ACCT6005 Assessment 2 Case Study Brief.docx Page 1 of 6 ASSESSMENT BRIEF Subject Code and Name ACCT6005 Company Accounting Assessment Assessment 2 Case Study (Individual) (+/- 10%) Individual/Group Individual Length Part A: Practical problem solving (40 Marks) Part B: Recommendations (60 Marks) Learning Outcomes This assessment addresses the following subject learning outcomes: a) Prepare consolidated financial statements and related accounting entries for incorporated entities. d) Generate and communicate strategic recommendations in various inter-entity relationship scenarios with reference to relevant accounting standards. Submission By 11:55pm AEST/AEDT Sunday of Week 9 (Module 5.1) Weighting 25% Total Marks 100 Marks Context: Assessment coverage: Module 4 Associates and Joint Ventures You are required to demonstrate: 1) the assumed knowledge and skills from Module 1 Introduction and Principles of Consolidation, Module 2 Intragroup Transactions, and Module 3 Non-controlling Interest, 2) understanding and ability to account for associates and joint ventures using the equity method of accounting. You are able to prepare: acquisition analysis, adjustment entries for associates and joint ventures using the equity method of accounting, consolidated financial statements You are able to recommend and communicate strategic recommendations regarding associates and joint ventures. Instructions: Show all relevant workings where required. Combine the answers for both Part A and Part B into one assessment document. ACCT6005 Assessment 2 Case Study Brief.docx Page 2 of 6 Submission Instructions: Submit the assessment document in a Word or Pdf format including a cover sheet. JPEG files or similar cannot be opened and will not be marked. Submit via the Assessment link in the main navigation menu in ACCT6005 Company Accounting. Case Scenario Antara Ltd operates in the construction industry and do not prepare consolidated financial statements. Laura Jones is the senior accountant of the company, leading the financial reporting team. As a result of being profitable for the last five years, on 1 July 2018, Antara Ltd acquired 25% of the issued ordinary shares of Blanca Ltd paying $198 000 in cash. This provided Antara Ltd with the significant influence over Blanca Ltd. At the acquisition date, Laura and her team received the information below for Blanca Ltd: Equity comprised $180 000 share capital and $144 000 retained earnings. All identifiable assets and liabilities were recorded at their carrying amounts equal to the fair values with the exceptions of three assets: Inventory, Land, and Equipment. $ $ Inventory 126 000 153 000 Land 162 000 198 000 Equipment 414 000 432 000 Other information related to the above assets includes: Blanca Ltd sold all the inventory by 30 June 2020. After acquisition, Land was revalued by Blanca Ltd and revaluation was recognised in Blanca Ltd's own accounting book. The company uses the revaluation model to account for its non-current assets. At 30 June 2019, Blanca Ltd had Land recorded at $252 000 fair value, and at 30 June 2020 at $288 000 fair value. Blanca Ltd planned to use Equipment for another 5 years, using the straight line method of depreciation. During two financial years following the acquisition, Antara Ltd and Blanca Ltd carried out the inter-entity transactions below. Antara Ltd sold a machine to Blanca Ltd for $85 000. The machine had a carrying amount of $79 600 at the time of sale on 1 January 2019. Blanca Ltd planned to use the machine for a further 3-year with depreciation based on the straight line method. On 15 May 2019, Antara Ltd sold inventory to Blanca Ltd for $20 800. The inventory had cost Antara Ltd $10 000. Blanca Ltd sold half of the inventory externally by 30 June 2019. On 30 April 2020, Antara Ltd sold inventory to Blanca Ltd for $126 000. The profit before-tax of this transaction was $14 400. Blanca Ltd sold 90% of the inventory externally by 30 June 2020. ACCT6005 Assessment 2 Case Study Brief.docx Page 3 of 6 Blanca Ltd's balance of Retained earnings at 30 June 2019 was $306 000. Both companies apply the tax rate of 30%. Laura approved the following consolidated statements of profit or loss and other comprehensive incomes for Antara Ltd and Blanca Ltd for the year ended 30 June 2020. She made a note that the statement for Antara Ltd does not include the financial results of Blanca Ltd prepared using the equity account method. Accounts Revenues $900 000 $432 000 Expenses 504 000 144 000 Profit before tax 396 000 288 000 Income tax expense (144 000) (90 000) Profit after tax 252 000 198 000 Other comprehensive income (OCI) items Gains on non-current asset revaluation 54 000 25 200 Comprehensive income $306 000 $223 200 For the financial year ended 30 June 2020, the Chief Financial Officer (CFO) of Antara Ltd has been advised by the company's auditor that the consolidated financial statements should be prepared, which include the financial results of Blanca Ltd based on the equity method. The CFO came to Laura seeking her professional opinions regarding this matter. Laura has decided to ask you as a member of her reporting team to undertake a number of tasks to provide her with sufficient information before she responds to the CFO. The tasks comprise Part A and Part B below. Part A Practical Problem Solving (40 Marks) a) Prepare the journal entries for Antara Ltd at 30 June 2020 to account for its investment in Blanca Ltd, assuming Antara Ltd prepares consolidated financial statements. (25 marks) b) Prepare the consolidated statement of profit or loss and other comprehensive income for Antara Ltd for the year ended at 30 June 2020, assuming this statement includes Blanca Ltd's financial results. (15 marks) ACCT6005 Assessment 2 Case Study Brief.docx Page 4 of 6 Part B Recommendations (60 Marks) Prepare a report explaining and making recommendations on the financial reporting issues below. a) The impact of change to preparing consolidated financial statements on Antara Ltd's disclosure of financial information. (40 marks) Your response should include: The differences between applying the equity method of accounting in Antara Ltd's own accounting records, and applying the equity method of accounting in Antara Ltd's consolidation worksheet. The content of Antara Ltd's relevant financial statement. The extent of financial information available to Antara Ltd's external users. References to the financial information in Part A and relevant accounting standards. b) Potential dividends paid by Blanca Ltd. This is because Blanca Ltd has been profitable and the company management plans to pay dividends to Antara Ltd. (20 marks) Your response should include: How dividends paid by Blanca Ltd are accounted for using the equity method of accounting. How dividends are disclosed in Antara Ltd's relevant financial statement. References to the financial information in Part A and relevant accounting standards. ACCT6005 Assessment 2 Case Study Brief.docx Page 5 of 6 Learning Rubric: Assessment 2 Assessment Attributes Fail (Unacceptable) 0%-49% Pass (Functional) 50%- 64% Credit (Proficient) 65%-74% Distinction (Advanced) 75%-84% High Distinction (Exceptional) 85% - 100% Knowledge and understanding (technical and theoretical knowledge) 40 Limited understanding of required concepts and knowledge Shows very little to no understanding of how to apply relevant accounting conepts to the case study questions. Key components of the practical questions are not addressed. Knowledge or understanding of the field or discipline. Resembles a recall or summary of key ideas. Shows limited understanding of how to apply relevant accounting concepts to the case study questions. Has answered some parts incorrectly. Thorough knowledge or understanding of the field or discipline/s. Demonstrates a capacity to explain and apply relevant accounting concepts to the case study questions. Highly developed understanding of the field or discipline/s. Well demonstrated capacity to explain and apply relevant accounting concepts. A sophisticated understanding of the field or discipline/s. Mastery of accounting concepts and application to the study. Quality of Recommendations 50 Demonstrates no awareness of content and/or purpose of the assignment. Specific position (perspective or argument) fails to take into account the complexities of the financial reporting issue(s). Makes assertions that are not justified. Demonstrates limited awareness of content and/or purpose of the assignment. Specific position (perspective or argument) begins to take into account the financial reporting issue(s). Justifies any conclusions reached with arguments not merely assertion. Demonstrates consistent awareness of content and/or purpose of the assignment. Specific position (perspective or argument) takes into account the complexities of the financial reporting issue(s) Others' points of view are acknowledged. Justifies any conclusions reached with well-formed arguments not merely assertion. Demonstrates an advanced and integrated understanding of content and/or purpose of the assignment. Specific position (perspective or argument) is expertly presented and accurately takes into account the complexities of the financial reporting issue(s). Justifies any conclusions reached with welldeveloped arguments. Consistently demonstrates a systematic and critical understanding of content and purpose of the assignment. Specific position (perspective or argument) is presented expertly, authoritatively and imaginatively, accurately taking into account the complexities of the financial reporting issue(s). Limits of position are acknowledged. Justifies any conclusions reached with sophisticated arguments. ACCT6005 Assessment 2 Case Study Brief.docx Page 6 of 6 Use of academic and discipline conventions and sources of evidence. Grammar, spelling and referencing 10 Poorly written with errors in spelling, grammar. Demonstrates inconsistent use of good quality, credible and relevant research sources to support and develop ideas. There are mistakes in using the APA style. Is written according to academic genre (e.g. with introduction, conclusion or summary) and has accurate spelling, grammar, sentence and paragraph construction. Demonstrates consistent use of credible and relevant research sources to support and develop ideas, but these are not always explicit or well developed. There are no mistakes in using the APA style. Is well-written and adheres to the academic genre (e.g. with introduction, conclusion or summary). Demonstrates consistent use of high quality, credible and relevant research sources to support and develop ideas. There are no mistakes in using the APA style. Is very well-written and adheres to the academic genre. Consistently demonstrates expert use of good quality, credible and relevant research sources to support and develop appropriate arguments and statements. Shows evidence of reading beyondthe key reading There are no mistakes in using the APA style. Expertly written and adheres to the academic genre. Demonstrates expert use of high-quality, credible and relevant research sources to support and develop arguments and position statements. Shows extensive evidence of reading beyond the key reading There are no mistakes in using the APA Style.