Business letter in Accounting NO.2

Paper , Order, or Assignment Requirements

Unit: Corporate Accounting

Assignment Instructions:

  • You are required to prepare a letter of advice to your client that would be accepted by an Australian accounting firm or business as ‘envelope-ready’ i.e. ready to be sent to the client.
  • The assignment will be assessed as follows:

1 ) Technical content will be marked out of 11. This mark only covers the technical content of your advice and explanation on each of the issues. You MUST answer the question mainly in your own words, but you may refer to particular provisions in the applicable accounting standards.

2) Writing skill component will be marked out of 5. This mark covers the following generic business letter writing skills: layout, organisation, written expressions and tone. Do not pad your answer with irrelevant material. No general answer.

Format requirements: “Times New Roman”, size 12 with 1.5 line-spacing

Use any material, for example textbooks, journal articles, etc, to support your answer, you are required to use the Harvard Style of referencing in your answer for both in-text and bibliography referencing.

Background Information

You are an accountant working for an accounting firm called Acme Accounting Services. One of your clients is Spinofex Ltd, which is located at 133 Smith Street, Noosa, Qld, 3555. Frederick Rubble is the Managing Director of Spinofex Ltd, a company which operates in a diverse range of industries. He frequently contacts you for assistance with various accounting issues, and on 10 October 2016 he wrote to you outlining the following matters on which he wishes you to provide specific written advice.

Issue 1:

Spinofex Ltd owns a large dairy farm in Queensland and also a factory in which it produces milk-based products. The milk produced on its dairy farm in not sold to third parties: it is all used in the company’s factory. Frederick is aware that AASB136 Impairment of Assets imposes requirements in relation to the carrying amount of assets but he is unsure as to whether the dairy farm assets should be subjected to impairment testing separately from those of the factory, or whether the farm and factory constitute one Cash Generating Unit (CGU). He is really confused as to what constitutes, and how to identify, a CGU. He seeks your opinion on whether or not the CGU concept applies in relation to the dairy farm and/or the factory. You are required to provide advice and state your opinion on the CGU matter as it applies to Spinofex Ltd. In so doing, you should explain:

(1) The circumstances in which an impairment loss will be deemed to have occurred;

(2) The meaning of the term “cash-generating unit” and to outline the factors that should be considered in determining the CGUs for Spinofex Ltd;

(3) The circumstances in which impairment testing is performed at the level of the CGU, rather than being based on single assets.

Issue 2:

Spinofex Ltd has been negotiating with Mulga Ltd for several months, and agreements have finally been reached for the two companies to merge their operations. In considering the accounting for the combined entity, management realises that, in applying AASB 3, an acquirer must be identified. However, there is debate among the accounting staff as to which entity is the acquirer. Frederick (1) seeks your advice concerning the factors/indicators that management should consider in determining which of the two entities is the acquirer, and

(2) an explanation as to why it is necessary to identify an acquirer. In particular, what differences in accounting would arise if White Ltd or Cloud Ltd were identified as the acquirer?

Required:

You are required to prepare a business letter (Please see the attached file:Business letter writing to help you to write same its structure and instruction MUST BE same structure) addressing the matters on which advice is sought by Frederick Rubble. Your advice should provide clear, succinct answers/explanations and appropriate references to the relevant accounting pronouncements. Frederick is not an accountant and does not have copies of the accounting standards. Therefore you must provide your advice in language that a non-accountant business executive would understand.

This Assessment Task relates to the following Learning Outcomes:

  • Demonstrate understanding of the theory and practice of compiling company financial statements.
  • Demonstrate understanding of the theory and practice of accounting for business combinations in Australia.
  • Demonstrate understanding of the theory and practice of consolidation accounting in Australia (AASB 127/AASB 10).
  • Demonstrate understanding of accounting for associated companies using equity accounting under AASB 128.
  • Demonstrate understanding of the theory and practice related to accounting for tangible and intangible assets.
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