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University of the South Pacific
a Schoo! of Accounting and Finance
Semester 2, 2015
AF301 Accounting Theory and Applications (Face-to-face Mode)
Mid-Semester Test
Instructions
There are three pages in this test paper, including this cover page
Answer one question from Section A and all questions in Section B
You have 5 minutes to read the paper and 2 hours to write your answers
This test has a total mark of 50 and carries a 25% weighting towards your overall
course grade Spend about 50 minutes on this section.
| Answer only ONE of the questions.in this section. For each question, a good answer
| would be between 1 and 2.pages.
Question 1
General purpose financial reporting is regulated through the IASB conceptual
framework and accounting standards.
a) Explain why lenders or investors might still be able to obtain financial reports in
an unregulated environment [10 marks]
b) Discuss how the limitations of unregulated financial disclosure can be addressed
through the conceptual framework and accounting standards. [10 marks].
ue:
n2
Compare and contrast public interest theory and private interest theory:
a) Outlining the main features of each theory [10 marks).
b) Explaining which groups in society are likely to benefit from regulation under
each theory. You may refer to the article by Chand/and White (2006) provided on
the course Moodle site [10 marks}.
Page 2 of 3 Section Short Answers 30 marks |
Spend about 60 minutes on this section.
Answer ALL questions in this section. For each part (i.e. a, b,c) of a question, a good
answer would be between 4 and 5 sentences.
Question 3
Distinguish between the following pairs of terms, using relevant examples.
a) Descriptive and Psychological branches of pragmatic accounting theory [5
marks).
b) Syntactics and semantics of any accounting theory [5 marks].
c) Principle-based and rule-based approach to accounting standards [5 marks).
Question 4
Briefly outline how the following items should be classified in general purpose
financial reports. Use the definition and recognition criteria from the conceptual
framework to support your answers. |
a) Frangipani Ltd manufactures ice cream. Last year it spent $20,000 on market |
surveys to determine what new flavours customers might purchase. Based on the
survey findings, it then spent a further $10,000 to manufacture and test a batch
of mango ice cream (this included laboratory testing and customer tasting)
before launching the product in the market [7 marks].
b) Hibiscus Ltd sells electrical goods. Based on sales in 2015, it expects to spend
$15,000 repairing and replacing faulty items under warranty over the next 3
years. In addition, a customer is suing Hibiscus Ltd for $5,000 for electrocution by
a faulty electric jug. Evidence indicates the company was not at fault [8 marks]. i
|
THE END
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