1 July 2023 The Manager Pinnacle Pty Ltd, Accounting firm 11 George Street, Sydney, NSW 2000 Dear Sir/Madam I am writing to seek your advice regarding numerous accounting issues for the year ended 30 June 2023. As you know, most of our directors have limited accounting knowledge and are a bit confused with the accounting treatment for several items that our junior accountant has proposed. Our senior accountant is on sick leave, and we are unsure when she will be back. The directors want to ensure that the junior accountant's proposal is in line with the requirements of the Australian Accounting Standards. They would also like to understand the reasoning behind the appropriate accounting treatments. The items of concern are as follows: Item 1 During the year, the company developed a new project called Jonny King. We commenced work to improve water filtering services on 1 July 2022, resulting in a patent for the Jonny King filter process in June 2023. The company expects approximately 10% increased sales revenue from selling Jonny King filters in the current water filtering market. Our marketing director says there is a possibility we can recognise the following costs (all) as an asset, but he has not been clear on how to make this determination. Can you please explain whether all the cost below can be recognised as part of an asset? Please explain the Ms. Sullivan Sampson On behalf of the Directors of National Limited 58 Dixon Avenue, Warwick Farm NSW 2123 requirements with July 2022 Sep 2022 Nov 2022 Dec 2022 Jan 2022 Feb 2023 Apr 2023 July to April June 2023 June 2023 June 2023 June 2023 examples that would be relevant to this case. Research conducted to develop filters The search for application of research findings Formulation of improved Jonny King filters Purchase of machinery to construct Jonny King filters* note 1 Design and construction of final selection of possible alternatives Operation of a pilot plant that is not for commercial production Testing of pre-use Jonny King filters Total wages paid to scientists and technicians* note 2 Registration of a trade design fees Lawyer fees incurred to protect Jonny King filters brand against cheap copies Selling and administrative costs allocated Initial operating losses $340 000 $114,000 $97,000 $300,000 $156 000 $79 000 $270,000 $1,799,000 $1 500 $15 000 $410,000 $160,000 Kaplan Business School Assessment 3 Case Study 2023

* Note 1: The machine was purchased on 1 December 2022 with a useful life of 6 years and no residual value. * Note 2: The breakdown of Wages paid is as follows: July September November January February April Total $189,000 $240,000 $250,000 $330,000 $390,000 $400,000 $1,799,000 2022 2022 2022 2023 2023 2023 Item 2 On 12 May 2023, the board of directors decided to close down a division making a particular product. On 28 May 2023 a detailed plan for closing down the division was agreed by the board; letters were sent to customers warning them to seek an alternative source of supply and redundancy notices were sent to the staff of the division. Some staff will be relocated, and the company will pay for relocation costs to relevant staff. The lease on the old factory continues for the next four months until it is closed. Unfortunately, the lease cannot be cancelled, and the factory cannot be re-let to another user. The costs associated with this shutdown are expected to be as follows: (a) Payout of staff annual leave $450,000. (b) Redundancy payout $800,000. (c) For those staff who will be moving to another division, retraining will be required at a cost of $500,000. (d) As another division is located 200km from the division being closed down, National Ltd agreed to pay for the costs of relocating those employees to another division. (e) The lease on old factory has five years to run. The cost of terminating the lease is expected to be $300,000. (f) The financial and management information systems of the division being closed need to be reconfigured to be comparable with another system, so that it can be used in the new division. This is estimated to cost approximately $1 million. (g) Expected loss due to closing down $979,000. The above costs will be paid during August 2023. We are unsure whether we need to include the above costs in the 2023 annual reports. Please explain any disclosure requirements for such events as at 30 June 2023. Kaplan Business School Assessment 3 Case Study 2023

Item 3 As you know, we have recently become a listed company, and as a result of this, we issued 1,000,000 ordinary shares to the public for the first time at an issue price of $10. The shares were payable as follows: $5 payable on application (closed on 28 January 2023) $2 payable on allotment (received by 31 March 2023) $3 payable on call made on 15 June 2023 and payable by 30 June 2023 All applicants paid only application money except a holder with 10,000 shares who paid $10 (full share price). On 31 March 2023, we have recorded share capital of $10,000,000 in the book. However, we are unsure whether this amount has been correctly accounted, therefore advice on journal entries will be highly appreciated. In addition, the call money due date was on 30 June and one of shareholders is not able to pay the call money on 4,000 shares he purchased. The prospectus state that shares will be forfeited and refund would be made to those who failed to pay call money. The underwriters informed us that they could sell 4,000 shares at $9 per share with a fee of $2,900. It would be great if you could provide journal entries of the share issue process as examples in your explanations. Yours sincerely, Sullivan Sampson