You are required to finish each of these questions, total 40 marks. Please give the
solutions in detail, show calculations and submit the solutions to Moodle using a
single file, it can be Excel format, Word format or PDF format, no requirement on
word limits. If any reference was used, please refer to Harvard style. Question 1 (10
marks), Question 2 (10 Marks), Question 3 (10 Marks), Question 4 (10 Marks).
1. Hines (1991) argues that conceptual frameworks ‘presume, legitimize and reproduce
the assumption of an objective world and as such they play a part in constituting the
social world … conceptual frameworks provide social legitimacy to the accounting
profession’. Try to explain what she means.
2. On 1 July 2011 Sprintfast Couriers, which has a year-end of 30 June, purchased a
delivery truck for use in its courier operations at a cost of $65 000. At the end of the
truck's useful life it is expected to have a residual value of $5000. During its six-year
useful life, Sprintfast Couriers Limited expected the truck to be driven 246 000
kilometres
REQUIRED
Calculate the annual depreciation charge for each of the six years of the truck’s life using
the following methods:
(a) the straight-line method
(b) the sum-of-digits method
(c) the declining-balance method
(d) the units-of-production method using kilometres as the basis of use and assuming the
following usage:
Year
2012
2013
2014
2015
2016
2017 Kilometres
28 000
34 000
42 000
55 000
68 000
19 000
246 000 3. Star City Limited commences construction of a multi-purpose water park on 1 July
2015 for Pretoria Limited. Star City Limited signs a fixed-price contract for total
revenues of $50 million. The project is expected to be completed by the end of 2018 and
Pretoria Limited controls the asset throughout the period of construction. The expected
cost as at the commencement of construction is $38 million. The estimated costs of a
construction project might change throughout the project—in this example, they do
change. The following data relates to the project (the financial years end on 30 June):
2016
2017
2018($
($m)
($m)
m)
Costs for the year
10
18
12
Costs incurred to date
10
28
40
Estimated costs to complete
28
12
–
Progress billings during the year
12
20
18 Cash collected during the year 11 19 20 REQUIRED
(a)
Using the above data, compute the gross profit to be recognised for each of
the three years, assuming that the outcome of the contract can be reliably estimated.
(b)
Prepare the journal entries for the 2016 financial year using the
percentage-of-completion method.
(c) Prepare the journal entries for the 2016 financial year, assuming the stage of
completion cannot be reliably assessed.
4. Innovator Ltd incurred expenditure researching and developing a cure for a common
disease found in turnips. At the end of 2013 management determined that the research
and development project was unlikely to succeed because trials of the prototype had been
unsuccessful. During 2014 a breakthrough in agricultural science improved chances of
the product succeeding and development resumed. The project was completed in 2014. At
the end of 2014 costs incurred on the project were expected to be recoverable. Innovator
expects that 10 per cent of the project revenue will be received in 2015, 20 per cent in
2016, 30 per cent in 2017, 30 per cent in 2018 and 10 per cent in 2019. After five years
the product will be at the end of its useful life because the disease found in turnips will
have been eradicated. Costs incurred were as follows:
REQUIRED
(a) How much research expenditure and development expenditure should be recognized
as an expense in 2013?
(b) How much research and development expenditure should be recognized as an expense
in 2014?
(c) State how much expenditure should be carried forward (deferred) and reported in the
statement of financial position at the end of 2013 and 2014.
(d) Prepare journal entries for the amortization of deferred costs in 2015 and 2016,
assuming that actual revenues are as expected. State the amount of deferred expenditure
carried forward in the statement of financial position in relation to the deferred costs.
(e) Assume that after charging amortization based on sales revenue at the end of 2014 the
discounted net cash flows expected to be generated from the deferred expenditure were
estimated as $15 000. Prepare any journal entries required to account for this information.

 

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