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.

Re: Accounting Issues: Year Ending 30 June 2019

From: Con Pewter (..r@pewterlimited.com.au)

Sent: 5 July 2019

To: Maria McKenzie (..e@mckenzieandassociates.com.au)

Dear Maria

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.

Issue 1: Martin Kellick, the marketing director on our board of directors, is also on a

number of other company boards. He heard the other companies refer to a new

standard on fair values and was very anxious to work out whether we had accounted

for all their assets based on "fair value". This had all the other directors quite confused.

Is there such a standard? Does it apply to our company or only to the public listed

ones? Should we be making a change to fair values for all our assets? I thought we

had to show them at cost? In fact, I think we had to lower the value of inventory last

year as the net realisable value of a number of items were less than the original cost.

We would love to get your opinion on this so that everyone on the board is clear as to

what needs to be done.

Issue 2: Jonny Appleton our manufacturing engineer designed and then manufactured

an item of machinery which enables us to dry the fresh produce used in our pickling

plant much more effectively. As this item of the plant was manufactured in-house the

only costs associated with it was the additional materials we needed to purchase for

the machine, which was $250,000. It works so effectively and efficiently that it cut our

manufacturing time by about 2 hours per batch. He has been asked by two other

businesses if he would be interested in manufacturing a similar machine for them and

is presently in the process of doing so. One of these customers is willing to pay more

than a million dollars if we make this machine for them. He says that this increases

the goodwill of the company too, and wants us to show this asset in the financial

statements at this value. Can we do that? How should we treat this? We haven't had

a transaction like this before.

Please respond by letter (not email) as I would like to present this to the Board. I look

forward to hearing from you shortly.

Regards

Could you please give me some advice about this question.