Assessment task
Maximum of four (4) students team members in the group maximum 3000 words plus references, diagrams, and tables.
Research case study - lotus limited
Lotus limited is an Australian company. Directors have formed a view that compliance with a Specific Australian accounting standard will mean that the company financial statements will not provide a true and fair view, which is contrary to the corporations act.
Additionally, the following information has been made available to you to assist in the preparation of the financial statements of lotus limited for the year ended 30 june 2016.
- On 10 September 2016 the directors resolve to issue to the public 20,000 10% debentures of $100 each, payable $50 on application and $50 on allotment.
- The company recognizes liabilities for the following employee entitlements accrued as at the end of the reporting period (30 June 2016): wages and salaries, annual leave and long service leave.
- Receivables are carried at nominal amounts less any allowance for doubtful debts. An estimate of doubtful debts is recognized when collection of the full amount is no longer probable.
- Bad debts are written off as incurred.
- Credit sales are on 60 day terms
- Buildings, plant and equipment are depreciated on a straight line basis so as to write-off the cost of each asset less residual value at the end of the life of the asset over 1st expected useful life. Depreciation of assets commence when the assets are installed and ready for use.
- Items of plant and equipment are measured using the cost basis.
- Land and buildings are measured using the fair value basis. Independent valuation of land and buildings are obtained every year. Where the carrying amount of land and buildings is materially different from its fair value.
- In ascertaining cash flow for the year, lotus limited includes in the cash balances all cash on hand and in the bank's net of any outstanding bank overdraft.
- Long-term cash or term deposits are not part of the daily cash management accountability and are regarded as asset investments.
- Lotus limited value its inventories at the lower of cost and net realisable value. Costs are assigned to inventories: (raw material-purchase costs on first-in-first-out basis)(work in progress and finished goods-cost of direct material and labour and a proportion of manufacturing oveheads based on normal operating capacity)
- On 12 July 2016, the accounting manager raised credit notes worth $50,000 relating to sale of faulty goods in the last 3 weeks of June 2016.
- On 30 September 2016, the company received notification that a customer owing $200,000 had gone into liquidation. The liquidator advised unsecured creditors are likely to receive a distribution of 30 cents in the dollar.
- Depreciation rates used by lotus limited -buildings 6%, plant and equipment 12% to 25%.
- Lotus limited preliminary profit expected for the year ended 30 June 2016 $1,900,000.
- Financial statements are authorised for issue on 10 September 2016.
Required
1. Prepare the accounting policy note for inclusion in the financial statements of lotus limited as 30 June 2016. You will need to research the accounting policy disclosure requirements of applicable accounting standards and the corporation's act 2001. As an example aasb 101 and aasb 119 are relevant.
2. Prepare the necessary notes or general journal entries to comply with the applicable accounting standards.
3. Critically analyze the relationship between the corporate citizenship report and financial statements. Is lotus limited required to prepare the report? Some companies have reports titled: environmental and social responsibility.