hi , Question 1Total 8 marks

On 1 July 2014, Magenta Ltd purchased an item of machinery for $200,000 to be used In the manufacture of furniture. The machinery had an estimated useful life of 8 years and a zero residual value. Magenta Ltd uses the straight-line method of depreciation for items of property, plant and equipment. In accordance with AASB 116 Property, Plant and Equipment, Magenta Ltd uses the cost model as its accounting policy to measure items of property, plant and equipment.

On 30 June 2017, Magenta Ltd changed its accounting policy in relation to the measurement of items of property, plant and equipment from the cost model to the revaluation model. On this date the fair value of the item of machinery was determined to be $135,000.

On 30 June 2018, the fair value of the item of machinery was determined to be $92,000.

On 1 July 2019, the item of machinery was sold for $60,000 cash.

Required

(a) Under what circumstances does AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors permit an entity to make a voluntary change in an accounting policy? How should Magenta Ltd account for the change in accounting policy from the cost model to the revaluation model? (2 marks)

(b) Based on the requirements of AASB 116 Property, Plant and Equipment, provide appropriate journal entries in relation to the item of machinery from 1 July 2014 to 1 July 2019. (6 marks)

Question 2 Total 6 marks

On 1 January 2014 Greymouth Ltd commenced construction of a chemical manufacturing plant which was to be used to manufacture a range of chemical compounds. The chemical manufacturing plant cost $3 million to construct and became operational on 30 June 2016. The estimated useful life of the chemical manufacturing plant is twenty five years from 30 June 2016.

Because the chemical manufacturing plant satisfies the definition (in the Work Health and Safety legislation) of a 'major hazard facility', it must be licensed by the local government. Greymouth Ltd obtained its licence for the chemical manufacturing plant on 30 June 2016. The cost of obtaining the licence was negligible and the licence is valid for the life of the chemical manufacturing plant. A condition of the licence is that, at the end of its useful life, the chemical manufacturing plant must be decommissioned. Decommissioning involves dismantling the chemical manufacturing plant and recycling some of the equipment at the local government's recycling facility.

As at 30 June 2016, Greymouth Ltd estimates the cost of decommissioning the chemical manufacturing plant at the end of its useful life to be:

CostProbability

$520,00015%

500,00080%

300,0005%

Greymouth Ltd believes that a discount rate of 5% is appropriate to adjust for the risks specific to this liability.

Required

(a) Explain why the cost of decommissioning the chemical manufacturing plant satisfies the definition of a provision in AASB 137 Provisions, Contingent Liabilities and Contingent Assets. (1 mark)

(b) Determine the amount that, in your judgement, Greymouth Ltd should recognise as a provision as at 30 June 2016. In your answer, you should:

Briefly explain the three methods that, according to AASB 137 Provisions, Contingent Liabilities and Contingent Assets, can be used by an entity to estimate the amount to be recognised as a provision,

Discuss which method (or methods) are appropriate in this situation,

Identify and justify which method, in your judgement, is the most appropriate to use in this situation, and

Use this method to calculate the amount of the provision. (4 marks)

(c) Provide the appropriate journal entries in relation to the provision as at 30 June 2016 and 30 June 2017. (1 mark)

Question 3 Total 6 marks

Prime Media Ltd is a digital marketing company that undertakes online marketing functions for its customers. In May 2017, Prime Media Ltd hired an external consulting firm to review its operations. One of the recommendations made by the external consultants was that the computer software used by Prime Media Ltd to produce online advertisements was outdated and should be replaced. Management of Prime Media Ltd prepared a report that outlined the following options for the replacement of the computer software:

Option 1: acquire a licence from Digital Solutions Ltd to use their computer software package. The licence could be acquired immediately for $60,000 and would last five years. A condition of the licence is that Prime Media Ltd is prohibited from selling, transferring, licensing, renting or exchanging the computer software even after the licence has expired.

Option 2: internally develop a computer software package. It would take between 8 and 12 months to develop the computer software at an estimated cost of $40,000. The computer software would be patented at an additional cost of $15,000.

Option 3: internally develop a computer software package. It would take between 8 and 12 months to develop the computer software at an estimated cost of $40,000. The computer software would not be patented.

Required

(a) For each of the three options, explain whether the computer software satisfies the definition of an intangible asset in accordance with AASB 138 Intangible Assets. In particular, explain whether the computer software satisfies the criterion of identifiability in the definition of an intangible asset.

(4 marks)

(b) For each option that satisfies the definition of an intangible asset, explain the recognition criteria that would be applied by Prime Media Ltd. (2 marks)

Assessment Task 2 Practical and Written Assessment Part B Due date: Thursday of Week 9 (23:45 AEST) Weighting: 20% ASSESSMENT 2B Objectives This assessment item relates to the following unit learning outcomes: Interpret and apply the AASB's Framework for the Preparation and Presentation of Financial Statements. Interpret the technical requirements and conceptual aspects of selected accounting standards that address fundamental issues in financial reporting. Apply the requirements of relevant accounting standards, conceptual accounting knowledge and professional judgement, to solve routine accounting problems. 1 Question 1 Total 8 marks On 1 July 2014, Magenta Ltd purchased an item of machinery for $200,000 to be used In the manufacture of furniture. The machinery had an estimated useful life of 8 years and a zero residual value. Magenta Ltd uses the straight-line method of depreciation for items of property, plant and equipment. In accordance with AASB 116 Property, Plant and Equipment, Magenta Ltd uses the cost model as its accounting policy to measure items of property, plant and equipment. On 30 June 2017, Magenta Ltd changed its accounting policy in relation to the measurement of items of property, plant and equipment from the cost model to the revaluation model. On this date the fair value of the item of machinery was determined to be $135,000. On 30 June 2018, the fair value of the item of machinery was determined to be $92,000. On 1 July 2019, the item of machinery was sold for $60,000 cash. Required (a) Under what circumstances does AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors permit an entity to make a voluntary change in an accounting policy? How should Magenta Ltd account for the change in accounting policy from the cost model to the revaluation model? (2 marks) (b) Based on the requirements of AASB 116 Property, Plant and Equipment, provide appropriate journal entries in relation to the item of machinery from 1 July 2014 to 1 July 2019. (6 marks) 2 Question 2 Total 6 marks On 1 January 2014 Greymouth Ltd commenced construction of a chemical manufacturing plant which was to be used to manufacture a range of chemical compounds. The chemical manufacturing plant cost $3 million to construct and became operational on 30 June 2016. The estimated useful life of the chemical manufacturing plant is twenty five years from 30 June 2016. Because the chemical manufacturing plant satisfies the definition (in the Work Health and Safety legislation) of a 'major hazard facility', it must be licensed by the local government. Greymouth Ltd obtained its licence for the chemical manufacturing plant on 30 June 2016. The cost of obtaining the licence was negligible and the licence is valid for the life of the chemical manufacturing plant. A condition of the licence is that, at the end of its useful life, the chemical manufacturing plant must be decommissioned. Decommissioning involves dismantling the chemical manufacturing plant and recycling some of the equipment at the local government's recycling facility. As at 30 June 2016, Greymouth Ltd estimates the cost of decommissioning the chemical manufacturing plant at the end of its useful life to be: Cost $520,000 500,000 300,000 Probability 15% 80% 5% Greymouth Ltd believes that a discount rate of 5% is appropriate to adjust for the risks specific to this liability. Required (a) Explain why the cost of decommissioning the chemical manufacturing plant satisfies the definition of a provision in AASB 137 Provisions, Contingent Liabilities and Contingent Assets. (1 mark) (b) Determine the amount that, in your judgement, Greymouth Ltd should recognise as a provision as at 30 June 2016. In your answer, you should: Briefly explain the three methods that, according to AASB 137 Provisions, Contingent Liabilities and Contingent Assets, can be used by an entity to estimate the amount to be recognised as a provision, Discuss which method (or methods) are appropriate in this situation, Identify and justify which method, in your judgement, is the most appropriate to use in this situation, and Use this method to calculate the amount of the provision. marks) (4 (c) Provide the appropriate journal entries in relation to the provision as at 30 June 2016 and 30 June 2017. (1 mark) 3 Question 3 Total 6 marks Prime Media Ltd is a digital marketing company that undertakes online marketing functions for its customers. In May 2017, Prime Media Ltd hired an external consulting firm to review its operations. One of the recommendations made by the external consultants was that the computer software used by Prime Media Ltd to produce online advertisements was outdated and should be replaced. Management of Prime Media Ltd prepared a report that outlined the following options for the replacement of the computer software: Option 1: acquire a licence from Digital Solutions Ltd to use their computer software package. The licence could be acquired immediately for $60,000 and would last five years. A condition of the licence is that Prime Media Ltd is prohibited from selling, transferring, licensing, renting or exchanging the computer software even after the licence has expired. Option 2: internally develop a computer software package. It would take between 8 and 12 months to develop the computer software at an estimated cost of $40,000. The computer software would be patented at an additional cost of $15,000. Option 3: internally develop a computer software package. It would take between 8 and 12 months to develop the computer software at an estimated cost of $40,000. The computer software would not be patented. Required (a) For each of the three options, explain whether the computer software satisfies the definition of an intangible asset in accordance with AASB 138 Intangible Assets. In particular, explain whether the computer software satisfies the criterion of identifiability in the definition of an intangible asset. (4 marks) (b) For each option that satisfies the definition of an intangible asset, explain the recognition criteria that would be applied by Prime Media Ltd. marks) (2 4 Assignment Information Assignment presentation You do not need to include a title page or a table of contents. Use the question numbers to indicate which question you are answering. You do not need to include the question as part of your answer. You should number all of the pages and include your name and student number (as either a Header or a Footer) on each page. You should use a consistent font throughout your assignment. Suggested fonts include Calibri or Arial. Referencing Your assignment should include references (both in-text and in a reference list) that conforms to the American Psychological Association (APA) style. A copy of the 'Abridged Guide to the APA Referencing Style' can be accessed from: The 'Assessment' page in Moodle, and The CQUniversity Referencing Guides web page: https://www.cqu.edu.au/student-life/services-andfacilities/referencing/cquniversity-referencing-guides You can adopt a simplified approach to the in-text referencing of accounting standards. Your first reference (within a question) to an accounting standard should be in full. For example, 'according to paragraph 27 of AASB 101 Presentation of Financial Statements (Australian Accounting Standards Board [AASB], 2015), financial statements should be prepared using ...'. Subsequent references to this accounting standard can be abbreviated. For example, 'it is a requirement of paragraph 36 of AASB 101 that ...'. The reference list nomenclature depends on whether you obtained the accounting standard directly from the AASB web site or from the ACCT19062 Intermediate Financial Accounting Moodle website. Australian Accounting Standards Board (AASB). (2015). AASB 101 Presentation of Financial statements. Retrieved from http://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf Australian Accounting Standards Board (AASB). (2015). AASB 101 Presentation of Financial statements. Retrieved from CQUniversity e-courses, ACCT19062 Intermediate Financial Accounting, http://moodle.cqu.edu.au 5 ACCT19062 Intermediate Financial Accounting Assignment: Part B Question 1 2 3 Criteria Marks Awarded The relevant requirements of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors and AASB 116 Property, Plant and Equipment have been appropriately applied. Written answers are correct (accurate), clearly expressed (the meaning is evident) and succinct (concise/brief). Where applicable, professional judgement has been exercised appropriately. All amounts are correct and workings are provided. /8 The relevant requirements of AASB 137 Provisions, Contingent Liabilities and Contingent Assets have been appropriately applied. Written answers are correct (accurate), clearly expressed (the meaning is evident) and succinct (concise/brief). Where applicable, professional judgement has been exercised appropriately. /6 The relevant requirements of AASB 138 Intangible Assets have been appropriately applied. Written answers are correct (accurate), clearly expressed (the meaning is evident) and succinct (concise/brief). Where applicable, professional judgement has been exercised appropriately. /6 Total /20 6