ACCM4200: Magenta and Associates - Kaplan Business School - Financial Accounting

Internal Code: MAS6570

Financial Accounting:

Assume that you are a graduate accountant working for Magenta and Associates a public accounting firm situated at 718 Geelong Street, Melbourne, VIC 3000. The manager of your firm, Ms Lisa Magenta has asked you to draft a letter in response to an email received from a client – Mr Christopher Sampson, the Managing Director of Beachlife Ltd, raising a number of issues regarding his company Questions: 1. At our recent board meeting, several directors raised concerns about an intangible asset relating to a brand name ‘Sun ‘n Surf Shirts’ which has been successfully developed by the business over the past decade. The directors want to recognize $800,000 for this asset as at 30 June 2018, being a ‘directors’ valuation’. Could you please provide advice on the correct presentation of such intangible assets and any potential changes in accounting policy? 2. Our company has recently entered into an agreement to sell equipment to Goodsports Ltd for $90,000 on 1 December 2017. Beachlife Ltd will deliver the equipment on 10 December 2017, with payment due on 30 December 2017. The agreement states that, from the date of delivery, Beachlife Ltd must provide maintenance for this equipment for the first 12 months. Good sports Ltd is entitled to a refund of 15% of the amount paid if Beachlife Ltd does not satisfactorily maintain the equipment for the year as required. Beachlife Ltd estimates the fair value of maintaining the equipment throughout the year to be $7500. The board cannot agree on the appropriate accounting treatment for this sale agreement. Could you please provide advice on the correct presentation of the revenue and related costs?