ACC3100 S2, 2019 Final Exam Solutions
Question 1a) Solution
Accounting standards would be more consistent and logical because they are developed from an orderly set of concepts. 1 mark
Increased international comparab
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ACC3100 S2, 2019 Final Exam Solutions
Question 1a) Solution
Accounting standards would be more consistent and logical because they are developed from an orderly set of concepts. 1 mark
Increased international comparability of accounting standards should occur, as they are based on a CF that is similar in other jurisdictions (e.g. IASB and FASB). 2 marks
The IASB and AASB would be more accountable for their decisions, as specific requirements should be more explicit, as should any departures.1 mark
The process of communication should be enhanced between IASB and AASB.1 mark
The development of accounting standards should be more economical as CF provides a guide for decision making. 1 mark
6 marks
Question 1b) Solution
2 marks each (1 mark qualitative characteristics + 1 mark explanation)
Lack of consistency and comparability: Different measurements are applied across years and firms for the exact same item and this lead to lack of consistency and comparability among companies
Low understandability: Complicates the interpretation of accounting summary amounts, e.g., profit or loss, since they are generated by both accounting- and economic- induced income or expense. Complicates interpretation lead to low understandability
Faithful representation: Choices can be opportunistic, since self-interested managers try influence contractual outcomes (e.g., bonus, debt) or manipulate users' perceptions. This compromises the faithful representation of accounting information.
Also accept increased relevance: Relevant financial information is capable of making a difference in the decisions made by users.
Any 3 x 2 marks = 6 marks Total 12 marks
Question 2 Solution
a) The calculation, using the implicit rate of interest of 7% therefore is:
PV of min lease payments:
22,000 x 1 = June)22,000 x 2.6243 = payments) 7,500 x 0.7629 = Plus: $ 22,000.00 (PV of Payment on 30
57,734.61 (PV of remaining 3
5,721.75 (PV of guaranteed residual)
PV of unguaranteed residual:
7,500 x 0.7629 = 5,721.75
$ 91,178.10
4 marks
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