I am writing to seek advice from you with regards to numerous accounting issues. As you know most of our directors have limited accounting knowledge and they are bit confused with the accounting treatment for several items that has been proposed by our junior accountant. Our senior accountant is on sick leave, and we are unsure when she will be back. The directors want to make sure that the proposal by the junior accountant is in line with the requirements of the Australian Accounting Standards. They would also like to understand the reasoning behind the appropriate accounting treatments. A preproduction prototype has been developed for Aquadelight, another toy. Aquadelight is a toy meant to be used in the swimming pool and can also be used as a floatation aide. The amount incurred during the year for the preproduction prototype amounted to $55,000. The junior accountant says that there is a possibility that this amount can be recognised as an asset but has not been clear on how to make this determination. Can you please explain in your SOA how to determine if this amount can be recognised as an asset? Please explain the requirements with examples that would be relevant to Aquadelight. The directors are also confused with the terms definition and recognition of an asset. They want to know, why an item that meets the definition of an asset is not necessarily recognised as an asset? a Recommendations and explanations and Conclusion?
I am writing to seek advice from you with regards to numerous accounting issues. As you know most of our directors have limited accounting knowledge and they are bit confused with the accounting treatment for several items that has been proposed by our junior accountant. Our senior accountant is on sick leave, and we are unsure when she will be back. The directors want to make sure that the proposal by the junior accountant is in line with the requirements of the Australian Accounting Standards. They would also like to understand the reasoning behind the appropriate accounting treatments. A preproduction prototype has been developed for Aquadelight, another toy. Aquadelight is a toy meant to be used in the swimming pool and can also be used as a floatation aide. The amount incurred during the year for the preproduction prototype amounted to $55,000. The junior accountant says that there is a possibility that this amount can be recognised as an asset but has not been clear on how to make this determination. Can you please explain in your SOA how to determine if this amount can be recognised as an asset? Please explain the requirements with examples that would be relevant to Aquadelight. The directors are also confused with the terms definition and recognition of an asset. They want to know, why an item that meets the definition of an asset is not necessarily recognised as an asset? a Recommendations and explanations and Conclusion?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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