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You must prepare a Statement of Advice (SoA) that addresses all the questions raised in the letter on the following three pages of this document. Assessment Description Assume that you are a team of graduate accountants working for Pinnacle

Assessment 3 Case Study Information

Subject Code:


Subject Name:

Advanced Financial

Assessment Title:

Assessment 3

Assessment Type:

Statement of Advice

Word Limit:

2,000 words (+/- 10%)



Total Marks:



Individual via Turnitin on

Due Date:

Tuesday of Week 13 at 19:55

Your Task

You must prepare a Statement of Advice (SoA) that addresses all the questions raised in the letter on the following three pages of this document.

Assessment Description

Assume that you are a team of graduate accountants working for Pinnacle Pty Ltd, an independent consulting & accounting firm located at 11 George Street, Sydney, NSW 2000. Among other things, your firm provides its clients with advice regarding accounting issues, including applying the Australian Accounting Standards in preparing Financial Reports. You must prepare a Statement of Advice (SoA) for National Ltd to address several accounting issues raised by Ms. Sullivan Sampson on behalf of the company’s directors. Ms. Sampson has raised these issues in a letter in the following three pages.

The maximum length for the SoA is 2,000 words (+/- 10%). You should address all the technical issues in your advice, followed by a Reference List. Marks will be awarded based on two components:

Technical component 30% – This includes the technical discussion in your SoA, the explanation of each issue, and the sources used. You must analyse the information provided and recommend the correct accounting treatment. You must justify your recommendations by referencing specific paragraphs of relevant accounting standards. You must explain the rationale behind each accounting standard requirement.

Communication Skills (Writing Skills) component 10% – marks will be awarded based on your ability to gather information and effectively communicate strategies to the client as part of the SoA. It will also cover the generic skill of writing, clear meaning, structure and organisation, appropriate tone and grammar, spelling, and punctuation, etc., throughout the whole assignment.

Refer to the rubrics at the end of this document for a breakdown of marks.

Letter received from Ms. Sullivan Sampson (National Ltd)

Ms. Sullivan Sampson

On behalf of the Directors of National Limited  58 Dixon Avenue, Warwick Farm NSW 2123

1 July 2023

The Manager

Pinnacle Pty Ltd, Accounting firm

11 George Street, Sydney, NSW 2000

Dear Sir/Madam

I am writing to seek your advice regarding numerous accounting issues for the year ended 30 June 2023. As you know, most of our directors have limited accounting knowledge and are a bit confused with the accounting treatment for several items that our junior accountant has proposed. Our senior accountant is on sick leave, and we are unsure when she will be back. The directors want to ensure that the junior accountant’s proposal is in line with the requirements of the Australian Accounting Standards. They would also like to understand the reasoning behind the appropriate accounting treatments. The items of concern are as follows:

Item 1

During the year, the company developed a new project called “Jonny King”. We commenced work to improve water filtering services on 1 July 2022, resulting in a patent for the Jonny King filter process in June 2023. The company expects approximately 10% increased sales revenue from selling Jonny King filters in the current water filtering market.

Our marketing director says there is a possibility we can recognise the following costs (all) as an asset, but he has not been clear on how to make this determination. Can you please explain whether all the cost below can be recognised as part of an asset? Please explain the requirements with examples that would be relevant to this case.

July 2022 

Research conducted to develop filters 

$340 000

Sep 2022

The search for application of research


Nov 2022

Formulation of improved Jonny King


Dec 2022

Purchase of machinery to construct Jonny
King filters* note 1


Jan 2022

Design and construction of final selection
of possible alternatives 

$156 000

Feb 2023

Operation of a pilot plant that is not for
commercial production 

$79 000

Apr 2023

Testing of pre-use Jonny King filters


July to April

Total wages paid to scientists and
technicians* note 2


June 2023

Registration of a trade design fees

$1 500

June 2023

Lawyer fees incurred to protect Jonny King
filters brand against cheap copies

$15 000

June 2023

Selling and administrative costs allocated


June 2023

Initial operating losses 


*  Note 1: The machine was purchased on 1 December 2022 with a useful life of 6 years and no residual value.

*  Note 2: The breakdown of Wages paid is as follows:



September 2022

November 2022

January 2023

February 2023











Item 2

On 12 May 2023, the board of directors decided to close down a division making a particular product. On 28 May 2023 a detailed plan for closing down the division was agreed by the board; letters were sent to customers warning them to seek an alternative source of supply and redundancy notices were sent to the staff of the division. Some staff will be relocated, and the company will pay for relocation costs to relevant staff.

The lease on the old factory continues for the next four months until it is closed. Unfortunately, the lease cannot be cancelled, and the factory cannot be re-let to another user.

The costs associated with this shutdown are expected to be as follows:

(a)  Payout of staff annual leave $450,000.

(b)  Redundancy payout $800,000.

(c)   For those staff who will be moving to another division, retraining will be required at a cost of $500,000.

(d)  As another division is located 200km from the division being closed down, National Ltd agreed to pay for the costs of relocating those employees to another division.

(e)  The lease on old factory has five years to run. The cost of terminating the lease is expected to be $300,000.

(f)    The financial and management information systems of the division being closed need to be reconfigured to be comparable with another system, so that it can be used in the new division. This is estimated to cost approximately $1 million.

(g)  Expected loss due to closing down $979,000.

The above costs will be paid during August 2023. We are unsure whether we need to include the above costs in the 2023 annual reports. Please explain any disclosure requirements for such events as at 30 June 2023.

Item 3

As you know, we have recently become a listed company, and as a result of this, we issued 1,000,000 ordinary shares to the public for the first time at an issue price of $10. The shares were payable as follows:

$5 payable on application (closed on 28 January 2023)

$2 payable on allotment (received by 31 March 2023)

$3 payable on call made on 15 June 2023 and payable by 30 June 2023

All applicants paid only application money except a holder with 10,000 shares who paid $10 (full share price).

On 31 March 2023, we have recorded share capital of $10,000,000 in the book. However, we are unsure whether this amount has been correctly accounted, therefore advice on journal entries will be highly appreciated.

In addition, the call money due date was on 30 June and one of shareholders is not able to pay the call money on 4,000 shares he purchased. The prospectus state that shares will be forfeited and refund would be made to those who failed to pay call money. The underwriters informed us that they could sell 4,000 shares at $9 per share with a fee of $2,900.

It would be great if you could provide journal entries of the share issue process as examples in your explanations.

Yours sincerely,

Sullivan Sampson

Additional Requirements

1)   You must include the following in your Statement of Advice (SoA):

a)       Cover Page should include:

i)   name/logo of your accounting and consulting firm ii)  The words “Statement of Advice” iii) Who the document is prepared by iv)Who the document is prepared for v) Date

vi) Brief information on what the document is about

b)       Table of Contents

c)       Recommendations and explanations – include in-text referencing d) Conclusion

e) Reference list

2)   Any sources that you use need to be acknowledged in order to avoid plagiarism. Information on referencing can be found under “Study Resources – Academic Skills” on MyKBS at this link.

3)   You must identify and refer to specific paragraphs of the relevant accounting standards in your advice.

Important Study Information

Academic Integrity Policy

KBS values academic integrity. All students must understand the meaning and consequences of cheating, plagiarism and other academic offences under the Academic Integrity and Conduct Policy.

• What is academic integrity and misconduct?

• What are the penalties for academic misconduct?

• What are the late penalties?

• How can I appeal my grade?

The answers to these questions can be accessed athttps://www.kbs.edu.au/about-us/schoolpolicies.

Length Limits for Assessments

Penalties may be applied for assessment submissions that exceed prescribed limits.

Study Assistance

Students may seek study assistance from their local Academic Learning Advisor or refer to the resources on the MyKBS Academic Success Centre page. Further details can be accessed at https://elearning.kbs.edu.au/course/view.php?id=1481


Component (30%)



50% – 75%










Items 1, 2 &


22.5 to 30 marks

15 to 22 marks

Less than 15 marks

All technical issues
raised clearly

identified and


Clear, correct, and
decisive advice

provided, displaying an outstanding

understanding of

each of the technical
issues raised, so

that it is easy for the
client (non-

accountants) to

Reference has been correctly made to the AASBs with detailed paragraph

Most technical issues raised

reasonably clearly, identified, and


Mostly correct advice
displaying a


understanding of

some of the technical
issues raised, so that

it is relatively easy for the client

accountants) to

understand. Reference has been
correctly made (with gaps) to the AASBs

with some paragraph

Most technical issues not identified or

Displays a lack of
understanding of

some or most of the technical issues

raised making it

difficult for the client to understand.

Little or no reference to the AASBs.


Component (10%)


50% – 75%







of advice structure (4 marks)

3 to 4 marks

2 to 2.9 marks

Less than 2 marks

A proper format for a SoA has been

used. SoA clearly identifies each issue.

Format is effective and professional.

In-text referencing included where required.

Complete reference

list in the right format.

Format of SoA could be improved.

Most issues clearly

Format effective and professional with

some exceptions.

In-text referencing mostly included

where required.

Reference list partly
incomplete or not

always in the right

Proper format not used.

Issues not clearly


Format is neither

effective nor


In-text referencing hardly or not

at all.

Reference list incomplete or not the right





and presentation (3 marks)

2.25 to 3 marks

1.5 to 2.2 marks

Less than 1.5 marks

The presentation is
logical, persuasive,

and well supported by

demonstrating a clear
flow of ideas and arguments.

Fluent professional
writing style

throughout. Grammar and
spelling accurate throughout.

Information, arguments, and

evidence are well

presented, mostly

clear flow of ideas and

Reasonably professional writing style.

Grammar and spelling mainly accurate

Difficult to understand for audience, no


structure, poor flow of ideas, argument
lacks supporting evidence.

Meaning may be unclear.

Grammar and

spelling contain numerous errors.





2.25 to 3 marks

1.5 to 2.2 marks

Less than 1.5 marks

Inclusion of adequate and sufficient in-text referencing. In-text

referencing match with

referencing items at the end of SoA

Only a couple of
inclusion of adequate

in-text referencing. In-

text referencing match

with referencing items at the end of SoA

Non-inclusion of intext referencing.
Intext referencing

does not match with

referencing items at the end of SoA

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