Reference no: EM131352840 , Length: word count:2000

Accounting for Managers Team Assignment

QUESTION 1: Big Business Tobacco (BBT) is a large Australian producer of tobacco products including a market-leader brand of cigarettes. With the continuing development of Asian countries such as China and its move to a market-based economy, the company has made the decision to sell its cigarettes in this large market from the beginning of next month. The cigarettes will be sold in packs of 40.

Mary Bender, marketing manager, is discussing the design of the cigarette packet for the Asian market with Randall Hedges, the company's public relations manager. Having agreed on the basic design of the pack, Hedges raised the issue of whether to include the normal health warning on the pack, which has to be displayed under Australian law. He emphasised recent medical findings which predicted many hundreds of thousands of deaths from cigarette smoking in the next few years, particularly in the developing countries.

Mary Bender was strongly opposed to including a 'health hazard' warning on the packs destined for parts of the Asian market. She explained: 'In this business it is the bottom line (i.e. profits) which matters - we have to think of our shareholders. BBT stands to lose a considerable market share to competitors if it includes such a warning. Besides, it is not a legal requirement in many Asian countries to display a health warning on cigarette packs. If Asian law is subsequently amended, then we will be one of the first to comply. Besides, the managing director supports me on this one.'

Hedges expressed a final opinion: 'The company could be better off in the long term by being seen to be acting with corporate responsibility, and demonstrating some concern for its consumers. Besides, such warnings have not been detrimental to the company's performance in Australia, where health warnings have been common for many years.'

Required:

A. Who are the major stakeholders in the debate on the health warnings on cigarette packs?

B. What are the main ethical issues involved in the debate?

C. If you were Randall Hedges, what would you do?

QUESTION 2: Brian Kelly has spent many years of his life panning for gold, with little success. On several occasions, he has found small traces of gold along the usual river banks that he is licensed to pan.

However, on his last trip to the Ballarat River, almost by accident he managed to find a very promising piece of rock which he placed in his satchel. He took the rock into town to be examined and valued by experts, who assured him that the rock was a valuable gold nugget and that it was worth at least $60,000. Brian was elated and opened a bottle of champagne to celebrate with his friends.

About 2 weeks later, he sold the nugget to a jeweller for $75,000 in cash.

Required: Evaluate and justify whether and when revenue exists and on the appropriate time for this revenue to be recognised in the accounts of Brian Kelly.

QUESTION 3: A. As a new management accountant, reply to this comment by a plant manager: 'No "bean counter" knows enough about my responsibilities to be of any use to me. As I see it, our accountants may be needed to keep records for shareholders and the Australian Tax Office, but I don't want them sticking their noses in my day-to-day operations.'

B. 'Knowledge of technical issues such as computer technology is a necessary but not a sufficient condition to becoming a successful management accountant.' Do you agree? Explain your answer.

Question 4: Required: In relation to the financial statements of Stratum Limited given below answer the following questions -

A. Calculate the changes in the financial statements from 2017 to 2016 in both dollar amounts and percentages.

B. Prepare common size financial statements for 2017 and 2016.

C. Comment on any relationships revealed by the horizontal and vertical analyses using a word limit of 200 words.

The comparative financial statements of Stratum Ltd are shown below and on the next page.

STRATUM LTD Comparative Statements of Profit or Loss for the years ended 30 June ($000)
	Note	2017	2016
Revenue	2	16,000	$13,750
Expenses, excluding finance costs	4	$13,705	$11,965
Finance costs		-	-
Profit before income tax expense		$2,295	$1,785
Income tax expense		$878	$535
Profit		$1,417	$1,250

 

STRATUM LTD Statements of Changes in Equity for the years ended 30 June ($000)
Share capital
Ordinary:
Balance at start of period	1500	1500
Issue of share capital	100	-
Balance at end of period	1600	1500
Retained earnings
Balance at start of period	350	200
Total recognised profit for the period	1417	1250
Dividend paid - ordinary	(852)	(1100)
Balance at end of period	915	350

 

STRATUM LTD Comparative Statements of Financial Position as at 30 June ($000)
	2017	2016
Current assets
Cash and cash equivalents	80	100
Trade and other receivables	380	335
Inventories	770	720
Total current assets	1230	1155
Non-current assets
Other financial assets	140	160
Property, plant and equipment	3400	2785
Total non-current assets	3540	2945
Total assets	4770	4100
Current liabilities Trade and other payables (Note 14)	505	500
Total current liabilities	505	500
Non-current liabilities                                                   Long-term borrowings	1750	1750
Total non-current liabilities	1750	1750
Total liabilities	2255	2250
Net assets	2515	1850
Equity
Share capital	1600	1500
Retained earnings	915	350
Total equity	2515	1850

 

Notes to the financial statements ($000)
Note 2:	Revenue	2017	2016
	Sales revenue (net)	$16 000	$13 750
Note 4:	Expenses
	Cost of sales	9 000	8 850
	Selling and distribution expenses	2 150	1 730
	Administration expenses	1 925	1 385
Note 14:	Payables
	Trade creditors	395	360
	Other creditors and accruals	110	140