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?
Chapter5: Ethical Responsibilities Of Independent Auditors
Section5.1: Cardillo Travel Systems, Inc.
Problem 4Q
Related questions
Question
Transcribed Image Text: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?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Business/Professional Ethics Directors/Executives…
Accounting
ISBN:
9781337485913
Author:
BROOKS
Publisher:
Cengage
Business/Professional Ethics Directors/Executives…
Accounting
ISBN:
9781337485913
Author:
BROOKS
Publisher:
Cengage