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Assessment Description Learning Outcome 4: Develop information gathering (research) and communication strategies to enable the provision of professional advice to a client. Objective: The objective of...

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Assessment Description

Learning Outcome 4: Develop information gathering (research) and communication strategies to enable the provision of professional advice to a client.

Objective: The objective of this assignment is to learn to effectively research a technical aspect of accounting and communicate professional advice to a client, via a business letter.

Background to the case study:

Assume that you are a graduate accountant working for Ebony and Associates a public accounting firm situated at 248 Adelaide Street, Brisbane, QLD 4000. Your direct manager, Ms. Ellen Lyrial has asked you to draft a letter in response to an email received from a client–Mr. Martin Muller, the Managing Director of Muppets Ltd, raising a number of issues regarding his company–see the copy of the email on the next page.

The maximum length of the letter is 1,250 words (excluding any calculations).

  •  Part A: Technical component 15% - This mark covers the technical content of your advice and the explanation on each of the issues, the calculations and the sources used. [7.5% for each issue presented by the client]

  •  Part B: Communication Skills–Letter Writing 10% - This mark covers the generic skills of business letter writing; layout, clear meaning, structure and organisation, appropriate tone and grammar, spelling and punctuation etc.

    The assignment is designed to test the following skills:

    1. Your knowledge and your ability to research the issues and then apply the information appropriately using judgement to correctly identify the relevant standards and legislation that relate to the issues raised by the client.

    2. Your written communication skills–business letter writing

    ACC203/1T2018/ FA2/SK/MR

Please note: Any work which has been copied or shared between students will result in a Fail grade for both students concerned. Therefore, please make sure that the answer to this individual assignment is your own work and not copied or bought from any source. In completing this assignment make sure you follow the guidelines for assignments especially those relating to the presentation of written work, late assignment policy and academic integrity.

Please check the marking rubric for each part to ensure that you have followed all the guidelines for presenting your work.

Re: Accounting Issues: Year Ending 30 June 2018 From: Martin Muller ( XXXXXXXXXX) Sent: 13 March 2018
To: Ellen Lyrial ( XXXXXXXXXX)

Dear Ellen

Thank you for your phone call this morning, as agreed I am emailing you regarding the accounting issues we briefly discussed. By the way to assist the accounting team in our decision-making process could you please make sure you reference any relevant sources relating to your advice, for example, AASBs, Corporations Act, and relevant websites.

  1. At our recent board meeting, several directors raised concerns about the values of certain assets as they appeared in last year’s financial statements, e.g.
    Plant and Equipment at cost $450,000
    Less Accumulated Depreciation 150,000

    $300,000
    Directors’ commented that this asset could not be sold for more than $200,000,

    and therefore the Accumulated Depreciation should be higher. The production manager disagreed by saying that the asset was working as efficiently as ever, and has not depreciated at all.
    Can you please provide advice regarding the correct accounting, valuation and disclosure of such assets for this financial year?

  2. Our company has prepared financial statements according to Australian Accounting Standards, yet every year 30% of the profit calculated differs in amount from the actual income tax paid to the government. The directors are concerned that either the financial statements or tax calculation may be incorrect. Could you please explain the principles that are applied in accounting for income tax that may cause a difference between taxable income and profit? Should these differences be disclosed? How can we explain this situation to shareholders?

ACC203/1T2018/ FA2/SK/MR

Please respond by letter (not email) as I would like to present this to the Board. I look forward to hearing from you in the near future.

Regards
Martin Muller
Managing Director, Muppets Ltd Level 13, 248 Adelaide Street, Brisbane QLD 4000

Hint: Remember that your firm plans to charge the client for your advice; as a check ask yourself if you would pay for the advice you have drafted!

Answered Same Day May 19, 2020 ACC203

Solution

Pulkit answered on May 21 2020
127 Votes
Martin Muller
Managing Director, Muppets Ltd
Level 13, 248 Adelaide Street,
Brisbane QLD 4000
16th March 2018
Dear Si
I really appreciate your promptness and your dedication towards your work. Your mail got delivered just when it was supposed to. I have gone through the details you have sent on the mail and to my surprise there is nothing as such about which you or the directors of your company should be wo
ied at all. I will be talking up both the issues in this letter one by one.
First of all, your first issue if about the valuation which the company should adopt for valuing the non-cu
ent assets that it possesses. It is to inform to you and the learned directors of the company that the policy that your company is adopting for valuing the fixed assets that it has is co
ect and very apt as the law. For understanding this in detail we need to refer the Compiled AASB Standard 116 - Property, Plant and Equipment. This standard is about the Non-cu
ent assets of the company i.e., the fixed assets and it highlights how the company should value the fixed assets that it possesses.
Para 29 of this standard clearly provides the company to choose one amongst the two options. The first option is to choose the Cost model of valuing its plants and equipment and the second method is to go for Revaluation model of valuing the plants and equipment of the company.
Para 30 of the standard further highlights the Cost model of valuation in detail. It states that the company can value its fixed assets on cost and any accumulated depreciation on this asset should be deducted out of this value and similarly any impairment loss which might have accrued on this asset can also be deducted from this value. This is the basic model which a company can adopt. Now in this method of valuation of non-cu
ent assets it becomes i
elevant to ascertain what the fair value of the asset in market is. Further there is no need for the company to perform revaluation of the non-cu
ent assets in this case.
Para 31 of the standard further highlights the revaluation model which can also be adopted by the company. Under this model the company will be required to reliably estimate the fair market value of the asset in consideration and use this value as the value of the asset in books less any accumulated...
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