Archive: I need a writer who can hep me do Accounting works
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- Description
- Question 1: (Approximately 400 words)
Broncobax Ltd is in the business of bottling beer, particularly for small boutique breweries that cannot afford sophisticated technical equipment and prefer to concentrate on the brewing of the beer. The beer bottles used by Broncobax Ltd have a built-in insulation device that keeps the contents of the bottle cold even when held in the hand.
In January 2018, Greentech Ltd, a company experimenting with energy sources useful in combating climate change, produced a device which when attached to the outside of a container, displays the temperature of the liquid inside. The temperature is displayed by the highlighting of certain colours on the device. How this device could be used with beer bottles has not yet been determined. However, Broncobax Ltd believes that its employees have the skills that would enable the company to determine the feasibility of such a project. Whether the costs of incorporating the device into beer bottles would be feasible was not yet knownt.
Broncobax Ltd was concerned that competing beer-bottling companies might acquire the device from Greentech Ltd, so it paid the company $5,000,000 for the exclusive rights to use the device in conjunction with bottles.
Required:
The accountant for Broncobax Ltd wants to measure the fair value of the asset acquired. Explain the process that the accountant should follow in determining this fair value using the four steps listed and discussed in the course textbook in section 3.3
‘Application to non-financial assets’.
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Question 2: (Approximately 350 words)
Recently, Palmer Ltd experienced a strike by employees that affected several of its manufacturing plants. The group accountant of Palmer Ltd argued that it was not appropriate to recognise depreciation expense during this period as the manufacturing equipment was not being used during the strike. He argued that during the strike the equipment did not depreciate and therefore an inappropriate matching of expenses and revenues would result if depreciation was to be recognised. His argument was based on the following points:
• It is inappropriate to recognise depreciation and other expenses in periods for which there are no related revenues arising from production;
• The basic driver of depreciation of the manufacturing equipment is wear and tear. As the equipment was not being used during the period, no wear and tear had occurred.
Required:
Explain whether the views of Palmer Ltd’s group accountant relating to depreciation are valid. You should refer to the Conceptual Framework and any relevant accounting standards to support your explanation.
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