Learning Outcome
1: Discipline-specific knowledge and capabilities
2: Comprehend accounting as a language of business
3: Evaluate financial statements and appreciate the regulation of accounting systems of business organisations
Task
At your first meeting, decide within your team which student will complete which question. It is a good idea that before your first meeting that each team member reads the case study so that they are able to present their point of view about the case study. It is recommended that each group member is allocated a question, you should then allocate a different group member to provide feedback on the answer given for each question. This is a suggestion only and you can allocate the work differently but keep in mind that every student in your team must participate and answer questions as well as provide feedback to others. Students should be allocated a questions based on their strengths. Please record details of your first meeting using the document titled ‘Action Plan Template.' You should also document who is answering which question and who is providing feedback on that question. Set deadlines that group members agree to have their questions and feedback finished and record these details. Provide a copy to each team member to ensure they all agree on what was said.
Group Task 1,500 words
The case data (Dream Furniture Pty Ltd) is given in a separate file.
Imagine that you are a graduate analyst working in the consulting service line of the accounting firm, Action Accountants. The department provides consulting services to small businesses around Australia and has recently received a new client, Dream Furniture Pty Ltd. As part of the engagement, Action Accountants needs to assess Dream Furniture's recording, expensing and reporting of non- current assets in order to provide advice regarding the company's non-current asset position and revenue recognition as the owners are concerned about the choices being made. As part of these assessment, Action Accountants needs to consider how Dream Furniture has recorded assets and revenue in previous and current financial years.
Your supervisor would like you to work as a group (team) with three other graduate analysts from the firm and meet with the concerned client, Dream Furniture Pty Ltd next week. In preparation, your supervisor has provided you with some background information regarding the company's non- current assets and revenue from customers. The group is required to prepare a brief report prior to the upcoming meeting. Your group is encouraged to refer to AASB 116 Property, Plant and Equipment, AASB 136 Impairment of Assets and AASB 15 Revenue from Contracts with Customers to justify your answer. When referring to the accounting standards to justify your answer, you may reference the paragraph number within the text. See the following example below:
In this scenario, the revaluation increase should be recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus (para 39, AASB 116).
Required
Your group is required to refer to the case data for Dream Furniture Pty Ltd, and produce a report. The report should address the following:
1. Determine the amounts to be recorded on the balance sheet for the newly acquired land, building and machinery. Consider any additional amounts that need to be included in the cost of the land, building and machinery and justify why or why not they should be included. Include in your answer the journal entries required to record the lump-sum acquisition. Show your calculations.
2. Calculate the annual depreciation expense to be charged in the accounts of Dream Furniture Pty Ltd, with respect to the building and machinery for each of the years ending 30 June 2013, 2014, 2015, 2016. Please display your results in a table. Explain whether Dream Furniture Pty Ltd are permitted to change depreciation method for the machinery for the year ending 30 June 2014. Provide a reason as to why James and Jess would want to change depreciation methods (No calculations is required).
3. Explain the treatment of revaluation increment and decrement under the revaluation model. Prepare the journal entries to account for both the land and building for the year ending 30 June 2016 as per AASB116 Property, Plant & Equipment. Show your calculations
4. Prepare an excerpt of the balance sheet which shows the non-current assets that Dream Furniture Pty Ltd has on hand as at 30 June 2016. Show any relevant calculations.
5. (Part a) Explain why Dream Furniture would not want to record the revaluation loss for the building and impairment loss for the machinery and whether they can change from the revaluation to the cost model for the building. Identify and discuss which qualitative characteristics of financial reporting would be violated if the revaluation and impairment loss were not recorded.
(Part b) Prepare the journal entries to account for both the building and machinery for the year ending 30 June 2018 as per AASB116 Property, Plant & Equipment.
Show your calculations.
6. When preparing general-purpose financial reports, Dream Furniture Pty Ltd are unsure which qualitative characteristics to include in their reports. Discuss enhancing and qualitative characteristics and advise Dream Furniture Pty Ltd on which qualitative characteristics to use and ensure you justify your answer.
7. With reference to AASB 15 Revenue from Contracts with Customers, apply the five-step process for revenue recognition in regards to the non-refundable joining fee and monthly membership fee. Students will need to consider whether the joining fee and monthly membership fee are considered separate performance obligations. Include in your answer the general journal entries to be recorded to recognise the revenue from members for the 30 June 2019 financial year. Show any calculations.
The answers are to be provided in a report, headings MUST be used.
For example:
Heading 1: Introduction (150 words maximum and not included in the word count)
Heading 2: Acquisition of Non-Current Assets (question 1)
Heading 3: Calculation of Depreciation (question 2)
Heading 4: Revaluation (questions 3)
Heading 5: Balance Sheet Excerpt (question 4)
Heading 6: Revaluation and Impairment (question 5)
Heading 7: (Qualitative Characteristics question 6)
Heading 8: Revenue Recognition (question 7)
These headings are only a suggestion.
The sooner you form a group and register the group you can get started. Please don't forget to include the names of your team members and group number on the title page when you submit.
Attachment:- case and template.rar