2013 final exam.pdf

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University of the South Pacific

School of Accounting and Finance

AF301 ACCOUNTING THEORY AND APPLICATIONS

Semester 2, 2013 (Face to face)

Final Examination

Duration

Reading time 10 minutes, Writing time 3 hours

Instructions

All questions carry equal marks

Answer ONE question in Section A, ONE question in Section B, TWO questions in

Section C and ONE question in Section D

This examination carries a 50% weighting towards your overall course grade. To

secure a pass mark in the course, you must secure a mark of at least 50% over all

assessment AND a mark of at least 40% in this examination.

There are six pages in this examination paper, including this cover page.

You may use a hand-held, non-programmable calculator. This is not supplied.


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Section A 20 marks

This section contains 1 compulsory question. Show all supporting calculations.

Question 1 Current Cost Accounting and Exit Price Accounting

Current Cost Accounting (10 marks)

The amounts in the following table are provided on a historical cost basis.

Account 30 June

2012

30 June

2013

Cash 10,000 9,000

Accounts Receivable 25,000 28,000

Inventory 30,000 32,000

Land ---------- 130,000Accounts Payable 18,000 20,000

Tax Payable 12,000 11,000

Inventory Price Index 100 110

General Price Index 100 105

Additional Information

a) Equipment was purchased on 1 July 2010 for 200,000

b)

There were no additions or disposals of equipment during 2013c) The current cost of the equipment was $200,000 on 1 July 2012 and $280,000 on 30 June 2013

d) Accumulated depreciation on the equipment at 30 June 2012 was 40,000

e) Equipment is depreciated at 10%

f) The land was acquired on the last day of the financial year.

Required

i) Calculate depreciation on equipment for the year ended 30 June 2013. 2 marks

ii) Calculate back-log depreciation on equipment for 2013. 3 marks

iii) Calculate the gain or loss on monetary items for 2013, indicating whether the

overall result is a gain or loss.

5 marks


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Question 1 continued

Exit Price Accounting (10 marks)

At the end of its first year of operations, a company had the following balances.

Account Historical Cost

Cash 15,000

Inventory (4,000 units acquired for $5 each) 20,000

Financial Investments 45,000

Equipment 100,000

Accounts Payable 20,000

Capital 180,000

Additional Information

At the end of the year

a) Inventory is selling for $6 each

a) the market price of financial investments is $40,000

b) the fair value of equipment is $150,000

c) the general price index is 108 (it was 100 at the start of the year)

Required

i) Calculate all price variation adjustments for the year, assuming there were no

additions or disposals of equipment or financial investments.

4 marks

ii) Calculate the price level adjustment for the year. 2 marks

iii) Explain how the use of current cash equivalents eliminates the problem of

additivity.

4 marks


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Section B 20 marks

This section contains 1 compulsory question, worth 20 marks.

A good answer will be between 1 to 2 pages.

Question 2 Harmonisaton of Financial Reporting and Behavioural Accounting Research

Read the following article and use it to answer the questions below.

3.6m profit for group

Ropate Valemei

1. FIJI Television Group reported a net profit after tax of $3.6million compared with $4.2m for

last year.2. The group recorded profit from operations of $5.9m compared with $6m in the past financial

year.

3. In its 2013 annual report, group chairman Padam Lala said the results were achieved despite

the competitive environment and the increased number of platforms for entertainment in the

Pacific.

4. "These financial results were achieved under conditions of increasing programing, compliance,

legal and human resource costs.

5. "There were no major events that are usually an incentive for our advertisers to become part

of our business," Mr Lala said.

6. He said the group's total revenue $39.5m increased by 10.7 per cent compared with the

previous financial year.

7. Fiji TV registered $22.4m in revenue this financial year, an increase of 5.1 per cent compared

to the previous financial year.

8. Papua New Guinea-based subsidiary, Media Niugini Ltd, registered revenue growth of 14.7

per cent in PNG kina," the report stated.

9. Mr Lala said Fiji TV group would also explore expanding its free to air and pay television

business into the Pacific.

AcknowledgementThis article appeared in the Fiji Times on Tuesday, October 08, 2013

Required

i) Discuss the benefits of harmonization from the perspective of a company like the Fiji Television

Group, which is listed on the South Pacific Stock Exchange.

ii) Discuss the merits of presenting accounting information in multiple formats. In particular,

suggest how the Fiji Television Group could best present the accounting information discussed

in paragraphs 1, 4 and 8 of the article.


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Section C 40 marks

This section contains 2 compulsory questions.

Each question is worth 20 marks. A good answer will be between 1 to 2 pages per question.

Question 3 Positive Accounting Theory

i) Using the bonus plan hypothesis, explain how a chief executive officer (CEO) is expected to

behave under the following circumstances:

a) A CEO who is serving the last year of her contract. She is also entitled to a profit-based

bonus if the firm makes a profit above $5 million. The firm is expected to make a profit

of $4.8 million this year.

b) A newly appointed CEO is entitled to a profit-based bonus if the firm makes a profit

above $5 million. Based on current projections, the maximum profit the firm could

make this year is $2 million.

ii) A board of directors is developing the remuneration package for its new CEO. Explain why the

board should reward managers with share optionsrather than shares.

Question 4 Theories of Regulation

i) Outline the following concepts and explain whether they support or negate the need for

accounting regulations

a) market for lemons

b) market for managers

ii)

Discuss the market for regulation and explain how it forms the basis of private interest theory.


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Section D 20 marks

This section contains 5 questions, based on course seminar topics. Each question is worth 20

marks. Answer ONLY ONEquestion from this section.

A good answer will be between 1 to 2 pages. In your answers, you may draw from lecture

material, course readings and your own research.

Question 5 Accounting and Climate Change

Firms involved in manufacturing, mining and the delivery of utilities have a major impact on the

environment. This impact includes (but is not limited to) climate change. Discuss the role of

accounting in disclosing and mitigating the environmental impact of large businesses.

Question 6 Accounting and Culture

Accountants behaviour and decision-making may be affected by their cultural attributes. Explain

the theoretical basis for this view and discuss relevant evidence.

Question 7 Accounting and Gender

In the field of accounting, females (including accountants, auditors, academics and students) may

face unique challenges. Explain the logical basis for this view and discuss relevant evidence.

Question 8 Accounting and Sport

All sporting bodies must account and be accountable. Discuss how this concept applies in one or

more sporting organisations that you are familiar with.

Question 9 Accounting and Non-government Organisations (NGOs)

Unlike companies, NGOs do not have shareholders or a profit motive. Given these differences,

discuss the role of accounting in one or more NGOs that you are familiar with.

THE END

2013 final exam.pdf

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