Company Accounting PG Assignment s2 2016 The following questions require you to deal with AASB 15 Revenue from Contracts with Customers, and other relevant documents. You can assume that your company adopted this rule. Reponses based on irrelevant accounting standards, such as AASB 118, or material taught in previous units will incur a 100% penalty. Each group will nominate a member to submit a single word file with the group�s response to the questions. (I do not want separate files for each question.) Submission date and details � as per the unit outline. Question 1 (40 marks) You work for a startup consulting company in a very competitive area. Your firm provides expertise to entities who wish to reduce their carbon footprint. The firm will typically send a team to a client�s workplace to understand their business processes and identify where improvements can be made. After this, the firm produces a detailed report for the client. In order to build business, the firm gets clients to pay 20 percent of the contract price up front and the remaining 80 percent will be paid on receipt of the report. If the client defaults, the firm can keep the 20 percent received. The firm has decided it will not pursue these claims in court, as the legal costs are likely to exceed the benefits. The managing director of the firm is not wildly delighted with these terms, but has approved them, due to the cutthroat nature of this industry. He expects to manage this risk by selecting clients (such as government agencies, and other entities who can use this sort of report in their marketing) who are unlikely to play nasty games, such as paying their bills. Assume that your firm�s financial year ends on the 30th of June 2019. On the 1st of April 2019, the firm received $200,000 from a client for a report that is expected to be delivered to the client at the end of July 2019. The total contracted price is $1,000,000. Internal budgeting shows that your company expects to pay $550,000 to internal staff and $150,000 to external experts to produce the report. These costs are expected to be incurred evenly over the period. An argument has broken out in the accounting team how these contracts should be accounted for. Kelly states that the company should recognise the $200,000 immediately and the remaining amount when the report is presented. On the other hand, Lee states that the company should recognise all of the $200,000 and some of the $800,000 in the current year, as the company�s profits are not expected to be very strong this year. To further complicate things, Ngoc stated that no income at all should be recognised until the report is completed and given to the client.
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