Homework answers / question archive / ACC-ACF2100 Financial Accounting – Semester 2, 2021 Group Assignment Weighting: 10% Due Date: Thursday 23 September 2021, before 4pm

ACC-ACF2100 Financial Accounting – Semester 2, 2021 Group Assignment Weighting: 10% Due Date: Thursday 23 September 2021, before 4pm

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ACC-ACF2100 Financial Accounting – Semester 2, 2021 Group Assignment Weighting: 10% Due Date: Thursday 23 September 2021, before 4pm. Word Limit: 1250 words Group Size: 4 students Total marks: 50 marks. Instruction: This assignment is based on the following case study: “Biosensors International Group: Valuation and Impairment Testing of Intangibles” (HBSP No.: NTU053), which is available on Moodle. You are expected to draw on research as well as theory in developing your responses to the three questions provided on the next two pages. Submission: The group leader is required to submit the softcopy of your group work via Moodle. On the cover page of your submission, please include your tutor’s name, tutorial day and time, group number, student ID and names of all group members. The softcopy submission should be a pdf file. The following naming convention should be used to name your softcopy submission. Naming File: Your group assignment submission file should be named Day_Time_Group.Ext where Day is your TUTORIAL DAY, Time is your TUTORIAL START TIME (e.g., 11AM, or 1230PM), Group is your GROUP NUMBER, and Ext is pdf. For example, Monday_930AM_Group_3.pdf Extensions of time and penalties for late lodgement: Unless an extension or special consideration has been granted, or otherwise specified in the learning management system, students who submit an assessment task after the due date will receive a late-submission penalty of 10 per cent of the available marks in that task. A further penalty of 10 per cent of the available marks will be applied for each additional day (24-hour period), or part thereof, the assessment task is overdue. Tasks submitted more than seven days after the due date will receive a mark of zero for that task. ACC-ACF2100 Financial Accounting (Group Assignment) Prepared by Dr Dharmendra Naidu, August 2021 Group Assignment This assignment is based on the case Biosensors International Group: Valuation and Impairment Testing of Intangibles (HBSP No.: NTU053) and some related research. It is important that you read and understand the case before answering the assignment questions. The case highlights that Matthew Tay, who is an analyst, is concerned about the significant increase in intangibles and goodwill from 4% to 62% of total assets of Biosensors International Group (BIG). Matthew wondered what the intangibles and goodwill represented, how they are recognized and how they should be interpreted. He also felt that the impairment review of the goodwill, which arose from the acquisition of JWMS, required special attention. Prepare a report (refer to the format suggested by Monash Business School) to solve Mathew Tay’s concerns about the significant increase in goodwill and its consequences for financial reporting. In your report, critically analyse the accounting treatment of goodwill and the allocation of acquisition cost to goodwill. Also discuss whether the accounting treatment of goodwill in subsequent years could be a concern for financial reporting. Specifically, you could consider the following questions in your report. 1. Critically analyse the accounting treatment of goodwill by considering the following questions. a. What is goodwill? How does goodwill arise? b. What does the goodwill represent that arose from BIG’s acquisition of JWMS? In other words, what did BIG pay for (in addition to the total identifiable net assets)? c. How is goodwill accounted for at acquisition and at subsequent financial statement date? [word limit: 600 words] 2. Critically analyse the allocation of acquisition cost to goodwill by considering the following questions a. Is the allocation of acquisition cost to goodwill subjective? Discuss. b. How does the allocation of acquisition cost to goodwill affect profit and cash flows in subsequent years? For your critical analysis, you could compare the effect of the 2 ACC-ACF2100 Financial Accounting (Group Assignment) Prepared by Dr Dharmendra Naidu, August 2021 accounting treatment of goodwill in subsequent years with the effect of the accounting treatment of property, plant and equipment (or intangibles with finite useful lives) in subsequent years. [word limit: 250 words] 3. The reported goodwill on the Balance Sheet may reveal managers’ private information of a firm’s future cash flows. However, research argues that subsequent treatment of goodwill may provide opportunities for earnings management. Discuss whether the accounting treatment of goodwill in subsequent years could be a concern for financial reporting. [word limit: 400 words] The End. 3 ACC-ACF2100 Financial Accounting (Group Assignment) Prepared by Dr Dharmendra Naidu, August 2021 ACC-ACF2100 Group Assignment Marking Rubric (50 marks) Question/ Criteria: Fail (Less than 50%) Pass (50 – 59%) Credit (60-69%) Distinction (70 – 79%) HD (80 – 100%) 1. Critical analysis of the accounting treatment of goodwill Goodwill is discussed with some examples, but its recognition is NOT discussed. Goodwill is thoroughly defined, and its recognition (how it arises) is correctly discussed. Goodwill is thoroughly defined, and its recognition (how it arises) is correctly and thoroughly discussed. Goodwill is thoroughly defined, and its recognition (how it arises) is correctly and thoroughly discussed. Goodwill is thoroughly defined, and its recognition (how it arises) is correctly and thoroughly discussed. Sufficient discussions on what goodwill represents. Thorough discussions on what goodwill represents. Thorough discussions on what goodwill represents with relevant examples from the case. Thorough discussions on what goodwill represents with relevant examples from the case. Accounting for goodwill is NOT discussed. Accounting for goodwill at acquisition date is discussed. Partial discussion of whether allocation is subjective. Partial discussion of whether allocation is subjective. Complete discussion of whether allocation is subjective. Accounting for goodwill at acquisition date and subsequent financial statement date is discussed. Complete discussion of whether allocation is subjective. Accounting for goodwill at acquisition date and subsequent financial statement date is critically analysed. Complete discussion of whether allocation is subjective. Effect on cash flow or profit is NOT discussed. Effect on cash flow is discussed correctly. Effect on cash flow is discussed correctly. Effect on cash flow is discussed correctly and thoroughly. Effect on cash flow is discussed correctly and thoroughly. Effect on profit is NOT discussed. Effect on profit is discussed correctly. Effect on profit is discussed correctly and thoroughly. Effect on profit is discussed correctly and thoroughly. No critical analysis Some but incomplete critical analysis. For critical analysis, a comparison is made with PPE or intangibles with finite useful lives. A thorough critical analysis by a comparison with PPE or intangibles with finite useful lives. 2. Critical analysis of the allocation of acquisition cost to goodwill No critical analysis. 4 ACC-ACF2100 Financial Accounting (Group Assignment) Prepared by Dr Dharmendra Naidu, August 2021 Question: Fail (Less than 50%) Pass (50 – 59%) Credit (60-69%) Distinction (70 – 79%) HD (80 – 100%) 3. Critical analysis of the accounting treatment of goodwill in subsequent years as a concern for financial reporting Some discussion about accounting treatment of goodwill in subsequent years. Accounting treatment of goodwill in subsequent years is thoroughly discussed. Accounting treatment of goodwill in subsequent years is thoroughly discussed. Accounting treatment of goodwill in subsequent years is thoroughly discussed. Accounting treatment of goodwill in subsequent years is thoroughly discussed. Some discussion about earnings management. Earnings management is defined and briefly discussed. Earnings management is defined and discussed. Earnings management is defined and thoroughly discussed. Earnings management is defined and thoroughly discussed. No discussion about the concern for financial reporting. A brief discussion of the accounting treatment of goodwill in subsequent years as a concern for financial reporting. Good discussion of how the accounting treatment of goodwill in subsequent years could be a concern for financial reporting. A thorough discussion of how the accounting treatment of goodwill in subsequent years could be a concern for financial reporting. Document contains many errors. E.g. some colloquialisms, disorganised, poor grammar. Document contains some errors. E.g. some colloquialisms, somewhat disorganised, some poor grammar. Document contains very few errors. E.g. some colloquial vocabulary, minor organisational issues that do not interfere with communication. Document contains very few errors. E.g. some colloquial vocabulary, minor organisational issues that do not interfere with communication. A thorough discussion of how the accounting treatment of goodwill in subsequent years could be a concern for financial reporting. Some relevant examples are also discussed. Professional quality. Error free, sophisticated use of vocabulary, and welldeveloped concise sentences and paragraphs. Multiple serious layout problems. At least one serious layout problem (e.g. no title). Minor layout problems Consistent formatting 4. Language and layout of the report 5 Consistent formatting Business Decision Making Tutorial Questions Note: Feb’19 Selected questions are taken and/or modified from textbooks indicated in Session Plan. Topic 1.1 Q1. In each of these statements, tell whether descriptive or inferential statistics have been used. a. By 2040 at least 3.5 billion people will run short of water (Source: World Future Society). b. In a sample of 100 on-the-job fatalities, 90% of the victims were men. c. Expenditures for the cable industry were $5.66 billion in 1996 (Source: USA TODAY). d. The average stay in a hospital for 2000 patients who had circulatory system problems was 4.7 days. e. Allergy therapy makes bees go away (Source: Prevention). f. Drinking decaffeinated coffee can raise cholesterol levels by 7% (Source: American Heart Association). g. The national average annual medicine expenditure per person is $1052 (Source: The Greensburg Tribune Review). h. Experts say that mortgage rates may soon hit bottom (Source: USA TODAY). Q2. Classify each sample as random, systematic, stratified, or cluster. a. In a large school district, all teachers from two buildings are interviewed to determine whether they believe the students have less homework to do now than in previous years. b. Every seventh customer entering a shopping mall is asked to select her or his favorite store. c. Nursing supervisors are selected using random numbers to determine annual salaries. d. Every 100th hamburger manufactured is checked to determine its fat content. e. Mail carriers of a large city are divided into four groups according to gender (male or female) and according to whether they walk or ride on their routes. Then 10 are selected from each group and interviewed to determine whether they have been bitten by a dog in the last year. 1 Business Decision Making Tutorial Questions Feb’19 Q3. Classify each quantitative variable as discrete or continuous. a. Number of laptops owned by each household. b. Cost of a student’s textbooks in a semester. c. Number of patients registered at a clinic. d. Monthly electricity bill (in dollars) in a factory. e. Lowest temperatures of 30 days. f. Number of books sold in a day. g. Ages of contestants signed up for a marathon. Q4. Classify each variable as qualitative or quantitative (discrete or continuous). a. Nationality of students enrolled in a program. b. Blood pressures of runners in a cross-country run. c. Weights of boxes in a store room. d. Types of automobiles in a shopping center parking lot. e. Distance travelled by employees every day. f. Number of audience attending the football match. g. Actual volume (in ml) of soft drink in each bottle. Q5. Classify each as nominal-level, ordinal-level, interval level, or ratio-level measurement. a. Number of pages in the 25 best-selling mystery novels. b. Rankings of golfers in a tournament (first, second, third place). c. Temperatures of a country. d. Weights of selected cell phones. e. Salaries of the coaches in the National Football League. f. Times required to complete a chess game. g. Ratings of textbooks (poor, fair, good, excellent). h. Number of gallons of petrol used last month. i. Ages of children in a day care center. j. Categories of magazines in a physician’s office (sports, women’s, health, men’s, news). 2 Business Decision Making Tutorial Questions Feb’19 Topic 1.2 Q1. The number of sticks picked up by participants in a game is recorded below. 8 8 6 4 6 5 8 7 7 4 8 6 7 7 8 8 8 7 8 7 9 5 8 8 9 5 9 8 8 9 6 9 7 9 8 6 Develop a frequency distribution and relative frequency distribution for the data. Class 4 5 Frequency Relative Freq Q2. The table below shows the number of points scored by a group of college students playing an online game. 72 71 62 68 69 76 85 76 83 75 59 58 65 74 61 55 73 71 66 76 63 52 64 75 51 81 67 65 76 51 a. Determine the number of classes required to construct a grouped frequency distribution. b. Find a suitable class width. c. Using the initial class indicated in the table, define the remaining class boundaries. d. Construct a grouped frequency distribution and a cumulative frequency distribution with 5 classes for the data as indicated in the table below. e. Construct a histogram and a frequency polygon using frequency distribution. f. Construct an ogive using cumulative frequency distribution. Class Midpoint Frequency Relative Freq Cumulative Frequency Cumulative Relative Frequency 51 – 57 3 Business Decision Making Tutorial Questions Feb’19 Q3. Listed are the weights of the NBA’s top 50 players (in kilograms). Find a suitable class width to construct a grouped frequency distribution and a cumulative frequency distribution with 6 classes. Complete the table below. Analyze the results in terms of peaks, extreme values, etc. 109 100 114 105 151 75 93 114 100 105 114 105 109 102 80 98 111 98 89 109 118 86 105 95 84 95 118 89 123 102 134 105 95 95 92 120 95 111 135 98 107 114 95 109 102 95 118 86 105 118 a. Determine the number of classes required to construct a grouped frequency distribution. b. Find a suitable class width. c. Using the initial class indicated in the table, define the remaining class boundaries. d. Construct a grouped frequency distribution and a cumulative frequency distribution with 6 classes for the data as indicated in the table below. e. Construct a histogram and frequency polygon using frequency distribution. f. Construct an ogive using cumulative frequency distribution. Class Midpoint Frequency Relative Freq Cumulative Frequency Cumulative Relative Frequency 75 and under 90 Q4. Repeat part e and part f of Question 2 and 3 using relative frequency and cumulative relative frequency. NOTE: Grids for graphs are provided at the end of this tutorial. 4 Business Decision Making Tutorial Questions Feb’19 Topic 2 Q1. Six Physics final exam grades are shown below. 65 86 64 76 50 89 a. Find three measures of center discussed (mean, median and mode). b. Find the measures of variation discussed (range, variance and standard deviation). c. Find the interquartile range. [a. 71.67, 70.5, none; b. 39, 219.47, 14.81; c. 64(Q1), 86(Q3), 22] Q2. The sales (in thousands of dollars) for the past 8 months are listed below. 72 82 89 122 107 95 82 100 a. Find three measures of center discussed (mean, median and mode). b. Find the measures of variation discussed (range, variance and standard deviation). c. Find the interquartile range. [a. 93.63, 92, 82; b. 50, 255.13, 15.97; c. 82(Q1), 103.5(Q3), 21.5] Q3. The number of hours undergraduate students spent on revision a day before the statistics exam is as follow. 7 8 8 10 9 4 12 9 11 5 10 3 a. Find three measures of center discussed (mean, median and mode). b. Find the measures of variation discussed (range, variance and standard deviation). c. Find the interquartile range. [a. 8, 8.5, (8, 9, 10); b. 9, 7.82, 2.80; c. 6(Q1), 10(Q3), 4] Q4. Fill in the blank: Based on the empirical rule we can expect about _________ of the values in bellshaped distributions to be within ± one standard deviation of the mean. 5 Business Decision Making Tutorial Questions Feb’19 Topic 3.1 Q1. Classify each statement as an example of classical probability, relative frequency, or subjective probability assessment. a. The probability that a person will watch the 6 o’clock evening news is 0.15. b. The probability of getting at least a Head when 2 coins are tossed is c. The probability that a bus will be in an accident on a specific road is about 6%. d. The probability of getting a diamond when a card is selected at random is e. The probability that a student will get a C or better in a statistics course is about 70%. f. The probability that a new fast-food restaurant will be a success in Chicago is 35%. g. The probability that Team A will win the basketball match next month is 0.70. 3 . 4 13 . 52 Q2. If two dice are rolled once, find the probability of getting these results. a. A sum of 5 b. A sum of 3 or 12 c. Doubles d. A sum less than 4 e. A sum greater than or equal to 10 Q3. A shopping mall has set up a promotion as follows. With any mall purchase of $50 or more, the customer gets to spin the wheel shown here. If a number 1 comes up, the customer wins $10. If the number 2 comes up, the customer wins $5; and if the number 3 or 4 comes up, the customer wins a discount coupon. Find the following probabilities. a. The customer wins $10. b. The customer wins money. c. The customer wins a coupon. 6 Business Decision Making Tutorial Questions Feb’19 Topic 3.2 Q1. There are 6 packets of peanuts, 8 packets of raisins, and 2 packets of chocolate chips. If a packet is selected at random, find the probability that it is a packet of a. raisins b. raisins or chocolate chips c. peanuts or raisins d. not peanuts [0.5; 0.625; 0.875; 0.625] Q2. Andy bought a packet of chocolate candies with 5 flavors. Mint 35% Lime 25% Orange 20% Cherry 10% Strawberry 10% If he randomly picks a candy from the packet, find the probability that he will get a candy a. with mint flavor b. with cherry or lime flavor c. which is neither orange nor strawberry flavor d. with mint and lime flavor [0.35; 0.35; 0.7; 0] Q3. The table below represents the qualifications awarded (in thousands) by a university in a recent academic year by gender. Men Women Bachelor’s Degree 624 818 Master’s Degree 211 301 Doctorate Degree 24 22 Choose an award at random. Find the probability that it is a. a bachelor’s degree b. a doctorate degree and it is awarded to a woman c. a doctorate degree or it is awarded to a woman d. not a master’s degree e. a degree awarded to a man, given that it is a bachelor degree [0.721; 0.011; 0.583; 0.744; 0.433] 7 Business Decision Making Tutorial Questions Q4. Feb’19 In addition to being grouped into four types, human blood is grouped by its Rhesus (Rh) factor. Consider the figures below which show the distributions of these groups for Americans. O Rh+ A B 37% 34% 10% Rh - 6% 6% 2% AB 4% 1% Choose 1 American at random. Find the probability that the person a. is a universal donor, i.e., the person has O negative blood b. has Rh– and type AB c. has type A or Rh+ d. has A+ blood or AB– blood e. has type O blood, given that the person is Rh+ f. has Rh–, given that the person has type B blood [0.0...