Re: Accounting Issues: Year Ending 30 June 2019 From: Martin Wahlburg Sent: 18 March 2019 To: Miley Jaspen Dear Miley Thank you for your phone call this morning, as agreed I am emailing you regarding the accounting issues we briefly discussed. By the way to assist the accounting team in our decision-making process could you please make sure you reference any relevant sources relating to your advice, for example, AASBs, Corporations Act, and other relevant articles or websites. Issue 1. Shadow Ltd has recently obtained some patents considered useful in its manufacture of leather handbags. The patents consist of: • Patent HDBG459, acquired from a leather manufacturing firm for $541 000. • Patent UBF871, obtained as part of a bundle of assets acquired from the conglomerate Underarmour Bag Fashions for $1,500,000. Shadow Ltd is also in the process of preparing an application for a patent for a new process of softening leather. It has spent a number of years refining this process. Our company accountant for Shadow Ltd is unsure how to account for patents under AASB’s. Please detailed report on the principles of how to account for patents, using the examples above to illustrate the appropriate accounting procedures. Issue 2. I have also been analysing the financial reports provided by the accountant, who has been with the firm for a number of years. The other company directors have expressed concern over depreciation charges being made in relation to the company’s equipment. In particular, they believe that the depreciation charges are not high enough in relation to the factory machines because new technology applied in that area is rapidly making the machines obsolete. The directors’ concern is that the machines will have to be replaced in the near future and, with the low depreciation charges, the fund will not be sufficient to pay for the replacement machines. Please discuss and summarise our options for accounting for our equipment correctly. 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 Mr Martin Wahlburg Managing Director, Shadow Limited Level 5, 99 Mary Street, Brisbane QLD 4000 ACCM4200 FAR1 – T1 2019 – Assignment Page 4 of 6 Referencing: Any sources that you use need to be acknowledged in order to avoid 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/course/view.php?id=1481§ion=2). 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. Penalties Regarding Referencing: No in‐text referencing – deduct 1 mark Some in‐text referencing only – deduct 1 mark No reference list – deduct 2 marks Incomplete reference list – deduct 1 mark
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