MGT401 - Financial Accounting II

SEMESTER FALL 2019 FINANCIAL ACCOUNTING II (MGT401) ASSIGNMENT NO. 01 DUE DATE: NOVEMBER 28, 2019 Assignment Topic: “Related Parties” and “Inventory Valuation” Part A: MARKS: 20 The following transaction occurred between “C” Ltd and its parent, “T” Industries, for the financial year ended 31st December, 2015.  C Ltd borrowed an amount of Rs. 275,000 as a medium term loan from clean bank on 31st December 2015.  The bank was not willing to grant the loan unless T Industries signed a guarantee against the loan.  The loan is repayable in 24 monthly installments, the first on 31st January 2016. The market related interest rate on this loan is 20% per year compounded monthly.  T industries do not make use of the debt in the financing of its operations. Requirement: Discuss whether or not the above mentioned related party transaction requires disclosure in the financial statements of the parent company “T” Industries. Part B: Fast Trading Corporation purchases motorcycles from various countries and exports them to Europe. Fast Trading Corporation has incurred these expenses during 2005: (a) Cost of purchases (based on vendors’ invoices) Rs. 100,000 (b) Trade discounts on purchases Rs. 5,000 (c ) Import duties Rs. 2,000 (d) Freight and insurance on purchases Rs. 1,000 (e) Other handling costs relating to imports Rs. 3,500 (f) Salaries of accounting department Rs. 5,000 (g) Sales commission payable to sales agents Rs. 1,000 (h) After-sales warranty costs Rs. 500 Required: Fast Trading Corporation is seeking your advice on which costs are permitted under IAS 2 to be included in cost of inventory.

Re: MGT401 GDB 1 Solution and Discussion Total Marks 4 Starting Date Wednesday, June 03, 2020 Closing Date Tuesday, June 09, 2020 Status Open Question Title Property, Plant and Equipment Question Description Matter of discussion Under current situation of COVID19, it is expected that changes in the accounting standards will be required now to account for the effects of this pandemic. Considering the current situation, you are required to discuss how this pandemic will affect the disclosure of property, plant and equipment in financial statements of business entities and will it affect the treatment of borrowing cost utilized for development of property, plant and equipment. Note: For acquiring the relevant knowledge, do not rely only on handouts but also watch the course video lectures and read additional material available online or in any other mode. Important Instructions: · Your discussion must be based on logical facts. · The GDB will open and close on above specified date and time. Please note that no grace day or extra time will be given for posting comments on GDB. · Use the font style “Times New Roman” and font size “12”. · Your answer should be relevant to the topic i.e. clear and concise. · Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course. · Books, websites and other reading material may be consulted before posting your comments; but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0) even if you provide references. · You should post your answer on the Graded Discussion Board (GDB), not on the Moderated Discussion Board (MDB). Both will run parallel to each other during the time specified above. Therefore, due care will be needed. · Obnoxious or ignoble answer should be strictly avoided. · You cannot participate in the discussion after the due date via email. · Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over. · For planning your semester activities in an organized manner, you are advised to view schedule of upcoming Assignments, Quizzes and GDBs in the overview tab of the course website on VU-LMS.

Total Marks 3 Starting Date Tuesday, January 21, 2020 Closing Date Monday, January 27, 2020 Status Open Question Title IAS37 Question Description GDB Question An offshore oil exploration company is required by its license to remove the rig and restore the seabed. Management has estimated that 85% of the eventual cost will be incurred in removing the rig and 15% through the extraction of oil. The company’s practice on similar projects has been to account for the decommissioning costs using the ‘unit of production’ method whereby the amount required for decommissioning was built up year by year, in line with production levels, to reach the amount of the expected costs by the time production ceased. Keeping in mind the past experiences, the company has created the provision for this purpose. Requirement: Being a financial analyst, you are required to analyze the above decision of the company by answering following questions: Is there a present obligation as a result of a past event? Is there a probable transfer of economic benefits? Can the amount of the outflow be reasonably estimated?