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This assignment is a compulsory component of your assessment for this unit.
Part A: This part of the assignment is worth a total of twelve (12) marks (details are provided below). It requires you to provide a written response to the two questions listed below.
When answering the provided questions you must ensure that your answers address the questions, that your answers have an Australian accounting/financial reporting focus, that your answers are internally consistent, and that the individual components of your answers provide a well-rounded argument that is easy to follow.
The Chief Financial Officer (CFO) of Large Mart has been unable to find answers for two accounting problems. He has asked you to investigate the following questions and to write a report (including relevant references to source materials and accounting standards) that will provide him with answers to these questions and help him to understand how you have developed your answers.
1) (5 marks) The Board of Directors of Large Mart has asked to CFO if it is possible to change the cost flow assumption that is used in Large Mart’s inventory accounting system. Large Mart is currently using the First-In-First-Out (FIFO) cost flow assumption (in a perpetual inventory accounting system) and the Board of Directors would like to use the Average-Weighted cost flow assumption (in a perpetual inventory accounting system) instead, because the Board believes that this change would improve Large Mart’s financial position in the balance sheet.
The CFO is not sure if Large Mart is legally allowed to make this change, and what impact such a change would have on the financial reports of Large Mart.
a) Determine whether or not Large Mart would legally be allowed to change its inventory cost flow assumption from FIFO to Weighted-Average-Cost, and what (if any) legal requirements would limit Large Mart’s ability to make this change.
b) Discuss what impact (if any) a change from the FIFO cost flow assumption to the Weighted-Average cost flow assumption would have on the financial position (balance sheet) of Large Mart. PLEASE NOTE: You are NOT required to calculate the amount of impact of this change on the balance sheet. Instead, please discuss the POTENTIAL impacts of such a change in general.

2) (5 marks) Large Mart is currently using its own engineers and equipment to build the machinery for a new factory in Armidale in which tablet computers will be produced. Building the machinery for the new factory took a total of 4 month time. During this time, the value of the Large Mart equipment that was used to build the new machinery depreciated by a total of $20,000. In addition, Large Mart took out a loan of $200,000 to pay for the components used in the new machinery, and during the 4 month in which the machinery was build, Large Mart payed a total of $5,000 in interest for the loan.

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The CFO is not sure how to deal with these issues and has asked you to investigate the following two issues:
a) Explain how Large Mart must account for the depreciation of the equipment that was used in the building of the new machinery AND explain why this treatment is required.
b) Explain how Large Mart must account for the loan as well as the payment of interest during the time that the new machinery was built AND explain why this treatment is required.
Your report should be approximately 400 words (+/- 10%) in length for question 1, and 400 words (+/- 10%) in length for question 2. This means that Part A of your assignment should be approximately 800 words in length in total). You can receive a maximum of 5 marks for each question.
The appropriate acknowledgement (referencing) of source material used to develop your report will attract one (1) mark. An additional one (1) mark will be given for the number of sources other than the textbook that were used to develop the arguments in Part A of your assignment. The use of a MINIMUM of three (3) appropriate sources other than the textbook is required (see below for details). However, in order to receive full marks for your use of resources, you will need to show that you have used substantially more than three (3) resources.
In Part A of this assignment, you are expected to provide in text references as well as a list of references in accordance with UNE’s referencing guidelines. The submission of assignments without in-text references and/or a reference list will be considered inappropriate conduct (plagiarism) under UNE’s plagiarism rules!
Furthermore, you are expected to use a MINIMUM of three (3) appropriate sources other than the textbook assigned to this unit when answering part A of this assignment. This means that although the prescribed textbook is an appropriate reference, there should be evidence (in the form of in-text references AND entries in your reference list) that you have used at least three other resources that are useful in developing the arguments in your report. Appropriate sources of information include, but are not limited to, journal articles, books, selected online resources (i.e. journal databases, newspaper articles, working paper databases, conference websites, official pronouncements of accounting bodies, standards setters, government agencies, public bodies, universities, or accounting firms). Inappropriate online resources which should NOT be used include Wikipedia, blogs, twitter and websites from “non-official” sources.

Assessment Guide for part A of the assignment
HD      To receive a high distinction, students must provide detailed background on the question, provide very well-reasoned and easy to follow arguments that answer all details of the provided question well, and extensively support their answers with literature.
D         To receive a distinction, students must provide background on the question, provide well-reasoned and reasonably easy to follow arguments that answer all provided questions, and support their answers with literature.
C         To receive a credit, students must provide a reasonable amount of background on the question, provide answers that answer the question with minor errors or omissions, utilise arguments that are reasonably easy to follow, and support their answers with literature.
P          To receive a pass, students must provide a reasonable answer to the question which contains major errors or omissions, provide answers that lack internal consistency and/or are difficult to follow, and use an insufficient amount of literature sources where required.

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