Case study

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Kaplan Business School Assessment Outline

Assessment 3 Information

Subject Code: ACCM4300

Subject Name: Financial Reporting

Assessment Title: Assessment 3

Assessment Type: Individual Assignment

Weighting: 30 %

Total Marks: 30

Submission: Via Turnitin-written report

Due Date: Monday of Week 13 at 19:55 AEST

Your Task

You are required to prepare a business letter to answer key accounting issues in regard to
acquisition analysis of partly owned subsidiary and intra-group transactions.

Assessment Description

Assume that you are a team of graduate accountants working for Hero Accounting Group, a
public accounting firm situated at 346 Gregory Street, Sydney, NSW 2000. The Manager of your
firm, Ms. Grace Harper, has asked you to prepare the SOA in response to an email received from
a client, Mr. William Kane, the Managing Director of Amy Ltd, raising several accounting issues.
Please refer to the email on the next page.

The maximum length for the body of the letter is 1,500 words. You should address all the
technical issues/discussion in the letter, followed by a Reference List.

• Part A: Technical component 25% – This mark covers the technical content of your advice
and the explanation of each of the issues, the calculations, and the sources used. Also
letter Writing covers the generic skills of Letter writing; layout, clear meaning, structure and
organisation, appropriate tone and grammar, spelling, and punctuation, etc. throughout the
whole assignment.

• Part B: Communication Skills – Letter Writing 5% – This mark covers the generic skills of
Letter writing; layout, clear meaning, structure and organisation, appropriate tone and
grammar, spelling, and punctuation, etc. throughout the whole assignment.

Page 2 Kaplan Business School Assessment Outline

Case Study

One of your clients has emailed your firm with several queries. Draft a business letter in reply and
make sure you reference any relevant sources relating to your advice, for example, AASBs,
Corporations Act, and relevant websites. See the email below.

Re: Accounting Issues: Year Ending 30 June 2021

From: William Kane (wkane@amy.com.au)

Sent: 8 July 2021

To: Grace Harper (grace.harper@herogroup.com.au)

Dear Grace,

As discussed, our chief accountant is currently on leave. I need to understand the following

transactions and events to present to the Board regarding the financial impacts of our recent takeover.

The chief accountant left me a note, but I am unsure of the effect of the below transactions. Can you

please provide me with a more detailed explanation just in case the board request further information?

Please remember the Board of directors have varying degrees of accounting knowledge, so please

limit the use of technical accounting terms.

Recently Amy Ltd acquired 100% of the issued shares of Astra Ltd for $80,000 (Astra Ltd.’s owner’s

equity at the time of purchasing was $100,000 made up of share capital of $80,000 and retained

earnings of $20,000). One of the liabilities of Astra Ltd was $18,000 for the dividend payable but not

yet paid, and our accountant informed me that the shares were acquired based on Ex-dividend. In

addition, one of the areas of discussion during the negotiation process was the current court case that

Astra Ltd was involved in. No monetary amount was disclosed, but the company’s lawyers had placed

a $6000 amount on the probable payout to settle the case.

Having prepared the acquisition analysis as part of preparing the consolidated financial statements

for Amy Ltd, can you explain how the unrecorded contingent liability of $6,000 by the subsidiary Astra

Ltd affects the group’s goodwill? I believe the goodwill for Amy Ltd should be $20,000 (being $80,000

less $100,000). Is this correct?

In addition, will the dividend payable by the subsidiary entity Astra Ltd impact the acquisition analysis?

Please explain?

The accountant told me that she had eliminated transactions incurred between the companies Amy

Ltd and Astra Ltd. The sales are legitimate, we have exchanged invoices and contracts, so can you

explain why we need to eliminate the inter-company transactions? I have extracted two examples

below. Would you please examine the following transactions for errors? If incorrect, explain why and

provide me with the corrected journal entries.

1. At the beginning of the current period, Amy Ltd sold Equipment to its wholly-owned subsidiary,

Astra Ltd, for $320,000. Amy Ltd had initially paid $800,000 for this asset, and at the time of

sale to Astra, Ltd had charged depreciation of $600,000. This asset is used differently in Astra

Ltd from how it was used in Amy Ltd; thus, whereas Amy Ltd used a 15% p.a. straight-line

depreciation method, Astra Ltd uses a 25% straight-line depreciation method. In calculating

Page 3 Kaplan Business School Assessment Outline

the depreciation expense for the consolidated group, the group accountant is unsure which

depreciation rate should be applied and which depreciation rate to use.

2. On 1 May 2021, Astra Ltd sold inventory for $25,000 to Amy Ltd at cost plus 25%. On 30 June

2021, Amy Ltd sold two-thirds of the inventory to other entities for $25,000 but still holds one-

third of these inventories as of 30 June 2021. Can we debit Sales for $50,000, credit the Cost

of Sales for $25,000 on 30 June 2021? Do we need to do anything else?

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

William Kane

Managing Director, Amy Ltd Level 6,

4300 Random Street,

Sydney NSW 2000

Page 4 Kaplan Business School Assessment Outline

Assessment Instructions

• The assignment file will need to be submitted electronically through the student portal –
use the link under “Assessments”.

Referencing

• Any sources that you use need to be acknowledged in order to avoid plagiarism.
Information on referencing can be found in the Guidelines for Referencing and
Presentation at the Kaplan website using the following address:
(https://elearning.kbs.edu.au/mod/page/view.php?id=128881).

In‐Text Referencing and the Reference List

• Sources of information must be cited both in the body of the text (in‐text referencing) and
the end of the assignment (reference list). Failure to do so will result in penalties.
Remember that when referencing an Annual Report, it is a corporate document that does
not have a particular author but it will still require referencing any time you use information
from it. Any other documents or books or other references you use will also require
referencing.

Please note

• Any work which has been copied or shared between students will result in a Fail grade for
all students concerned. Therefore, please make sure that the answer to this assignment is
your work and not copied or bought from any source. In completing this assignment make
sure you follow the guidelines for assignments especially those relating to the presentation
of written work, late assignment policy and academic integrity.

Page 5 Kaplan Business School Assessment Outline

Important Study Information

Academic Integrity Policy

KBS values academic integrity. All students must understand the meaning and consequences
of cheating, plagiarism and other academic offences under the Academic Integrity and Conduct
Policy.

What is academic integrity and misconduct?
What are the penalties for academic misconduct?
What are the late penalties?
How can I appeal my grade?

Click here for answers to these questions:
http://www.kbs.edu.au/current-students/student-policies/.

Word Limits for Written Assessments

Submissions that exceed the word limit by more than 10% will cease to be marked from the point
at which that limit is exceeded.

Study Assistance

Students may seek study assistance from their local Academic Learning Advisor or refer to the
resources on the MyKBS Academic Success Centre page. Click here for this information.

http://www.kbs.edu.au/current-students/student-policies/

https://elearning.kbs.edu.au/course/view.php?id=1481

ACCM4300 Assessment
Information

Page 6 of 7 Updated: 13 October 2021

ACCM4300 Assignment Rubrics: 30% Individual Assessment

Components High

Distinction

85 – 100%

(Marks 25.5 to 30)

Distinction

75 – 84%

(Marks 22.5 to 25.4)

Credit

65 – 74%

(Marks 19.5 to 22.4)

Pass

50 – 64%

(Marks 15 to 19.4)

Fail

0 – 49%

(Marks 0 to 14.9)

Mark

Awarded

(Out of 30)

Technical
component

Journal entries,
Calculations,
Explanations

25%

It clearly identifies and
addresses all the
technical issues raised &
provides clear, correct
& decisive answers
displaying an
outstanding
understanding of each
of the technical issues.

It is easy for the client
(non-accountants) to

understand.

Where applicable and

appropriate reference
has been correctly
made to the AASBs,

GAAPs and other

legislation

It clearly identifies
and addresses most
of the technical
issues raised by the
client and provides
clear, correct and
decisive advice
displaying a good
understanding of
most of the technical
issues.

It is easy for the
client (non-
accountants) to
understand.

Where applicable and

appropriate,

reference has been

correctly made to the

AASBs, GAAPs and

other legislation

It clearly identifies &
addresses some of the
technical issues raised
by the client and
provides reasonably
clear, correct and
decisive advice
displaying a
reasonably good
understanding of
some of the technical
issues.

It is relatively easy for

the client to

understand.

Reference has been

made (with gaps) to

some of the AASBs,

GAAPs and other

legislation where

applicable

It identifies and
addresses some of the
technical issues raised
by the client and
provides fairly clear, but
not always correct
and/or decisive advice.
It displays a reasonable
understanding of some
of the technical issues
raised.

It is relatively easy for
the client to
understand.

Reference has been
made (with gaps) to
some of the AASBs,
GAAPs and other
legislation where

applicable and/or

appropriate

It does not
identify or address the
technical issues raised
by the client
It displays a lack of
understanding of some
or most of the
technical issues
raised.

It is difficult for the
client to understand.

It does not give
correct clear and/or
decisive advice on
most of the issues
raised and makes little
or no reference to the
AASBs, GAAPs and
other legislation where
applicable.

ACCM4300 Assessment
Information

Page 7 of 7 Updated: 13 October 2021

Communication
Skills/Writing

Written
Business Letter
with letterhead

Overall
Presentation,
Language and
Grammar

The Letter includes
letterhead with a logo
and business name.

Recipient name and
address clearly
identified.