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Semester Two 2020
Exam - Alternative Assessment Task
STUDENT ID: SURNAME: GIVEN NAME:
UNIT CODE: ACW
UNIT TITLE: ACCOUNTING IN BUSINESS
ASSESSMENT DURATION: 2 hours and 40 minutes (includes reading,
downloading, and uploading time)
This is an individual assessment task.
This is an open book exam
All responses must be included within this document and under
individual questions.
Students are required to answer ALL questions.
This assessment accounts for 50% of the total in the unit and has a hurdle
requirement of 40 % to pass the unit.
If a calculator is allowed for this assessment, you can use any model
Upon completion of this assessment task, please upload this document to
Moodle using the assignment submission link.
Your submission must occur within 2 hours and 40 minutes of the official
commencement of this assessment task.
Please read the next page carefully and sign and date the Student
Statement before commencing the assessment task.
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Question 1 – write your answers commencing from page 5 A. Study the following transactions of Bluebells Ltd. i. The company delivered a product worth $270,000 on 30 June 2019. 65% of the selling price was received on the same day, but another 35% will be received in July
ii. Products worth $500,000 were delivered to a customer on 28 June 2019. 20% of the price was received on 2 May 2019 as a deposit. Another 80% will be received on 3 July 2019. iii. Salary incurred for June was $150,000 and was paid in cash on 5 July 2019. iv. Rent for June and July 2019 was paid on 1 June 2019. Each month’s rent amount is $50,000. [TASK 1] For each transaction, using the accrual accounting principle, determine the amount of revenues or expenses that should be recognised in the income statement for the month ended 30 June 2019. Make sure that you indicate if the amount is revenue or expense. [TASK 2] For each transaction, using the cash accounting principle, determine the amount of cash received or paid that should be reported in the statement of cash flows for the month ended 30 June 2019. Make sure that you indicate if the amount is an inflow or outflow. [8 marks] B. The application of the accrual accounting principle and the cash accounting principle in recognising revenues and expenses could result in the amount of profit reported in a period to be different from the total cash in the period. Explain why this difference could happen. [TASK] Explain your answer by using one of the transactions in part A above as an example. [ 5 marks] C. Banks always need an audited financial statement to be submitted together with the application for a loan. Explain why the banks require the audited financial statements in assessing the loan applications. [TASK] Explain your answer. [4 marks] D. Shareholders of a limited liability company have a limited risk of losing their investment during the difficult financial situation. The maximum amount of money they could lose is the amount of their investment in the company. If there is only a limited amount of money/resources available in the limited liability company, how could the company’s creditors recover the debts if the company is going to be closed down? [TASK] Explain your answer. [4 marks] E. It is a common occurrence that a large company is owned by a group of people who are not the managers of the company. In this situation, how to ensure that the management always serve the best interest of the owners?
[TASK] Explain your answer. [4 marks] [Total: 25 marks] Please provide your answer to Question 1 in the space below (please use as much space as needed to answer the question):
Please provide your answer to Question 2 in the space below (please use as much space as needed to answer the question):
Question 3 – write your answers commencing from page 9 A. Hydra Ltd is a company that sells sports glasses. The business profit calculation for last year is as follows: Sales revenue (2,000 units x $25) $50, Less: Variable costs (20,000) Contribution margin 30, Less: Fixed costs (22,000) Profit 8, Hydra Ltd has decided to increase the price of its product to $30 per unit. The company management believes that if it increases its fixed advertising cost by $3,400, the next year’s sales volume will increase to 2 ,200 units. Variable cost per unit will remain the same as last year. [TASK] i. Show the calculation of the expected profit for Hydra Ltd's operation next year. ii. How many sports glasses would Hydra Ltd have to sell to earn as much profit next year as it did last year? iii. Do you agree with Hydra Ltd's decision? Explain why or why not. [7 marks] B. Break-even is composed of three financial figures: selling price per unit, variable cost per unit, and fixed costs. [TASK] Using these factors, devise two strategies to help a hotel operator which has continually failed to achieve the break-even point (i.e. very low occupancy rate). Discuss your strategies in details. [8 marks] C. Woof Ltd sells pet food in 10-kilogram bags for $12.40 per bag. Sales estimates (in the number of units) for the two months of the year are as follows: Bags January 20, February 17, All sales are cash sales. Woof Ltd purchases bags of pet food at $9.40 per bag on credit and pays for them the month after the purchase. Purchases estimates (in the number of units) for the two months of the year are as follows: Bags January 19, February 16, Last December purchases were 21,000 bags. General and administrative expenses total $ 1 8,000 per month (including $10,000 depreciation), and Woof Ltd pays for these expenses (except for depreciation) in the same month they are
Question 4 – write you answers commencing from page 11 A. Orionis Ltd is obligated to restore a leased land to its original condition after its oil drilling activities are over in four years. The cash flow for the restoration costs in four years are as follows: Year Cash flow required 1 $400, 2 $120, 3 $120, 4 $50, The company's interest rate is 6%. [TASK] Determine the net present value of the restoration costs. [4 marks] B. Antares Ltd is considering two investment options. The first option (Option A) involves an upgrade to an existing food-processing facility and the second option (Option B) is to build new food-processing facility. Antares can only undertake one of the two options and therefore, the management is evaluating which option it should choose. The cash flows for options A and B are as follows. Option A Year 0^ Year 1^ Year 2^ Year 3^ Year 4^ Year 5 Cash inflows 400,000 450,000 500,000 550,000 60, Cash outflows - 487,500 175,000 175,000 225,000 225,000 250, Option B Cash inflows 612,500 575,000 500,000 450,000 40, Cash outflows - 500,000 250,000 225,000 200,000 175,000 150, [TASK] Determine the payback period for both options A and B [4 marks] C. Onyx Inc. has four potential projects to consider for investment in the next financial period. The following table summarises an appraisal of the projects using different analysis tools: Project Payback (Years) NPV(10%) A 4 - $ B 3.5 +$2, C 3.8 +$3, D 4.2 +$4, [TASK] i. Why was the payback technique inadequate on its own to assess the four projects? ii. Explain clearly what the +$2,430 Net Present Value (NPV) for project B means. iii. Both payback period and net present value techniques employ cash flows forecast in their analyses. Why do you think that cash flow forecasts are used rather than profit forecasts to assess the viability of the proposed projects? Explain your answer.
iv. Explain two non-financial factors that Onyx needs to consider before deciding to approve an investment with a positive NPV. [17 marks] [Total: 25 marks] Please provide your answer to Question 4 in the space below (please use as much space as needed to answer the question):
END OF EXAM
