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Chapter: 2- ORGANISATIONS AND THEIR REPORTING BOUNDARIES -Problem: 1 >> In relation to the potential restructure of ASD from a partnership to a company. a. Identify and discuss the differences between a partnership and a company. b. Prepare a brief list of items that Archer, Maddie and Dillon should consider when deciding whether or not to proceed with the ASD restructure.
Answer Preview: a. Note that students are not asked to provide a recommendation. Rather, students should evaluate the below features with respect to positives vs nega…

, Chapter: 11- THE STATEMENT OF CASH FLOWS, AND CASH CONTROLS -Problem: 3 >> In order for Dillon to understand the reasons for the decrease in cash:a. Prepare a draft cash flow statement for the month of August 20X8. Show all workings. You are not required to prepare a reconciliation of profit to net cash provided by operating activities but may do so if you wish.b. Provide an explanation as to the key reason why the cash has decreased during the month of August.c. Suggest
Answer Preview: a. Cash flows from operating activities Students are not required to prepare the reconciliation of p…

, Chapter: 5- PERFORMANCE MEASUREMENT AND EVALUATION – FURTHER CONSIDERATIONS -Problem: 2 >> You have been asked to provide input at the Directors’ meeting regarding the Production Manager’s proposal in relation to the new machinery. In preparation for the meeting, you have decided to undertake a financial and non-financial analysis of the proposal. As part of your preparation: a. Undertake an analysis using the following financial-based management tools. Your analysis should include rele
Answer Preview: a. Payback period After two years the investment would have generated net cash inflows (represented by the savings in cash outflows) which, when aggregated, equal the upfront cash investment. Accounti…

, Chapter: 7- AN INTRODUCTION TO FINANCIAL ACCOUNTING -Problem: 2 >> Before you can commence finalising the annual financial statements, you are required to consider the impact of each of the missing June transactions and events on the financial statements.a. Briefly describe the impact (if any) of each transaction on the Balance Sheet and Income Statement. b. Use the table below in order to record (if appropriate) the missing transactions for the month of June 20X
Answer Preview: a. b. 1 June 20X8 3 June 20X8 5 June 20X8 ASD purchased new machinery at a cost of $140 000 by way o…

, Chapter: 7- AN INTRODUCTION TO FINANCIAL ACCOUNTING -Problem: 1 >> Maddie has reviewed your proposal but is not convinced that an additional accountant is required. Explain to Maddie how ASD’s reporting requirements as a publicly listed company are now different compared to when they first started their business as a partnership. In your answer, be sure to discuss the reporting requirements as they relate to financial, social and environmental disclosures.
Answer Preview: A publicly listed company has greater regulatory requiremen…

, Chapter: 5- PERFORMANCE MEASUREMENT AND EVALUATION – FURTHER CONSIDERATIONS -Problem: 1 >> Archer, Maddie and Dillon have asked you to start attending their monthly Directors’ meetings in order to keep them updated with an overall picture as to how the business is performing. From your studies, you recall that the Balanced Scorecard is a performance measurement framework that adds strategic non-financial performance measures to traditional financial measures to give managers a more ‘bal
Answer Preview: They should be encouraged to prepare a diagram of the balanced scorecar…

, Chapter: 9- THE BALANCE SHEET -Problem: 1 >> In preparation for your upcoming meeting, you are undertaking a review of ASD’s assets and resources. a. Based on your knowledge of ASD and the surfing industry generally, identify five assets that might appear on the balance sheet of ASD. For each asset: i. advise whether it should be categorised as a current or a non-current asset. ii. advise how the asset should be measured for financial report
Answer Preview: a. Examples referred to in earlier parts of the case study include: b. They are expected to identify that a range of measurement principles are used i…

, Chapter: 4- BUDGETING AS A MEANS OF ORGANISATIONAL PLANNING AND CONTROL -Problem: 3 >> It is now some time since the original operating budgets for the beach towel line were prepared. As part of the ongoing budgeting process, you have been regularly comparing the budgeted results to the actual results. During the first half of the year, you did not identify any material variances. However, during the second half of the year you notice a favourable material cost variance with the act
Answer Preview: Students may identify several possible reasons for these variances althoug…

, Chapter: 3- An Introduction to Management Accounting -Problem: 3 >> Archer has arranged a meeting with you to discuss the recent criticisms regarding the surfboard manufacturing industry and why some of ASD’s competitors have decided to import surfboards rather than manufacture them locally. In preparation for the meeting you have undertaken some research into the issue and have come across the following articles: http://www.pbs.org/newshour/bb/one-u-s-company-try
Answer Preview: a. They should recognise that there are economic cost savings associated with importing surfboards and discuss the possible reasons for such cost savi…

, Chapter: 12- THE ANALYSIS OF ORGANISATION’ EXTERNAL REPORTS -Problem: 3 >> Archer, Maddie and Dillon have been told that if they wish to fully acquire Sea Salt Surf Ltd, it would cost approximately $50 million. From the balance sheet, they can see that the total assets of the company are approximately $42.5 million, but the company also has total liabilities of close to $6.8 million, leaving the net assets of the company at just over $35.7 million. Archer, Maddie and Dil
Answer Preview: The value of a company is not always equal to its net assets, and this is due to the concept of goodwill, intangible assets, future earnings potential, and market dynamics. Let's break down these factors to explain why the value of a company can differ from its net assets. Goodwill: Goodwill represents the intangible value of a company's reputation, brand recognition, customer loyalty, and other non-physical assets that contribute to its revenue and earnings. When a company is well-regarded in the industry and has a strong customer base, it can command a higher price than just the sum of its tangible assets. For instance, if Sea Salt Surf Ltd has a well-established brand and a loyal customer following, its value would be higher than just its net assets. Intangible Assets: Companies often possess intangible assets such as patents, trademarks, copyrights, and proprietary technology that are not included in the net assets calculation. These assets can contribute significantly to a company's value. For example, if Sea Salt Surf Ltd holds patents for innovative surfboard designs or proprietary wave prediction technology, these assets could increase the company's value beyond its net assets. Future Earnings Potential: The value of a company takes into consideration its future earning potential. If the company is expected to generate strong cash flows and profits in the coming years, potential …

, Chapter: 1- WHAT IS ACCOUNTING? -Problem: 3 >> Sam has been busy planning the event and has asked if there is any data that ASD would like to collect on the day of the event. Dillon believes that it would be a good idea to report back to the volunteers and the community about the impact of the beach clean-up but isn’t too sure of the best way to go about this. He recalls from university that there are some generally accepted characteristics th
Answer Preview: a. They should be relevant to the beach clean-up event. Information could include: Number of participants Demographics of participants (such as age an…

, Chapter: 5- PERFORMANCE MEASUREMENT AND EVALUATION – FURTHER CONSIDERATIONS -Problem: 3 >> Dillon has asked for your assistance to understand the product life cycle of a plastic bottle and for you to present your research at the upcoming Directors’ meeting. He is keen to ensure that Maddie and Archer take this into consideration before deciding on whether to collaborate with the drinks manufacturer. To assist you in getting started he has directed you to a short YouTube video he found o
Answer Preview: a. An example is as follows: b. Examples include: 1. Risk of oil spills and worker injury 2. Pollution from factory 3. Carbon emission from transporta…

, Chapter: 10- THE INCOME STATEMENT AND THE STATEMENT OF CHANGES IN EQUITY -Problem: 2 >> In relation to the sports watches, determine the cost of sales and ending inventory amounts for the quarter ending 30 September 20X8 on the basis that ASD adopts a FIFO cost flow assumption and employs a perpetual inventory system. Show all workings. Transcribed Image Text: The purchases of these wa
Answer Preview: In relation to the watches, the cost of goods sold for the period is $176 …

, Chapter: 6- THE EXTERNAL REPORTING OF SOCIAL AND ENVIRONMENTAL INFORMATION -Problem: 1 >> Archer, Maddie and Dillon have asked you to explain why their competitors might have decided to report information relating to their social and environmental performance. Explain to Archer, Maddie and Dillon what factors may motivate, or drive, an organisation to report on this type of performance. Also, discuss the potential benefits for ASD from collecting and reporting on social and environment
Answer Preview: Possible reasons that could be raised by students: It is generally accepted that organisations have …

, Chapter: 11- THE STATEMENT OF CASH FLOWS, AND CASH CONTROLS -Problem: 1 >> With reference to the operating cycle, explain two changes that ASD may be able to make in order to improve cash flow from operations, and discuss any associated implications which should be considered prior to implementing such changes.
Answer Preview: Examples include: ACTION Shorten customer credit terms Offer customer discount for early paym…

, Chapter: 10- THE INCOME STATEMENT AND THE STATEMENT OF CHANGES IN EQUITY -Problem: 3 >> Archer has noticed that the equity of ASD has increased during the last financial year. a. Identify two possible reasons that could explain this increase in equity. b. Explain to Archer how the statement of changes in equity can assist users to better understand differences between the opening and closing equity balances.
Answer Preview: a. Possible reasons include: ASD has generated a profit ASD has issued shares to shareholders ASD ha…

, Chapter: 11- THE STATEMENT OF CASH FLOWS, AND CASH CONTROLS -Problem: 5 >> Discuss the risk of theft associated with the recent beach clean-up day. Your discussion should include specific examples of internal control weaknesses. Suggest how the internal controls could be improved for this event in the future.
Answer Preview: They should identify that due to a number of internal control weaknesses, there is a risk that the theft of cash has occurred. It is possible that Ste…

, Chapter: 3- An Introduction to Management Accounting -Problem: 1 >> You have been shortlisted for the accounting role and have secured an interview with Dillon and Archer. At the interview, Dillon seems reluctant to employ an accountant. He asks: ‘how can an accountant add any value to our business?’ Archer on the other hand is keen to employ an accountant but is looking for one with some existing knowledge of the surfing industry and the types of activities that
Answer Preview: a. They should recognise that accountants play a key role in organisations and can add value to a business. IFAC (2011) notes that accountants should …

, Chapter: 6- THE EXTERNAL REPORTING OF SOCIAL AND ENVIRONMENTAL INFORMATION -Problem: 2 >> Archer, Maddie and Dillon are considering preparing a social and environmental report to accompany the release of their financial statements but are unsure as to what specific information could be included. a. With reference to the information provided thus far in the case study, and your own research regarding the surfing industry, list three items of social information and three items of environ
Answer Preview: a. Social reporting provides information about an organisations impacts upon particular people/societies. It could include information about: Training of employees Diversity and equal opportunity poli…

, Chapter: 9- THE BALANCE SHEET -Problem: 3 >> Identify any transactions or events during the month of June 20X8 that ASD should consider as having the potential to give rise to a contingent liability. Explain why the transaction or event may give rise to a contingent liability and advise how and where such contingent liabilities should be reported.
Answer Preview: ASD should consider whether they have any legal responsibility for these workers in the foreign juri…

, Chapter: 12- THE ANALYSIS OF ORGANISATION’ EXTERNAL REPORTS -Problem: 2 >> During your meeting, Dillon asks about the sustainability of Sea Salt Surf Ltd. You had already provided him with a brief overview of the information contained in the Sustainability Report, but he has asked you to prepare a more detailed analysis. a. In order to commence this analysis, respond to each of the following questions and where possible support your answer with reference to the informati
Answer Preview: a. Managers at Sea Salt Surf Ltd might have prepared the sustainability report for several reasons: Transparency and Accountability: The company might want to demonstrate its commitment to transparenc…

, Chapter: 9- THE BALANCE SHEET -Problem: 2 >> Archer, Maddie and Dillon have asked you for further information to assist them to make a decision regarding the delivery van. Specifically, you are required to: a. Calculate the annual depreciation on the brand-new delivery van over the eight years of its useful life using the diminishing balance method. the diminishing balance depreciation rate is 12.8314%. b. Compare and contrast both options (
Answer Preview: a. b. Purchase of the brand-new van would increase ASDs non-current assets and their total assets by $45 000, whereas purchase of the Kombi van would increase ASDs non-current assets and their total a…

, Chapter: 8- RECORDING TRANSACTIONS IN JOURNALS AND LEDGERS – MORE DETAIL ON THE FINANCIAL ACCOUNTING PROCESS -Problem: 2 >> Prepare the journal entries to record the transactions detailed on the following pieces of source documentation: a. Invoice issued by ASD to Waves Surf Shop (noting that the cost of the goods sold was $1230) b. Invoice issued from Staple Stationery to ASD You should refer to the Chart of Accounts in order to obtain the relevant account numbers. You may wish to use the following template in order t
Answer Preview: a and b, Please note; this amount has been treated …

, Chapter: 4- BUDGETING AS A MEANS OF ORGANISATIONAL PLANNING AND CONTROL -Problem: 2 >> Part of the business plan is to pay a bonus to manufacturing staff based on the number of towels each staff member produces each quarter. Maddie has asked you if the reward system for manufacturing staff based on the number of towels produced may affect the staff behaviour in any way. In your response to Maddie: a) Discuss the positive impacts which may arise as a result of the reward system. b) D
Answer Preview: a. Students can discuss how staff may work harder and more productively. Staff may exerc…

, Chapter: 2- ORGANISATIONS AND THEIR REPORTING BOUNDARIES -Problem: 2 >> Archer, Maddie and Dillon each have an equal one-third share in ASD and as such they are keen to ensure that they are each contributing equal resources into the business. a. From the information provided thus far in the case study (including the Introduction), identify the specific resources that Archer, Maddie and Dillon could each contribute to the business. b. Do you believe that the value of t
Answer Preview: a. They should consider resources broadly. While not specifically asked within this activity, resour…

, Chapter: 8- RECORDING TRANSACTIONS IN JOURNALS AND LEDGERS – MORE DETAIL ON THE FINANCIAL ACCOUNTING PROCESS -Problem: 3 >> In relation to the email received from Hamish, you are required to: a. Reply to Hamish’s email and advise of the amount of any prepaid and/or accrued expenses related to insurance and/or wages for the year ended 30 June 20X8. Include calculations in your email so that Hamish will be able to see how you have determined these figures. b. Prepare the journal entries to record the adjusting journal en
Answer Preview: a. Students are encouraged to format their answer in the form of an email. The structure of the emai…

, Chapter: 4- BUDGETING AS A MEANS OF ORGANISATIONAL PLANNING AND CONTROL -Problem: 1 >> From the information obtained during the meeting, prepare the following operating budgets (with a quarterly breakdown) for the new beach towel line for the year ending 30 June 20X5. a) Sales Budget b) Production Budget c) Material Budget d) Labour Budget e) Overhead Budget
Answer Preview: The operating budgets for …

, Chapter: 6- THE EXTERNAL REPORTING OF SOCIAL AND ENVIRONMENTAL INFORMATION -Problem: 3 >> Archer, Maddie and Dillon became friends when they travelled together to Indonesia on a surfing trip organised by a local travel company. At the time of the trip they were each taking a break before starting their university studies. Despite studying different courses and attending different universities, they have remained friends since their trip to Indonesia and enjoy surfing together regularly
Answer Preview: In the journey of Archer, Maddie, and Dillon, friends who bonded over their shared love for surfing and went on to establish Armadillo Surf Designs Pty Ltd (ASD), the question of how to handle social …

, Chapter: 3- An Introduction to Management Accounting -Problem: 2 >> Congratulations! You got the job! Your first project is to work with Maddie to assess the feasibility of the special edition rash-vest line. You have been told that in order to produce the rash-vests, Maddie will need to work with a pattern maker to design the vest. This is estimated to cost $12 000. Maddie has a factory in mind that can manufacture the rash- vests with a set-up cost of $17 000, a
Answer Preview: a. Fixed Costs: $12 000 + $17 000 = $29 000 Variable Costs: $14 + $2 = $16 Selling Price: $6…

, Chapter: 8- RECORDING TRANSACTIONS IN JOURNALS AND LEDGERS – MORE DETAIL ON THE FINANCIAL ACCOUNTING PROCESS -Problem: 4 >> In relation to the new machinery purchased on 1 June 20X8: a. Calculate the depreciation expense for the month of June 20X8 noting that the machinery will be used on a uniform basis throughout its life and therefore the straight-line method of depreciation is to be adopted. the monthly depreciation expense can be determined by first calculating the annual depreciation expense and then dividing thi
Answer Preview: a. Students have not been introduced to the reducing balance method at this point s…

, Chapter: 8- RECORDING TRANSACTIONS IN JOURNALS AND LEDGERS – MORE DETAIL ON THE FINANCIAL ACCOUNTING PROCESS -Problem: 1 >> You are required to review the journal entries prepared by Hamish. a. Advise Hamish of any errors that he has made when recording the journal entries. b. For each error identified in part a, explain why it is incorrect and how the journal entry should be corrected.
Answer Preview: a and b, ASD GENERAL JOURNAL ENTRIES (DRAFT) Prepared by: Hamish Anderson Date 1 June 20X…

, Chapter: 11- THE STATEMENT OF CASH FLOWS, AND CASH CONTROLS -Problem: 2 >> Advise Dillon whether it is possible for the bank balance to go down during the month of August when the business has made a substantial profit during the same month. You should explain your answer with the use of at least one example.
Answer Preview: Yes. Profit is determined on an accruals basis rather than a …

, Chapter: 2- ORGANISATIONS AND THEIR REPORTING BOUNDARIES -Problem: 3 >> Archer, Maddie and Dillon are unsure at this stage how far they should extend the reporting boundary of ASD. Maddie wishes to better understand the reporting boundary concept and how this might apply to ASD if they restructure to a company. Maddie has been collecting articles related to the surfing industry, particularly in relation to current topical issues that may be of interest to ASD’s stakeh
Answer Preview: a. They should relate to ASD and their knowledge of the surfing industry. They should demonstrate a …

, Chapter: 9- THE BALANCE SHEET -Problem: 4 >> In the balance sheet that you provided ahead of the meeting, Maddie noticed that ASD has a significant level of retained earnings and reserves. She has expressed concern that there may be idle cash in the business that could be better utilised. As a result, she has brought with her to the meeting a list of items she would like ASD to purchase to help the business meet its objectives. Maddie is con
Answer Preview: They should recognise that ASDs retained earnings are past and current profits that have not been distributed to shareholders by way of dividends. Any …

, Chapter: 1- WHAT IS ACCOUNTING? -Problem: 1 >> Dillon studied introductory accounting as part of his marketing degree. Now that he, Archer and Maddie are moving ahead with the business, he is reviewing his study materials and notes a definition of accountability as ‘the duty to provide an account or reckoning of those actions for which one is held responsible’ (Gray, Adams and Owen 2014, p. 50). In order to fulfil this duty, Dillon understands
Answer Preview: a. The stakeholders identified will be influenced by whether ASD have a narrow or a broad view of th…

, Chapter: 12- THE ANALYSIS OF ORGANISATION’ EXTERNAL REPORTS -Problem: 1 >> Archer, Maddie and Dillon have requested a meeting with you to discuss the potential investment in Sea Salt Surf Ltd. As part of your preparation for this meeting: a. Prepare a one-page report on the profitability and efficiency of Sea Salt Surf Ltd. Use ratio analysis and comment on any significant changes in profitability and efficiency since 20X2. Ratio formulae is provided at Appendix A.b. Con
Answer Preview: a. Profitability (P) and operating efficiency (OE) ratios are summarised below: In relation to profitability, ROA has decreased from 20 01% in 20X2 to 17 93% in 20X3, which appears to signal a decline …

, Chapter: 11- THE STATEMENT OF CASH FLOWS, AND CASH CONTROLS -Problem: 4 >> Explain why the cash balance per the balance sheet might be different from the cash balance per the bank statement. Describe the process you would use in order to reconcile this difference.
Answer Preview: Such differences could be due to timing differences between what the bank reports is in the ASD bank account and what ASD reports within its own finan…

, Chapter: 1- WHAT IS ACCOUNTING? -Problem: 2 >> Archer, Maddie and Dillon are looking ahead to their broader reporting responsibilities and are considering what type of information they might provide in the future in relation to their financial, environmental and social performance and impacts. a. Identify three pieces of financial information that ASD might disclose to their stakeholders. b. Identify three pieces of environmental information t
Answer Preview: a. They should be relevant to the ASD business. Information could include: …

, Chapter: 10- THE INCOME STATEMENT AND THE STATEMENT OF CHANGES IN EQUITY -Problem: 1 >> Archer, Maddie and Dillon are keen to make sure that the profit of the business has not been understated and so have asked you to undertake a review of the draft income statement prepared by Hamish. As part of this review, they have asked you to: a. Identify and explain at least one area where professional judgement may have impacted ASD’s reported profitability. b. Advise whether a large sale whi
Answer Preview: a. Key examples include: Depreciation: judgement regarding useful life, re…

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14 Reviews for An Introduction To Accounting Accountability In Organisations And Society Textbook Questions And Answers