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BUACC5934 Financial Accounting Exam Solution


BUACC5934 Financial Accounting Assignment Help

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Semester 1 2021

Timed Online Assessment

Please read ALL these instructions carefully before you commence:

Time to complete: 3 hours 40 minutes (220 minutes)

During the assessment:

  1. To add your answers to the assessment word document you will find a box under each question where it asks you to Click or tap here to enter text. Click on this box and begin typing your answers.
  2. You can leave Moodle at any time once you have downloaded your assessment, HOWEVER the clock will continue to count down (closing down your internet browser will save you bandwidth issues if your internet is not always reliable).
  3. If you leave Moodle at any time, you MUST return to the assessment area on Moodle and click on Continue the last attempt before the time runs out to upload your completed assessment document.

To complete & upload your assessment:

  1. Save the document to your desktop using Your Name_StudentID_CourseCode
  2. Return to the Moodle assessment area and click on Continue the last attempt button to return to the assessment.
  3. Scroll down to Question 1 and click on the paper icon to upload your completed assessment.
  4. Click Finish attempt and follow the final prompts to submit your assessment.

If you experience technical issues during your assessment, please don’t panic. Email your lecturer explaining the issue. It would be good to provide a screenshot with your email. The lecturer will get in contact with you as soon as possible to discuss how to proceed.

If you are unable to upload your completed assessment document before your time runs out, please email your lecturer with your assessment document attached and a clear explanation as to why you were late. Your lecturer will contact you to discuss.

All Federation University Australia rules apply to the online assessment task: penalties can be applied for late submissions and for breaches of academic integrity inclusive of collusion and/or plagiarism.

Please note for essay type questions, exact words copied from a website, textbook or tutorial solutions will not be accepted. You must answer using your own words, including paraphrasing. The final assessment may be submitted to Turnitin for plagiarism and collusion. For journal entries student can prepare tables in a separate word document and copy-paste. Same can be done for other questions if needed. This is an open book assessment: students can use textbooks, notes and the internet. There is no word limit in the text box, however, students should write brief responses, with the respective length based on allocated marks. This assessment has 85 marks and contributes 55% in final grade for this course.

PART A                                     5 x 8 marks = 40 marks

Question 1

Pursuant to the conceptual framework, for an item to be characterised as a liability the definition of liabilities must be applicable to the transaction or event, and the recognition criteria should also be satisfied.

Applying the definition of liabilities, there are three key components in the definition of ‘liability’, these being:

  1. There must be an expected future disposition of economic benefits to other entities.
  2. There must be a present obligation.
  3. A past transaction or other event must have created the obligation.


Take any two examples of liabilities and test if they meet all three requirements.

(4 x 4 =8 marks)


Click or tap here to enter text.

Question 2

Assume that Gilligan Ltd enters into a contract to buy inventory from an overseas supplier. On 1 February 2023 it acquires the material at a cost of US$500,000 payable in two months’ time. The exchange rate at the time is A$1 = US$1.15. The actual debt is considered to be a trade payable and is a primary financial instrument. The exchange rate on 1 April 2023 is A$1 = US$1.09.


  • As the debt is payable in two months’ time describe the potential risk to Gilligan Ltd.
    • Assume that McCoy Ltd is concerned about possible adverse exchange rate movements, what action could the company take?

(4 x 4 = 8 marks)


Click or tap here to enter text.

Question 3

The ‘true and fair view’ concept is one of two competing but not mutually exclusive legal or professional standards for financial reporting quality that have been subject to debate on their meaning, use and importance. The other is ‘present fairly in accordance with generally accepted accounting principles.


Explain the concept of true and fair and how a company can ensure that the financial accounts are true and fair and of its performance for the financial year ended on that date.

(8 marks)


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Question 4

Earnings management relates to the use of discretionary accounting accruals to manipulate reported earnings figures (Schipper, 1989, pp. 92–93; Jones, 1991, p. 206). Further, Watts and Zimmerman (1986, pp. 230–231) argue that, because corporations are particularly vulnerable to wealth-extracting political transfers in the form of legislation and/or regulation, companies may use earnings management to decrease net income in periods of increased political sensitivity. In support of this claim, recently published research (Deegan and Rankin, 1996; Patten, 2000, 2002) reports evidence indicating corporations appear to use environmental disclosure to offset negative environmental performance.


  • Discuss how earnings management is used as a tool to reduce sensitivity to political pressure. In support of this claim, recently published research (Deegan and Rankin, 1996; Patten, 2000,
  • Regulators may impose political costs on firms. However, there are ways that some firms practice to minimise such costs. Discuss with examples.

(4+4 = 8 marks)


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Question 5

Geelong City Council spent $5 million on a gym and healthy facility for its staff. The objective of this new facility expenditure was to encourage staff to adopt a healthy lifestyle. The use of facility will be free of cost to the staff. It is expected that although there will be no revenue generated from this new facility operating costs are expected to be $650,000 per annum.


  • Discuss if Geelong City Council should record the cost of new facility as an asset, or treat it all as an expense.
  • An alternative is to charge a membership fee for the use of the facilities. Would this change anything related to your decision?

(4+4 =8 marks)


Click or tap here to enter text.

Part B                                                                                45 marks

Question 6                                                                                                 20 marks

ZEN Ltd signs a contract on 30 June 2019, agreeing to build a bridge for XYN at a contract price of $20 million. XYN will be in control of the asset throughout the construction process. ZEN estimates that construction costs will be as follows:

Year EndingCost
30th June 2020$ 5,000,000
30th June 2021$ 8,000,000
30th June 2022$ 3,000,000

The contract provides that XYN will make payments on 30 June of each year as follows:

2020$ 4,000,000
2021$ 10,000,000
2022$ 6,000,000

The contract is completed as expected on 30 June 2022. Assume that actual costs and cash collections with expectations and that cost (an input measure) is used as the basis for assessing progress on the car contract.


  • Calculate the income and gross profit recognised each year 2020, 2021, 2022.
  • Prepare the journal entries for the year ended 30th June 2020.

(15+5 = 20 marks)


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Question 7                                                                      10 marks

Carnarvon Ltd is a listed diversified retail company. Its stores are located mainly in Australia. It has three main types of stores: general department stores, liquor stores and specialist toy stores. Each of these stores has different products, customer types and distribution processes. In accordance with AASB 8/IFRS 8, Carnarvon Ltd has identified three operating segments: general department stores, liquor stores and specialist toy stores.

All three business units earn most of their revenue from external customers. Total consolidated revenue of Carnarvon Ltd is $800 million.

Business SegmentSegment revenue ($000)Profit or loss ($000)Segment assets ($000)
General Dept Store50028800
Liquor Stores2209350
Toy Stores806150
All segments800431300


Determine which segments of Carnarvon Ltd are reportable in accordance with the guidelines provided in AASB 8/IFRS 8. Show your calculations.

(10 marks)


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Question 8                                                             15 marks

Farm Ltd leases some parcels of land from their owner for a period of 10 years at a time. The lease agreement can be cancelled, but a significant penalty will be incurred by Farm Ltd. The lease payments required include a payment up-front of $300 000, followed by another 9 payments of equal value at the end of every year up to the end of the ninth year. The implicit rate in the lease is 10%. PV of 9 payments at 10% is 5.7590. The first lease payment commenced on 1.7.21


  • Calculate the present value of the lease payments at the inception of the lease.
  • Prepare journal entries for the years 30.06.21 and 30.6.22.
  • What is the amount of the lease liability at 30.06.23.

(5+5+5 = 15 marks)


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