Creative Hardwares Pty Ltd (CHPL)

Background
Creative Hardwares Pty Ltd (CHPL) is a national hardware retailer that is listed on the Australian Securities
Exchange (ASX). CHPL introduced a new executive compensation plan (ECP) on 1 July 2019. The plan allows
for cash bonuses to be paid to executive directors under the following terms and conditions:
➢ A bonus will be paid if the company’s earnings per share (EPS) exceed ‘normal’ EPS.
➢ ‘Normal’ EPS has been agreed to be $0.65 per share.
➢ The bonus is calculated to be 12.5% of any profit generated in excess of that required to result in an EPS of
$0.65.
The draft financial statements for the year ended 30 June 2020 show an EPS of $0.922 per share and a bonus
payable under the ECP of $108,800.
Additional information
On 1 December 2019, CHPL entered into an agreement with Apex Investment Pty Ltd (Apex Investment) to
lease a property to Apex Investment. The terms of the agreement are as follows:
➢ The period of the lease is 20 years.
➢ The consideration payable to CHPL at the inception of the lease is $2.5 million.
➢ The interest rate implicit in the lease is 7.5%.
➢ CHPL signed an unconditional agreement to repurchase the property after six years for a fixed amount of
$3.43 million.
At the request of the executive directors of CHPL, the property has been derecognised from the statement of
financial position and a profit of $1.5 million has been recognised in the statement of comprehensive income.
The $1.5 million profit was calculated by comparing the $1 million carrying value of the property prior to disposal
with the consideration received.
Prior to derecognition, the property was being depreciated on a straight line basis at 5% per annum, based on
an initial cost of $1.4 million.
Required:
You are employed as a senior auditor by RCD Chartered Accountants (RCD).
(a) Determine whether or not the correct accounting treatment has been adopted by CHPL in relation to
the transaction between the company and Apex Investment. If you determine that the accounting
treatment adopted is not correct, advise on the correct accounting treatment. (5 marks)
(b) Explain why the directors may have been motivated to adopt the accounting treatment that has been
adopted. (3 marks)
(c) Determine whether the directors have acted unethically and what (if any) impact this would have on
you, as auditor of CHPL. (4 marks)

HER ANSWERS ARE BELOW. IF YOU CAN REDO IT TOO PLEASE. SHE ONLY PUT OPINIONS ON HER ANSWERS WHICH IS NOT GOOD ENOUGH. THANK YOU SO MUCH
NEED AROUND 700 WORDS IN TOTAL. SO SORRY ABOUT THIS. I AM REALLY SORRY!

a) Determine whether or not correct Accounting treatment has been adopted by CHPL in relation to the transaction between the company and Apex agreement. If you determine that the accounting treatment adopted is not correct, advice on the correct accounting treatment.
Answer
The accounting treatment which was followed by the CHPL is not correct as the property was derecognized in the financial statements. But the property should be written in the statement as it is still the property of CHPL.
The main treatment as per the accounting is to recognized the property which is not fully transferred to the other person and must be shown in the books of account (shown in balance sheet as fixed asset)
According to accounting principles the company is required to show all the properties and assets which it owns either on lease or any other way
The directors should mention the property as well the amount received in the financial statements of the company
The accounting treatment of LEASE is clearly indicates that all the properties the ownership of which property is not transferred to the other person still it remain the property of the lesser and it will be owned by the other only when the lease period is completed and the property is transferred to the relevant person then he will show the property in their books.
At the end we can say this property will be transferred to the lessee when he will pay full amount to the lesser at the end of the lease period or in between of the lease period
If he pay at the end, the property will transferred at the end of lease period otherwise it will be transferred at the time paying final payment
The value of the property will be shown in the books of accounts by the person who will be the owner at that time.

b) Explain why the directors may have been motivated to adopt the accounting treatment that has been adopted.

Answer

The directors may have been motivated to adopt the accounting treatment because if the company comes into the agreement with the APEX Investment so that the company can earn extra profit and the bonus will be distributed to directors of the extra profit earned.
The accounting treatment is followed by the company is not correct but this is accepted by the company because it helps to increase the income of the company
The initial profit was less that the profit earned after applying this accounting treatment which was not correct
The directors may adopt this accounting agreement because they are in the company to earn income if they get an extra income by the this accounting treatment
The company offers 12.5% share of the profit if they earns excess profit than normal profit
They will get same income if they stands at the normal profit which is 0.65 per share
The directors earns $ 108800 as bonus which is calculated @ 12.5 of the excess profit.
So the excess profit will be
108800*100/12.5=$ 870400

c) Determine whether the directors have acted unethically and what (if any) impact this would have on you, as auditor of CHPL?

Answer
Yes the directors have acted unethically.
This gave a bad impact on me as a auditor as just for their personal earnings and personal goals they forget the companies objectives.
The directors should focus on company’s goodwill as compared to individual interests.
The directors should work as per the accounting principles if they work without following the accounting principles then their act will be counted as unethically so that the earning earned by the directors are not reasonable as per the business point of views.
As per my opinion, if I am working as an auditor of the company to audit their accounts and I found this type of accounting error then it will put a bad impact on the professionalism
The result of unethically made accounting books are treated as false books and audit is always shown a qualified report for that type of companies’ mistakes.
The company should follow the accounting treatment which is as per the accounting principles and not as to increase only his earnings and the earning of the directors.

Compelling correspondence is essential to the achievement all things considered but since of the changing idea of the present working environments, successful correspondence turns out to be more troublesome, and because of the numerous impediments that will permit beneficiaries to acknowledge the plan of the sender It is restricted. Misguided judgments.In spite of the fact that correspondence inside the association is rarely completely open, numerous straightforward arrangements can be executed to advance the effect of these hindrances.

Concerning specific contextual analysis, two significant correspondence standards, correspondence channel determination and commotion are self-evident. This course presents the standards of correspondence, the act of general correspondence, and different speculations to all the more likely comprehend the correspondence exchanges experienced in regular daily existence. The standards and practices that you learn in this course give the premise to additionally learning and correspondence.

This question has been answered

This course starts with an outline of the correspondence cycle, the method of reasoning and hypothesis. In resulting modules of the course, we will look at explicit use of relational connections in close to home and expert life. These incorporate relational correspondence, bunch correspondence and dynamic, authoritative correspondence in the work environment or relational correspondence. Rule of Business Communication In request to make correspondence viable, it is important to follow a few rules and standards. Seven of them are fundamental and applicable, and these are clear, finished, brief, obliging, right, thought to be, concrete. These standards are frequently called 7C for business correspondence. The subtleties of these correspondence standards are examined underneath: Politeness Principle: When conveying, we should build up a cordial relationship with every individual who sends data to us.

To be inviting and polite is indistinguishable, and politeness requires an insightful and amicable activity against others. Axioms are notable that gracious “pay of graciousness is the main thing to win everything”. Correspondence staff ought to consistently remember this. The accompanying standards may assist with improving courtesy:Preliminary considering correspondence with family All glad families have the mystery of progress. This achievement originates from a strong establishment of closeness and closeness. Indeed, through private correspondence these cozy family connections become all the more intently. Correspondence is the foundation of different affiliations, building solid partners of obedient devotion, improving family way of life, and assisting with accomplishing satisfaction (Gosche, p. 1). In any case, so as to keep up an amicable relationship, a few families experienced tumultuous encounters. Correspondence in the family is an intricate and alluring marvel. Correspondence between families isn’t restricted to single messages between families or verbal correspondence.

It is a unique cycle that oversees force, closeness and limits, cohesiveness and flexibility of route frameworks, and makes pictures, topics, stories, ceremonies, rules, jobs, making implications, making a feeling of family life An intelligent cycle that makes a model. This model has passed ages. Notwithstanding the view as a family and family automatic framework, one of the greatest exploration establishments in between family correspondence centers around a family correspondence model. Family correspondence model (FCP) hypothesis clarifies why families impart in their own specific manner dependent on one another ‘s psychological direction. Early FCP research established in media research is keen on how families handle broad communications data. Family correspondence was perceived as an exceptional scholastic exploration field by the National Communications Association in 1989. Family correspondence researchers were at first impacted by family research, social brain science, and relational hypothesis, before long built up the hypothesis and began research in a family framework zeroed in on a significant job. Until 2001, the primary issue of the Family Communication Research Journal, Family Communication Magazine, was given. Family correspondence is more than the field of correspondence analysts in the family. Examination on family correspondence is normally done by individuals in brain science, humanism, and family research, to give some examples models. However, as the popular family correspondence researcher Leslie Baxter stated, it is the focal point of this intelligent semantic creation measure making the grant of family correspondence special. In the field of in-home correspondence, correspondence is normally not founded on autonomous messages from one sender to one beneficiary, yet dependent on the dynamic interdependency of data shared among families It is conceptualized. The focal point of this methodology is on the shared trait of semantic development inside family frameworks. As such, producing doesn’t happen in vacuum, however it happens in a wide scope of ages and social exchange.

Standards are rules end up being followed when performing work to agree to a given objective. Hierarchical achievement relies significantly upon compelling correspondence. So as to successfully impart, it is important to follow a few standards and rules. Coming up next are rules to guarantee powerful correspondence: clearness: lucidity of data is a significant guideline of correspondence. For beneficiaries to know the message plainly, the messages ought to be sorted out in a basic language. To guarantee that beneficiaries can without much of a stretch comprehend the importance of the message, the sender needs to impart unmistakably and unhesitatingly so the beneficiary can plainly and unquestionably comprehend the data.>

Creative Hardwares Pty Ltd (CHPL)

Sample Answer

Our Services

Secure Checkout

Our Advantages