BackgroundCarcraft Ltd is a company established by the smash repair industry in Australia. Smash repairers fix andrepair cars after they have been involved in an accident. Most of the revenue of the smash repair businesscomes from a small number of insurance companies and car paint is their biggest cost. The industry is veryfragmented, comprising many small businesses across Australia. Therefore, the individual smash repairerbusinesses had very little bargaining power either with the insurance companies or with their suppliers. Inorder to combat this, Carcraft Ltd was established and aims to negotiate better prices for the smashrepairers for their paint and other supplies which they could not do individually due to their size.The structure of Carcraft Ltd is as follows;? The income of Carcraft Ltd comprises rebate income from the paint suppliers as well as investmentincome. The rebate income is calculated as a fixed % of all the paint that each of the shareholderbusinesses acquire from the main paint supplier and is paid every July based on the paint costs ofthe prior financial year.? Shareholders are generally only provided with financial statements/financial information at theAnnual General Meeting (?AGM?) and the company is NOT listed.? Carcraft Ltd has a policy of paying out dividends annually to the shareholders as well as a smallproportion of rebates to shareholders in proportion to their contribution to the rebate income.? Carcraft Ltd has recently acquired a commercial rental property with bank funding. As a result ofthe funding, the bank has imposed a debt covenant of a Current Ratio of at least two.Directors = 4shareholderrepresentatives plusNoelleCarcraft LtdShareholders = 40 individual smashrepairer businesses (equalshareholding)Employees = Noelle, theGeneral Manager and 2administration staff Page 2 of 3Scenario and decisionIn the June 2016 meeting, Noelle had advised the board that one of the shareholders (Nick) was demandingthat an additional $300,000 rebate expense be set aside for him as compensation for his extraordinarycontribution to Carcraft?s 2015/2016 rebate income. Nick, who is not one of the directors of Carcraft, hadthreatened to leave the group if this was not confirmed in the June 2016 board minutes. Reluctantly, theboard agreed to the additional rebate expense at this meeting, but noting that the rebate expense wouldonly be physically be paid in July 2016 when the rebate income was received.During this meeting, Noelle warned the board that the additional $300,000 may need to be recorded in the2015/2016 accounts due to the application of the conceptual framework and general purpose accounts.The directors disagreed with this, suggesting that?Why can?t we just record it next year when it is paid? We are not big enough to have to comply with allthat stupid accounting standard stuff so we can do what we like. Accounting standards are only for bigcompanies.?Noelle is unsure of this and has sought your advice as the external accountant to Carcraft Ltd. This advice isto be presented with the draft 2015/2016 accounts to the board in July 2016.Carart LtdProjected Financial statements for the year ended 30th June 2016Assets IncomeCurrent Assets Rental income 100000Cash at Bank 150000 Rebates 750000Rebates receivable 750000 Gross income 850000Total current assets 900000Less: ExpensesNon-current assets Salaries 80000Land & buildings 1000000 Rebates paid 65000Total non-current assets 1000000 Other expenses 210000Total assets 1900000 Interest 45000Total expenses 400000Current LiabilitiesStaff superannuation 25000 Net Profit 450000Dividends payable 200000 Less: income tax 135000Rebates payable 0 Net Profit after tax 315000Total current liabilities 225000 Less: dividends 200000Non-current liabilities Net profit after tax and dividends 115000Bank Loan 650000Total Liabilities 875000EquityShare capital 40000Retained earnings 985000Total Equity 1025000REQUIREDThe main requirement is to provide a recommendation to the Carcraft board as to whether ornot they have to prepare general purpose accounts in accordance with Australian accountingstandards. In addition, you should address- The financial impact if the rebate expense is disclosed next year (some financial analysisrequired) and- Details of any guidance provided by the conceptual framework (if applicable) for thistransaction.Your recommendation should be in the form of a Letter of Advice, addressed to the board,together with a transmittal email to Noelle.

School of Accounting ACCT3004 Accounting Theory and Analysis Sem 1/Tri 1A 2017 Written Assessment Information Sheet Bentley, Miri, CTI and Singapore, Hong Kong Written Assessment (15%) Due 6pm, Friday 7th April 2017 (uploaded through Turnitin on the Blackboard site used by this unit) Background Carcraft Ltd is a company established by the smash repair industry in Australia. Smash repairers fix and repair cars after they have been involved in an accident. Most of the revenue of the smash repair business comes from a small number of insurance companies and car paint is their biggest cost. The industry is very fragmented, comprising many small businesses across Australia. Therefore, the individual smash repairer businesses had very little bargaining power either with the insurance companies or with their suppliers. In order to combat this, Carcraft Ltd was established and aims to negotiate better prices for the smash repairers for their paint and other supplies which they could not do individually due to their size. The structure of Carcraft Ltd is as follows; Directors = 4 shareholder representatives plus Noelle Carcraft Ltd Employees = Noelle, the General Manager and 2 administration staff Shareholders = 40 individual smash repairer businesses (equal shareholding) The income of Carcraft Ltd comprises rebate income from the paint suppliers as well as investment income. The rebate income is calculated as a fixed % of all the paint that each of the shareholder businesses acquire from the main paint supplier and is paid every July based on the paint costs of the prior financial year. Shareholders are generally only provided with financial statements/financial information at the Annual General Meeting (\"AGM\") and the company is NOT listed. Carcraft Ltd has a policy of paying out dividends annually to the shareholders as well as a small proportion of rebates to shareholders in proportion to their contribution to the rebate income. Carcraft Ltd has recently acquired a commercial rental property with bank funding. As a result of the funding, the bank has imposed a debt covenant of a Current Ratio of at least two. Page 1 of 3 Carart Ltd Projected Financial statements for the year ended 30th June 2016 Assets Current Assets Cash at Bank Rebates receivable Total current assets Non-current assets Land & buildings Total non-current assets Total assets Current Liabilities Staff superannuation Dividends payable Rebates payable Total current liabilities Non-current liabilities Bank Loan Total Liabilities Equity Share capital Retained earnings Total Equity 150000 750000 900000 1000000 1000000 1900000 25000 200000 0 225000 Income Rental income Rebates Gross income 100000 750000 850000 Less: Expenses Salaries Rebates paid Other expenses Interest Total expenses 80000 65000 210000 45000 400000 Net Profit Less: income tax Net Profit after tax Less: dividends Net profit after tax and dividends 450000 135000 315000 200000 115000 650000 875000 40000 985000 1025000 Scenario and decision In the June 2016 meeting, Noelle had advised the board that one of the shareholders (Nick) was demanding that an additional $300,000 rebate expense be set aside for him as compensation for his extraordinary contribution to Carcraft's 2015/2016 rebate income. Nick, who is not one of the directors of Carcraft, had threatened to leave the group if this was not confirmed in the June 2016 board minutes. Reluctantly, the board agreed to the additional rebate expense at this meeting, but noting that the rebate expense would only be physically be paid in July 2016 when the rebate income was received. During this meeting, Noelle warned the board that the additional $300,000 may need to be recorded in the 2015/2016 accounts due to the application of the conceptual framework and general purpose accounts. The directors disagreed with this, suggesting that \"Why can't we just record it next year when it is paid? We are not big enough to have to comply with all that stupid accounting standard stuff so we can do what we like. Accounting standards are only for big companies.\" Noelle is unsure of this and has sought your advice as the external accountant to Carcraft Ltd. This advice is to be presented with the draft 2015/2016 accounts to the board in July 2016. REQUIRED The main requirement is to provide a recommendation to the Carcraft board as to whether or not they have to prepare general purpose accounts in accordance with Australian accounting standards. In addition, you should address - The financial impact if the rebate expense is disclosed next year (some financial analysis required) and - Details of any guidance provided by the conceptual framework (if applicable) for this transaction. Your recommendation should be in the form of a Letter of Advice, addressed to the board, together with a transmittal email to Noelle. Page 2 of 3 Important Additional Information This scenario and client are a real case and consulting job that has been undertaken in the past for this company. Therefore, the company can be researched to provide additional information. With most consulting jobs, not all of the information/facts is provided initially in a short summary. As additional background to this scenario, a video of an initial \"client interview\" has been provided on Blackboard. It is strongly suggested that this is viewed and information from the video used in compiling your recommendation. In addition, there will be an opportunity to ask further questions of the scenario of the client, Noelle via email. This is designed to simulate a real life scenario in the work force where you can ask additional information of clients. All questions are to be emailed to the unit co-ordinator who will liaise with Noelle to provide answers. Questions and responses will be put up on the discussion board in blackboard for all students to have access to. Required Format and additional requirements Your recommendation should be in the form 1) A Letter of Advice, addressed to the Board, which includes references 2) A transmittal email to Noelle. The structure of the letter does not need to follow the points addressed above. There are two documents required to be submitted via one document in turnitin The Letter of advice should be limited to 4 pages plus academic references and appendices. A detailed rubric/marking guide will be placed on Blackboard. Note that some marks will be allocated for written communication, with most marks are allocated to content as broadly below: Allocated by document type 15% of 15 marks 85% of 15 marks Communication Content and analysis A separate cover page is not required. However, your Student Name and Student ID should be incorporated into the written communication eg in the address section and your letter should include page numbers. Chicago referencing style is required for in-text and end-text referencing. In-text and end-text references are required. Students need to ensure they discuss the points they think are the most important to ensure that the word limit is adhered to. University policies and procedures for academic misconduct and plagiarism will be applied. Further information is available at academicintegrity.curtin.edu.au. A minimum of six (6) quality references should be provided. Please also refer to the additional resources and templates provided on Blackboard and in the tutorials for writing letters of advice and transmittal emails. Originality reports displaying percentage (%) of similarity can be viewed by students to ensure they have referenced where appropriate and not plagiarised. Students can resubmit their edited documents multiple times prior to the submission time. IMPORTANT - The file name of the word document and the submission title in Turnitin needs to reflect your location and student ID (That is labelled correctly in BOTH places) for example; - BEN_12345678 - FO_12345678 - Miri_12345678 (for Bentley Students) (for Fully Online Students) (for Miri Sarawak Campus Students) - MAU_12345678 (for Mauritius Students) (for Singapore Students) - SING_12345678 Page 3 of 3