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Acct 2159 - Conceptual Framework

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RMIT International University Vietnam

ASSIGNMENT COVER PAGE

Your assessment will not be accepted unless all fields below are completed

Subject Code:

ACCT2159

Subject Name:

Financial Accountability and Reporting

Location where you study:

RMIT Vietnam – HN Campus

Title of Assignment:

Individual Assignment

File(s) Submitted

1

Student name:

Nguyen Xuan Phuong  s3636652

Learning Facilitator in charge:

Marlehan bin Mohamed

Assignment due date:

8/4/2017

Date of Submission:

3/4/2017

Number of pages including this one:

5

Word Count:

1100

Question 1:        

Conceptual Framework defines an asset as resources controlled by the entity as a result of past events, from which future economic benefits are expected to flow to the entity. In AASB 116, the cost of an item of property, plant and equipment shall be recognised as an asset if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably (Australian Accounting Standard Board 2010)

Freeland can be recognised as an item asset by Big Safari since

  1. Big Safari purchases Freelands for the purpose of establishing an ecotourism business on the land. Therefore, Freeland will bring future economic benefit for Big Safari since the business functions on the land.
  2. On 1 July, 2012, Big Safari buys Freelands with the price of $10,000,000. Freelands can be measured reliably based on the price Big Safari purchases it.

Freeland can be recognised as an item of property, plant and equipment of Big Safari. An item of property, plant and equipment should initially be recorded at cost (AASB 2010). Therefore, Big Safari will record Freelands at the cost of $10,000,000.

Plants and animal in Freelands cannot be recognised as an asset of Big Safari since

  1. It is probable that the future economic benefits associated with Freelands will flow to Big Safari since the animal can be used for sightseeing.
  2. The cost of the plants and wild animals cannot be measured reliably because some animals are forbidden to trade.

Question 2

According to AASB 116, useful life is the period over which an asset is expected to be available for use by an entity (AASB 2010). Different useful lives are indicated for the individual items of each safari properties since each items is in separated class of property plant and equipment.Since the items are in different class of property, their components are different from other and therefore their useful lives are different.  The different useful life will be used to calculate the deprecation of different items of the safari properties.

Question 3        

An item of property, plant and equipment shall be measured at cost (AASB 2010). Cost includes its purchase price, any costs directly attributable to add to, replace part of, or service it (AASB 2010).

Since the electricity generator is an item of property, plant and equipment, its acquisition cost should include the installation cost since it is directly attributable to make the generator operate. Also, the cost of disposal of the machine ($2,000) can be considered as part of the acquisition cost since according to IAS 16, it is  “the initial estimate of dismantling and removing the asset and restoring the site on which it is located, to its original condition”. (IASB 2010)

Acquisition cost =$100,000 +$23,000 +$2,000=$125,000

Question 4

        The safari tents are items of property, plant and equipment.

An item of property, plant and equipment shall be measured at cost which includes its purchase price, any costs directly attributable to add to, replace part of, or service it (AASB 2010).

The costs of acquisition of 18 canvas safari tents = Purchase price + transport costs

= $1,000,000 + $10,000 = $1,010,000

Question 5

In AASB 138 paragraph 57, development expenditure can be deferred if the entity meets all the criteria (AASB 2010).

The website development cost can be classified intangible asset since the website is technically feasible; it will generate probable future economic benefits since the website is Big Safari’s main link to the customers.  The website can be measured reliably based on its development cost $100,000 and Big Safari has enough resources to continue develop the website.

Question 6

According to AASB 138, critical attributes of an intangible asset are: identifiability, control, future economic benefits (AASB 2010). The second advertisement campaign cannot be classified as intangible asset. Although there will be future economic benefits flow into the business as the result of the second campaign, the campaign is not separated from the cost of developing the business as a whole.

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