Question 1 It is argued by some researchers that even in the absence of regulation, organisations will have an incentive to provide credible information about their operations and performance to certain parties outside the organisation; otherwise, the costs of the organisation's operations will rise. What is the basis of this belief?   Question 2 On 1 July 2013, Bells Beach Tourist Operations acquired an aircraft that can be used for taking wealthy surfers to remote surfing destinations with lovely waves and limited crowds. The aircraft cost $12 000 000. An engineer's analysis commissioned by the company determined that the aircraft could be broken down into the following components: airframe, engines and fittings. The airframe comprised 55 per cent of the cost,…

Question 1 (8 marks)   A hospital is expecting to have $25,000 cash in hand on 1st April 2015 and it requires you to prepare an estimate of cash position in respect of three months from April to June 2015, from the information given below:   Patient services       Purchases       Wages       Expenses February                 70,000                       40,000              8,000         6,000 March                      80,000                       50,000              8,000         7,000 April                         92,000                       52,000              9,000         7,000 May                          100,000                     60,000              10,000       8,000 June                        120,000                     55,000              12,000       9,000   Additional Information: (a) The hospital pays for purchases two months after the purchase. (b) 25% of patients pay in cash in…

DRUMMERS’ CHOICE LTD 17 TIPPERS STREET ST ABLANS 3021 Damian Drickers is a semi-retired music teacher and is starting a wholesale drum set sales business on the 1st September 2016, he is contributing the following assets and liabilities to commence the business: Cash at Bank $2,000, Motor Vehicles $30,000, Office Supplies $300, Motor Vehicles Financing Loan $10,000. The terms of the Loan are: interest rate of 12% per annum payable at the end of each month and repayment of principle of $90 at the end of each month. He has employed your accounting firm to design and set up the accounting journals and ledgers, and to complete the financial statements for the month ended 30th September 2016. Damian supplies two types…

CONSOLIDATION (20 MARKS)   On 1 July 2011, Amy Ltd acquired all the issued ordinary shares (cum div.) and gained control of Zara Ltd for a consideration of $528,000. At that date the shareholders’ equity of Zara Ltd was:   Share Capital                                    $310,000 General Reserve                                   38,000 Retained Earnings                                68,000   At acquisition date, all the identifiable assets and liabilities of Zara Ltd were recorded at amounts equal to fair value except for: Carrying                          Fair                                                                             Amount                       Value Goodwill                                              40,000                      82,000 Inventory                                         $100,000                  $120,000 Land                                                     80,000                    120,000 Machinery (cost $30,000)                    23,000                      25,000 Plant & Equipment (cost $460,000)  280,000                    286,000 Trademark (cost $225,000)                150,000                    180,000   In addition at the date of acquisition, Zara Ltd had a provision for dividend of $20,000 and…

Preet Gupta is a Project Manager for ABC consultants. She has been asked to help choose one of the four potential project candidates. The management used Payback period technique for project selection. Which of the following projects should Preet recommend to the management and why? Building an apartment. Project involves making an investment of $200,000. After six months, there will be monthly rental returns of $5000. Building a bridge. Project involves making an investment of $1,000,000. After two years, there will be monthly returns via toll for the bridge of $50,000. Building a house. Project involves making an investment of $500,000. After one year, there will be monthly rental returns of $10,000. Building a school. Project involves making an investment of…

1. (Bond valuation) The 8-year $1,000 par bonds of Vail Inc. pay 11 percent interest. The market's required yield to maturity on a comparable-risk bond is 7 percent. The current market price for the bond is $1,130. What is your yield to maturity on the Vail bonds given the current market price of the bonds? (Round to two decimal places.) What should be the value of the Vail bonds given the yield to maturity on a comparable risk bond? (Round to the nearest cent.) Should you purchase the bond at the current market price?   2. (Annuity interest rate) Your parents just called and would like some advice from you. An insurance agent just called them and offered them the opportunity…

HOME GYM LTD 17 HALL STREET MOONEE PONDS 3039 Max Matters is a semi-retired physical education teacher and is starting a wholesale home gym sales business on the 1st September 2016, he is contributing the following assets and liabilities to commence the business: Cash at Bank $4,000, Motor Vehicles $60,000, Office Supplies $600, Motor Vehicles Financing Loan $20,000. The terms of the Loan are: interest rate of 12% per annum payable at the end of each month and repayment of principle of $180 at the end of each month. He has employed your accounting firm to design and set up the accounting journals and ledgers, and to complete the financial statements for the month ended 30th September 2016. Max supplies two…

Crossbow Ltd is an entity that specialises in the manufacture of leather footwear for women. It has aggressively undertaken a strategy of buying out other companies that had competing products. These companies were liquidated and the assets and liabilities brought into Crossbow Ltd. At 30 June 2015, Crossbow Ltd reported the following assets in its statement of financial position:                      Land                                                                      $200 000                    Inventory products                                                 180 000                    Brand ‘Crossbow Shoes’                                       160 000                    Shoe factory                                                            700 000                    Machinery for manufacturing shoes                    400 000                    Goodwill on acquisition of competing companies  40 000                                                                                                 $1 680 000 Because of the competition from overseas as customers pursue a strategy of buying online rather than visit Crossbow Ltd’s stores,…

Emu Electronics is an electronics manufacturer located in Box Hill, Victoria. The company’s managing director is Shelly Chan, who inherited the company from her father. The company originally repaired radios and other household appliances when it was founded more than 50 years ago. Over the years, the company has expanded, and it is now a reputable manufacturer of various specialty electronic items. Robert McCanless, a recent MBA graduate, has been hired by the company in the finance department. One of the major revenue-producing items manufactured by Emu Electronics is a smart phone. Emu Electronics currently has one smart phone model on the market and sales have been excellent. The smart phone is a unique item in that it comes in a…