (8 marks)Appropriateness and quality of discussion. (2 marks) ” 相关考题
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The Pareto Principle is a technique used by quality managers to determine which quality control problems of a particular service or manufacturing process should be corrected. Which of the following statements represents the philosophy of the principle?A . In order to minimize financial losses from quality control problems, all problems which have a measurable cost associated with them should be corrected.B . the majority of defects are caused by a small percentage of the identifiable problems. Improvements efforts should be reserved for these vital few problems.C . in order to achieve zero defects, all quality control problems, including those which do not have a direct financial cost should be corrected.D . generally, 80 % of the quality control problems are justifiable for correction via cost-benefit analysis. The remaining 20% are not financially worthy of improvement efforts.E . A and D
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VThe Pareto Principle is a technique used to determine which quality control problems in a particular process should be corrected. Which of the following statements best represents the philosophy employed by this principle?A . In order to minimize financial losses from quality control problems, all problems which have a measureable cost should be correctedB . the majority of defects are caused by a small percentage of the identifiable problems. Improvement efforts should be reserved for these vital problems.C . in order to achieve zero defects, all quality control problems, including those which do not have a direct financial cost should be corrected.D . generally, 80% of the quality control problems are justifiable for correction via cost-benefit analysis. The remaining 20% are not financially worthy of improvement efforts.E . A and D
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158 The Pareto Principle is a technique used by quality managers to determine which quality control problems of a particular service or manufacturing process should be corrected. Which of the following statements represents the philosophy of the principle?A. In order to minimize financial losses from quality control problems, all problems which have a measurable cost associated with them should be corrected.B. the majority of defects are caused by a small percentage of the identifiable problems. Improvements efforts should be reserved for these vital few problems.C. in order to achieve zero defects, all quality control problems, including those which do not have a direct financial cost should be corrected.D. generally, 80 % of the quality control problems are justifiable for correction via cost-benefit analysis. The remaining 20% are not financially worthy of improvement efforts.E. A and D
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(c) Discuss the ways in which budgets and the budgeting process can be used to motivate managers toendeavour to meet the objectives of the company. Your answer should refer to:(i) setting targets for financial performance;(ii) participation in the budget-setting process. (12 marks)
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(b) Ambush loaned $200,000 to Bromwich on 1 December 2003. The effective and stated interest rate for thisloan was 8 per cent. Interest is payable by Bromwich at the end of each year and the loan is repayable on30 November 2007. At 30 November 2005, the directors of Ambush have heard that Bromwich is in financialdifficulties and is undergoing a financial reorganisation. The directors feel that it is likely that they will onlyreceive $100,000 on 30 November 2007 and no future interest payment. Interest for the year ended30 November 2005 had been received. The financial year end of Ambush is 30 November 2005.Required:(i) Outline the requirements of IAS 39 as regards the impairment of financial assets. (6 marks)
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(ii) Explain the accounting treatment under IAS39 of the loan to Bromwich in the financial statements ofAmbush for the year ended 30 November 2005. (4 marks)
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(b) (i) Discuss the main factors that should be taken into account when determining how to treat gains andlosses arising on tangible non-current assets in a single statement of financial performance. (8 marks)
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(iv) Tyre recently undertook a sales campaign whereby customers can obtain free car accessories, by presenting acoupon, which has been included in an advertisement in a national newspaper, on the purchase of a vehicle.The offer is valid for a limited time period from 1 January 2006 until 31 July 2006. The management are unsureas to how to treat this offer in the financial statements for the year ended 31 May 2006.(5 marks)Required:Advise the directors of Tyre on how to treat the above items in the financial statements for the year ended31 May 2006.(The mark allocation is shown against each of the above items)
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5 International Financial Reporting Standards (IFRSs) are primarily designed for use by publicly listed companies andin many countries the majority of companies using IFRSs are listed companies. In other countries IFRSs are used asnational Generally Accepted Accounting Practices (GAAP) for all companies including unlisted entities. It has beenargued that the same IFRSs should be used by all entities or alternatively a different body of standards should applyto small and medium entities (SMEs).Required:(a) Discuss whether there is a need to develop a set of IFRSs specifically for SMEs. (7 marks)
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(b) Discuss the key issues which will need to be addressed in determining the basic components of aninternationally agreed conceptual framework. (10 marks)Appropriateness and quality of discussion. (2 marks)
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(c) Discuss how the manipulation of financial statements by company accountants is inconsistent with theirresponsibilities as members of the accounting profession setting out the distinguishing features of aprofession and the privileges that society gives to a profession. (Your answer should include reference to theabove scenario.) (7 marks)Note: requirement (c) includes 2 marks for the quality of the discussion.
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(b) One of the hotels owned by Norman is a hotel complex which includes a theme park, a casino and a golf course,as well as a hotel. The theme park, casino, and hotel were sold in the year ended 31 May 2008 to Conquest, apublic limited company, for $200 million but the sale agreement stated that Norman would continue to operateand manage the three businesses for their remaining useful life of 15 years. The residual interest in the businessreverts back to Norman after the 15 year period. Norman would receive 75% of the net profit of the businessesas operator fees and Conquest would receive the remaining 25%. Norman has guaranteed to Conquest that thenet minimum profit paid to Conquest would not be less than $15 million. (4 marks)Norman has recently started issuing vouchers to customers when they stay in its hotels. The vouchers entitle thecustomers to a $30 discount on a subsequent room booking within three months of their stay. Historicalexperience has shown that only one in five vouchers are redeemed by the customer. At the company’s year endof 31 May 2008, it is estimated that there are vouchers worth $20 million which are eligible for discount. Theincome from room sales for the year is $300 million and Norman is unsure how to report the income from roomsales in the financial statements. (4 marks)Norman has obtained a significant amount of grant income for the development of hotels in Europe. The grantshave been received from government bodies and relate to the size of the hotel which has been built by the grantassistance. The intention of the grant income was to create jobs in areas where there was significantunemployment. The grants received of $70 million will have to be repaid if the cost of building the hotels is lessthan $500 million. (4 marks)Appropriateness and quality of discussion (2 marks)Required:Discuss how the above income would be treated in the financial statements of Norman for the year ended31 May 2008.
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(c) On 1 May 2007 Sirus acquired another company, Marne plc. The directors of Marne, who were the onlyshareholders, were offered an increased profit share in the enlarged business for a period of two years after thedate of acquisition as an incentive to accept the purchase offer. After this period, normal remuneration levels willbe resumed. Sirus estimated that this would cost them $5 million at 30 April 2008, and a further $6 million at30 April 2009. These amounts will be paid in cash shortly after the respective year ends. (5 marks)Required:Draft a report to the directors of Sirus which discusses the principles and nature of the accounting treatment ofthe above elements under International Financial Reporting Standards in the financial statements for the yearended 30 April 2008.
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(d) Sirus raised a loan with a bank of $2 million on 1 May 2007. The market interest rate of 8% per annum is tobe paid annually in arrears and the principal is to be repaid in 10 years time. The terms of the loan allow Sirusto redeem the loan after seven years by paying the full amount of the interest to be charged over the ten yearperiod, plus a penalty of $200,000 and the principal of $2 million. The effective interest rate of the repaymentoption is 9·1%. The directors of Sirus are currently restructuring the funding of the company and are in initialdiscussions with the bank about the possibility of repaying the loan within the next financial year. Sirus isuncertain about the accounting treatment for the current loan agreement and whether the loan can be shown asa current liability because of the discussions with the bank. (6 marks)Appropriateness of the format and presentation of the report and quality of discussion (2 marks)Required:Draft a report to the directors of Sirus which discusses the principles and nature of the accounting treatment ofthe above elements under International Financial Reporting Standards in the financial statements for the yearended 30 April 2008.
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4 The transition to International Financial Reporting Standards (IFRSs) involves major change for companies as IFRSsintroduce significant changes in accounting practices that were often not required by national generally acceptedaccounting practice. It is important that the interpretation and application of IFRSs is consistent from country tocountry. IFRSs are partly based on rules, and partly on principles and management’s judgement. Judgement is morelikely to be better used when it is based on experience of IFRSs within a sound financial reporting infrastructure. It ishoped that national differences in accounting will be eliminated and financial statements will be consistent andcomparable worldwide.Required:(a) Discuss how the changes in accounting practices on transition to IFRSs and choice in the application ofindividual IFRSs could lead to inconsistency between the financial statements of companies. (17 marks)
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(b) Discuss how management’s judgement and the financial reporting infrastructure of a country can have asignificant impact on financial statements prepared under IFRS. (6 marks)Appropriateness and quality of discussion. (2 marks)
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(c) Discuss the ethical responsibility of the company accountant in ensuring that manipulation of the statementof cash flows, such as that suggested by the directors, does not occur. (5 marks)Note: requirements (b) and (c) include 2 professional marks in total for the quality of the discussion.
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3 Johan, a public limited company, operates in the telecommunications industry. The industry is capital intensive withheavy investment in licences and network infrastructure. Competition in the sector is fierce and technologicaladvances are a characteristic of the industry. Johan has responded to these factors by offering incentives to customersand, in an attempt to acquire and retain them, Johan purchased a telecom licence on 1 December 2006 for$120 million. The licence has a term of six years and cannot be used until the network assets and infrastructure areready for use. The related network assets and infrastructure became ready for use on 1 December 2007. Johan couldnot operate in the country without the licence and is not permitted to sell the licence. Johan expects its subscriberbase to grow over the period of the licence but is disappointed with its market share for the year to 30 November2008. The licence agreement does not deal with the renewal of the licence but there is an expectation that theregulator will grant a single renewal for the same period of time as long as certain criteria regarding network buildquality and service quality are met. Johan has no experience of the charge that will be made by the regulator for therenewal but other licences have been renewed at a nominal cost. The licence is currently stated at its original cost of$120 million in the statement of financial position under non-current assets.Johan is considering extending its network and has carried out a feasibility study during the year to 30 November2008. The design and planning department of Johan identified five possible geographical areas for the extension ofits network. The internal costs of this study were $150,000 and the external costs were $100,000 during the yearto 30 November 2008. Following the feasibility study, Johan chose a geographical area where it was going to installa base station for the telephone network. The location of the base station was dependent upon getting planningpermission. A further independent study has been carried out by third party consultants in an attempt to provide apreferred location in the area, as there is a need for the optimal operation of the network in terms of signal qualityand coverage. Johan proposes to build a base station on the recommended site on which planning permission hasbeen obtained. The third party consultants have charged $50,000 for the study. Additionally Johan has paid$300,000 as a single payment together with $60,000 a month to the government of the region for access to the landupon which the base station will be situated. The contract with the government is for a period of 12 years andcommenced on 1 November 2008. There is no right of renewal of the contract and legal title to the land remains withthe government.Johan purchases telephone handsets from a manufacturer for $200 each, and sells the handsets direct to customersfor $150 if they purchase call credit (call card) in advance on what is called a prepaid phone. The costs of selling thehandset are estimated at $1 per set. The customers using a prepaid phone pay $21 for each call card at the purchasedate. Call cards expire six months from the date of first sale. There is an average unused call credit of $3 per cardafter six months and the card is activated when sold.Johan also sells handsets to dealers for $150 and invoices the dealers for those handsets. The dealer can return thehandset up to a service contract being signed by a customer. When the customer signs a service contract, thecustomer receives the handset free of charge. Johan allows the dealer a commission of $280 on the connection of acustomer and the transaction with the dealer is settled net by a payment of $130 by Johan to the dealer being thecost of the handset to the dealer ($150) deducted from the commission ($280). The handset cannot be soldseparately by the dealer and the service contract lasts for a 12 month period. Dealers do not sell prepaid phones, andJohan receives monthly revenue from the service contract.The chief operating officer, a non-accountant, has asked for an explanation of the accounting principles and practiceswhich should be used to account for the above events.Required:Discuss the principles and practices which should be used in the financial year to 30 November 2008 to accountfor:(a) the licences; (8 marks)
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Required:Discuss the principles and practices which should be used in the financial year to 30 November 2008 to accountfor:(b) the costs incurred in extending the network; (7 marks)
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(b) Discuss the relative costs to the preparer and benefits to the users of financial statements of increaseddisclosure of information in financial statements. (14 marks)Quality of discussion and reasoning. (2 marks)
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(b) Calculate the percentage of maximum capacity at which the zoo will break even during the year ending30 November 2007. You should assume that 50% of the revenue from sales of ticket type ZC is attributableto the zoo. (7 marks)
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(ii) Briefly discuss FOUR non-financial factors which might influence the above decision. (4 marks)
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(iii) The extent to which Amy will be subject to income tax in the UK on her earnings in respect of dutiesperformed for Cutlass Inc and the travel costs paid for by that company. (5 marks)Appropriateness of format and presentation of the report and the effectiveness with which its advice iscommunicated. (2 marks)Note:You should assume that the income tax rates and allowances for the tax year 2006/07 and the corporation taxrates and allowances for the financial year 2006 apply throughout this questio
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(c) The inheritance tax payable by Adam in respect of the gift from his aunt. (4 marks)Additional marks will be awarded for the appropriateness of the format and presentation of the memorandum andthe effectiveness with which the information is communicated. (2 marks)Note: you should assume that the tax rates and allowances for the tax year 2006/07 will continue to apply for theforeseeable future.
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(c) Explanatory notes, together with relevant supporting calculations, in connection with the loan. (8 marks)Additional marks will be awarded for the appropriateness of the format and presentation of the schedules, theeffectiveness with which the information is communicated and the extent to which the schedules are structured ina logical manner. (3 marks)Notes: – you should assume that the tax rates and allowances for the tax year 2006/07 and for the financial yearto 31 March 2007 apply throughout the question.– you should ignore value added tax (VAT).
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(c) In November 2006 Seymour announced the recall and discontinuation of a range of petcare products. Theproduct recall was prompted by the high level of customer returns due to claims of poor quality. For the year to30 September 2006, the product range represented $8·9 million of consolidated revenue (2005 – $9·6 million)and $1·3 million loss before tax (2005 – $0·4 million profit before tax). The results of the ‘petcare’ operationsare disclosed separately on the face of the income statement. (6 marks)Required:For each of the above issues:(i) comment on the matters that you should consider; and(ii) state the audit evidence that you should expect to find,in undertaking your review of the audit working papers and financial statements of Seymour Co for the year ended30 September 2006.NOTE: The mark allocation is shown against each of the three issues.
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There has been significant divergence in practice over recognition of revenue mainly because International Financial Reporting Standards (IFRS) have contained limited guidance in certain areas. The International Accounting Standards Board (IASB) as a result of the joint project with the US Financial Accounting Standards Board (FASB) has issued IFRS 15 Revenue from Contracts with Customers. IFRS 15 sets out a five-step model, which applies to revenue earned from a contract with a customer with limited exceptions, regardless of the type of revenue transaction or the industry. Step one in the five-step model requires the identification of the contract with the customer and is critical for the purpose of applying the standard. The remaining four steps in the standard’s revenue recognition model are irrelevant if the contract does not fall within the scope of IFRS 15.Required:(a) (i) Discuss the criteria which must be met for a contract with a customer to fall within the scope of IFRS 15. (5 marks)(ii) Discuss the four remaining steps which lead to revenue recognition after a contract has been identified as falling within the scope of IFRS 15. (8 marks)(b) (i) Tang enters into a contract with a customer to sell an existing printing machine such that control of the printing machine vests with the customer in two years’ time. The contract has two payment options. The customer can pay $240,000 when the contract is signed or $300,000 in two years’ time when the customer gains control of the printing machine. The interest rate implicit in the contract is 11·8% in order to adjust for the risk involved in the delay in payment. However, Tang’s incremental borrowing rate is 5%. The customer paid $240,000 on 1 December 2014 when the contract was signed. (4 marks)(ii) Tang enters into a contract on 1 December 2014 to construct a printing machine on a customer’s premises for a promised consideration of $1,500,000 with a bonus of $100,000 if the machine is completed within 24 months. At the inception of the contract, Tang correctly accounts for the promised bundle of goods and services as a single performance obligation in accordance with IFRS 15. At the inception of the contract, Tang expects the costs to be $800,000 and concludes that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will occur. Completion of the printing machine is highly susceptible to factors outside of Tang’s influence, mainly issues with the supply of components.At 30 November 2015, Tang has satisfied 65% of its performance obligation on the basis of costs incurred to date and concludes that the variable consideration is still constrained in accordance with IFRS 15. However, on 4 December 2015, the contract is modified with the result that the fixed consideration and expected costs increase by $110,000 and $60,000 respectively. The time allowable for achieving the bonus is extended by six months with the result that Tang concludes that it is highly probable that the bonus will be achieved and that the contract still remains a single performance obligation. Tang has an accounting year end of 30 November. (6 marks)Required:Discuss how the above two contracts should be accounted for under IFRS 15. (In the case of (b)(i), the discussion should include the accounting treatment up to 30 November 2016 and in the case of (b)(ii), the accounting treatment up to 4 December 2015.)Note: The mark allocation is shown against each of the items above.Professional marks will be awarded in question 4 for clarity and quality of presentation. (2 marks)
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