UNIT CODE: ACT204
UNIT NAME: FINANCIAL ACCOUNTING
Weighting : Assessment 20%
Assignment Information : ACT204 FINANCIAL ACCOUNTING Assignment
This Assignment is worth 20% of the total assessment for this unit. This assignment will be marked out of 100 and scaled down to being out of 20.
Q1. The Wentnor Dairy Company Ltd has run for many years dairy farms in Tasmania. In addition to the farms it has vertically integrated by purchasing factories that produce milk products. These products
are then are further developed in other factories owned by the company by producing high grade yoghurts.
The chief financial officer for the company has asked your advice on how AASB 136 Impairment of Assets, should be applied to the company’s various activities. In particular she wishes to correctly identify the cash-generating units (CGUs) for the company.
One issue is whether the milk production section is a separate CGU even though the company does not sell milk directly to other entities but uses the products within its own vertically integrated structure or should it should be included in the milk-based products CGU.
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Required
Write a letter to the chief financial officer of The Wentnor Dairy Company Ltd, including the following:
A. Define a CGU. (2 marks)
B. Explain why impairment testing requires the use of CGUs, rather than being based on single assets. (5 marks)
C. Explain the factors that the chief financial officer should consider in determining the CGUs for The Wentnor Dairy Company Ltd. (6 marks)
Pay particular attention to referencing your advice to the relevant paragraphs of the accounting standard.
Q2. When downloading the annual reports it’s a good idea not to print the whole report as they can be over 100 pages long.
Required
A) Calculate the following ratios for 2017 and 2016:
- Current and Acid Test ratios
- Inventory turnover and days in inventory
- Gross profit percentage, accounts receivable turnover and days sales in receivables
- Debt ratio and debt to equity ratio
- Rate of return on net sales ratio and rate of return on total assets ratio
- Asset turnover ratio and the rate of return on ordinary shareholders equity
- Dividend yield and dividend payout. (24 marks) (13 marks)
B) Using the ratios calculated in Part A and information gathered from elsewhere in the Annual Reports write a report to a potential investor with your recommendations as to whether Woolworths Limited would make a good investment.
C) As a rule of thumb the Current Ratio for businesses should be 2:1 and the Acid Test between1.5 to 1 How would you explain these ratios for Woolworths Limited when compared to this rule? (4 marks) (48 marks)
Required
A) Prepare a Statement of Cash Flows for Flash in the Pan Ltd for the year ended 30th June 2019 using the direct method. (12 marks)
B) The Statement should be accompanied by all the relevant notes (3 in total) including the indirect method. (14 marks) (26 marks)
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