Accounting

Accounting

Please according to the following requirements to complete, including specific explanation and calculation process.

Pan A: This part of

the assignment is worth a total of 12 marks (details are provided below). It requires you to provide a written response to the questions

listed below.

When answering the provided questions you must ensure that your answers address the questions, that your answers have an
accountinglfinancial reporting focus, that your answers are internally consistent and that the individual components of your answers provide
a well-rounded argument that is easy to follow.

The Chief Financial Officer (CFO) of Large Mart has been unable to find answers for two

accounting problems. He has asked you to inv estigate the following questions and to write a report (including relev ant referencesto source
materials and accounting standards) that will provide him with answersto these questions and help him to understand how you have developed
your answers.

1) (5 marks) The Board of Directors of Large Mart has asked to CFO if it is possible to change the cost flow

assumption that is used in Large Mart’s inventory accounting system. Large Mart is currently using the First-In-First-Out (FIFO) cost flow
assumption (in a perpetual inventory accounting system) and the Board of Directors would like to use the Av erage-Weighted cost flow
assumption (in a perpetual inventory accounting system) instead, because the Board believes that this change would improve Large Mart’s
financial position in the balance sheet.

The CFO is not sure if Large Mart is legally allowed to make this change, and what impact such a

change would have on the financial reports of Large Mart.

a) Determine whether or not Large Mart would legally be allowed to change its . . . . H
inventory cost flow assumption from FIFO to Weighted-Av erage-Cost, and what (if any) legal requirements would limit Large Mart’s ability

to make this change.

b) Discuss what impact (if any) a change from the FIFO costflow assumption to the Weighted-Average cost flow

assumption would have on the financial position (balance sheet) of Large Mart. PLEASE NOTE: You are NOT required to calculate the amount o‘
impact of this change on the balance sheet. Instead, please discuss the POTENTIALimpacts of such a change in general.

2) (5

marks) Large Mart is currently using its own engineers and equipment to build the machinery for a new factory in Armidale in which tablet
computers will be produced. Building the machinery for the new factory took a total of 4 month time. During thistime,the value of the

Large Mart equipment that was use to build the new machinery depreciated by a total of $20,000. In addition, Large Mart took out a loan of
$200,000 to pay for the components used in the new machinery, and during the 4 month in which the machinery was build, Large Mart payed a
total of $5,000 in interest for the loan.

The CFO is not sure how to deal with these issues and has asked you to inv estigate the

following two issues:

a) Explainhow Large Martomust accountfor the ‘depreciation of the equipment that was used in the building of the

new machinery AN explain why this treatment is required.

b) Explain how Large Mart must accountfor the loan as well asthe payment of

interest during the time that the new machinery was built AND explain why this treatment is required.

Your report should be

approximately 400 words (+/- 10%) in length for question 1 ,and 400 words (+l- 10%) in length for question 2. You can receiv e a maximum of 5
marks for each question.

The appropriate acknowledgement (referencing) of source material used to dev elop your report will attract one

(1) mark. An additional one (1)_mark will beMqiv en for the number of sources other than the textbook that were usedto develop the arguments
in Part A of your assignment. he use of a NIMUM of four (4) appropriate sources other than the textbook is required (see below for
details). However, in order to receive full marks for your use of resources, you will need to show that you have used substantially more

than four (4) resources.

In Pan A of this assignment, you are expected to provide in text references as well as a list of references in

accordance with UTS’s referencing guidelines. The submission of assignments without in-text references andlor a reference list will be
considered inappropriate conduct (plagiarism) under UTS’s plagiarism rules!

Furthermore, you are expected to use a MINIMUM of four (4)

appropriate sources other than the textbook assigned to this unit when answering part A of this assignment. This means that although the
prescribed textbook is an appropriate reference, there should be evidence (in the form of in-te xt references AND entries in your reference
list) that you have used at least four other resourcesthat are useful in developing the argumentsin your essay. Appropriate sources of
information include, but are not limited to,journaI articles, books, selected on ine resources (i.e. journal databases, newspaper articles,
working paper databases, conference websites, official pronouncements of accounting bodies, standards setters, government agencies, public
bodies, univ ersities, or accounting firms). Inappropriate online resources which should NOT be used include Wikipedia, blogs, twitter and
websites from “non-officiaI” sources.

Part B: This part of the assignment is worth a total of four (3) marks (details about the

allocation of marks in part b are provided below).

The Research & Development Department of Large Mart is currently working on the

dev elopment of a “study piIIow” that allows students to upload study material into their brain whilst sleeping. In order to complete

this project, Large Mart has purchased the following items:

A car (which is used to transport students participating in a trial of

the study pillow to the laboratory)

Anotebook computer (which is used to record the feedback of students participating in the

trial)

The car was purchased on credit on 11th May 201x. The list price of the car was $45,000, and the car dealer charged an additional

amount of $1 .000 to deliv er the car to the Large Mart Research & Dev elopment Department. Large Mart received the car on 2oth May. On the
same day, a big Large Mart logo was painted on the outside of the car. The painting of the logo cost $2,000 and was paid for in cash. Large
Mart started using the car as soon as it became av ailabe for its intended use on 21th May 201x. The invoice from the car dealer was paid on
1st June 201x and Large Mart received an early payment discount of 5% when the payment was made.

Large Mart expects to use the car for a

period of 7 years. At the end of its useful Iife,the car is expected to have a residual value of $2,000. The depreciation method used for

the car is identical to the method that Large Mart is using for other cars (straight-line depreciation).

On 1st July 201x,the accounting

department of Large Mart decides to rev alue the car to its fair v alue of $46,000.

The notebook computer was purchased in a cash

transaction on 1st May 201x. he computer had a list price of $5000. However, because Large Mart purchases all of its notebook computers
from this supplier, Large Mart was able to receive a trade discount of 30%. After unpacking the notebook computer on 2nd May 201x, Large
Mart noticed that the computer was broken and returned it to the supplier.

Required:

1) (0.5 marks) – Provide all journal

entries that are necessary in the books of Large Mart to account for the purchase of the notebook computer on 1st May 201x as well as the
return of the computer to the supplier on 2nd May 201x

2) (1 mark) – Provide alljournal entries that are necessary in the books of

Large Mart to account for the purchase of the car as well as the payment of the car.

3) (1.5 marks) – Provide all journal entries

that are necessary in the books of Large Mart to account for the rev aluation of the car on 1st July 201x AND provide a detailed outline of

all required calculations.

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