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Question 1 (10 marks) Lease

Erika Ltd runs a successful chain of sushi restaurants, but has been experiencing significant cash flow problems. The directors are examining a proposal made by an accounting consultant that all the shop premises currently owned by the company be sold and either leased back or the businesses moved to alternative leased shops. The directors are keen on the plan but are puzzled by the consultant’s insistence that all lease agreements for the shops be ‘operating’ rather than ‘finance’ leases.

Required

1) Explain the difference between a finance lease and an operating lease (refer to AASB). vvip

 

(2 marks)

2) Explain, by reference to the requirements of AASB 117, why the consultant prefers operating to finance leases.

(4 marks)

3) Describe THREE disadvantages to the company of entering into finance lease agreements.

 

(4 marks)

The overall word limit for Question 1 is 500 words. Words in excess of this limit will not be marked

 

Question 2 (10 marks) (Consolidations)

Paul Lee is the accountant for Beeves Ltd. This entity has an 80% holding in the entity

Lambs Ltd. Paul is concerned that the consolidated financial statements prepared under

AASB 10 may be misleading. He rests of those shareholders. He therefore wants to prepare the consolidated financial statement believes that the main users of the consolidated financial statements are the shareholders of Beeves Ltd. The key performance indicators are then the profit numbers relating to the interests showing the non-controlling interest in Lambs Ltd in a category other than equity in the statement of financial performance, and for the statement of changes in equity to show the profit numbers relating to the parent shareholders only.

Required

Discuss the differences that would arise in the consolidated financial statements if the non- controlling interests were classified as debt rather than equity, and the reasons the standard setters have chosen the equity classification in AASB 10.

 

1) How the prime users are considered in the preparation of Consolidated Financial Statements of the consolidated financial statements are prepared;

(3 marks)

2) The differences that would arise in the consolidated financial statements if the non- controlling interests were classified as debt rather than equity (Debt vs Equity), and

(3 marks)

3) The reasons the standard setters have chosen the equity classification in AASB 10.

(4 marks)

The overall word limit for Question 2 is 500 words. Words in excess of this limit will not be marked

 

 

 

Management

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Research Essay

Semester 2, 2014 Research Essay Questions: Is deterrence an effective strategy to prevent the proliferation of nuclear weapons to rogue states and international terrorists? Why or Why not? Security scholars are divided on whether the Nuclear Proliferation Treaty is capable of reform or needs to be a ...

View Answer
Q

Information Technology

The relevant SQL queries for the ‘Archie Luxury Motors’ Database System; The required stored procedures, stored function, and triggers.Using the tables provided above, provide SQL statements for the following queries.   a. Display the name of the customer who has purchased the mos ...

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BEX206 Driving Change And Developing organizations

Academic Essay Essay question: What is open systems planning and what assumptions is it based on? Create a convincing argument for its being accepted as a valid change strategy. Assessment Instructions: This assessment requires you to write an argumentative academic essay and in doing so you will re ...

View Answer
Q

Proposal research project

The assignment requires the development of a plan for a research project. The activity is a fictional exercise (proposed projects will not be executed and funded), and seeks to demonstrate your capabilities in research and project management skills solely for the purpose of assessment. The topic ...

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