The main purpose of this assignment is to assess your
ability to recognise and value accounting for bad debts and make some economic
decisions for a small business. It is expected that the students will do some
research and study some other text book to have a better understanding of the
subject matter.
The course specification (available from the course
homepage) contains information about:
o Assignment late policy o Assignment extension policy
o Plagiarism and academic misconduct (such as collusion and
cheating)
To ensure that the submission in this case study is your own
work, plagiarism detection software may be used.
Assignment Preparation and Submission
Please read the following points carefully.
o The assignment must be lodged using USQ’s online
submission system (MOODLE). o The assignment must be made by word processing
software like MS Word (2003 and above). o Page margin should be 1 inch (2.54
cm) all around.
o The font should be ‘Times New Roman’. o The line spacing
should be double spaced. o The table (if any) should be nicely formatted.
o Referencing: for referencing please visit USQ library
http://www.usq.edu.au/library/referencing, referencing.
o The assignment is due at 11.59PM on Wednesday 7th October
2015 (USQ time – please refer to the USQ Time icon on the course homepage).
Extensions
Extensions are only granted in extenuating circumstances and
will not be granted after the due date – you must contact the course leader on
or before the due date to seek an extension. Crashing of computers, too busy
with other assignments and such reasons are not considered extenuating
circumstances. You must organise your study time around these other
commitments. Extensions will only be considered where supporting documentation
is provided (e.g. doctor’s certificate). You must also provide a copy of your
assignment (even if incomplete) to show that you have attempted the assignment
to a reasonable level, prior to the extenuating circumstances. Work commitments
are generally not considered to be extenuating circumstances; if you have had
to do extensive amounts of overtime or work-related travel you must provide a
supporting letter from your employer, which provides details of such
circumstances.
ACC5202 Accounting 2015 SEM 2 Assignment
Case study requirements
The case study requirements, which are set out in detail in
this document, are as follows:
Requirement Marks
Requirement 1: 6
Requirement 2: 4
Requirement 3 4
Requirement 4: 4
Requirement 5: 6
Requirement 6: 6
Awarding of Marks
The purpose of this assignment is to test your ability to
meet the objectives of module 5 and to a similar extent the objectives of
modules 1 and 6. The assignment contributes 30% to your final grade. Marks will
be awarded for:
• Presentation of your assignment
• Answering the questions correctly
• Evidence of doing research including reference to relevant
accounting standards • Clarity of argument.
Assignment instructions
PLEASE READ THESE INSTRUCTIONS VERY CAREFULLY BEFORE YOU
START
If you have any questions about this assignment, please post
a message to the assignment discussion forum. You can start this case study now
and work on it progressively over the next few weeks. DO NOT leave this to the
last weekend. This is a large assignment and contributes 30% to your final
grade. Make sure you have read all the instructions a few times and checked the
‘discussion forum’ before you send a message. While making a post to the
discussion forum, please refrain from asking or answering questions that
directly may help doing the assignment.
2
ACC5202 Accounting 2015 SEM 2 Assignment
The Assignment
Harry, Sue and Lee are in partnership and started a new
business called “Computer World”. Initially they are selling a single notebook
item which they purchase from a renowned manufacturer. Although in first year
of operations, they were reluctant to extend credit, in their second year of
operations they are exploring if the business can extend credit to improve
sales. The partners are in dilemma whether the business should follow up the
collection itself or make other arrangements. One option is to make sales by
extending credit through “Easy Money”, a credit union. If a customer makes a
purchase through “Easy Money”, the business will get immediate cash subject to
4 percent Easy Money’s commission to be deducted from the gross amount. The
second option is to follow up the sales and collection by the business itself.
The third option is to offer a discount of 3.5 percent to customers who will
make cash purchases and do not pay by credit card and remainder will obtain
credit through Easy Money. The business has following hypothetical figures
available for the year:
Projected credit sales $350,000; projected new staff salary
if the business wants to follow up the collection $30,000; 30 percent of
customers will pay cash.
Requirement 1: What option the business should choose (show
your calculation). Are there any other factors that need to be considered while
making a credit sales decision? (6 Marks)
Requirement 2: If the business decides to follow up the
credit by the business itself and appoints a clerk to follow up the collection,
is there any issue to consider as part of internal control? (4 Marks)
The partners are all aware that simply extending credits by
firm itself will lead to some bad debt expenses and they are in dilemma as
which accounting method to follow to record the bad debts. All the partners
have studied a basic accounting course at a university. Sue argued that the
business should follow the ‘Direct Write Off’ method as it allows the recording
of the ‘Bad Debt’ as and when it occurs.
Requirement 3: Do you agree with Sue? Why or why not? (4
Marks)
On their discussion about bad debt recording Harry argues
that the ‘Allowance Method’ is problematic as it requires the making of
estimates and estimates are different under different estimation techniques.
Requirement 4: Please provide explanations as how these
estimates may not result in any undue bias in accounting record. (4 Marks)
On their discussion about bad debt recording Harry further
argues that if the business follows the ‘Allowance Method’, the business should
produce a “Retrospective Statement” to show the difference in estimation of bad
debt.
Requirement 5: Please explain whether a “Retrospective
Statement” will be required following AASB 108. (6 Marks)
Requirement 6: To mediate, Lee argues that the business
should be able to use both ‘Direct Write
Off’ and the “Allowance Method” to record the bad debt.
Discuss if it is true. (6 Marks)
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