Assessment Task 1

Part A

Refer to the consolidated financial statements and notes in the 2013 financial report of JB Hi-Fi Limited on its website, jbhifi, and answer the following questions:

1. Have the current liabilities of JB Hi-Fi Limited increased or decreased over the year? By how much? What classes of liabilities are recorded under the classification "Current Liabilities"?

2. What are the major liabilities of JB Hi-Fi Limited at the end of the financial year?

3. What items are included under the heading ‘Provisions' in the ‘Current Liabilities' section of the statement of financial position (balance sheet)? Explain the nature of these items. Do these satisfy the definition of provisions as contained in IAS37/AASB137? By how much have liabilitiesfor employee benefits increased over the year?

4. How much cash has been raised by interest-bearing loans in the most recent financial year? How much of such loans has been repaid? How do these amounts compare with the previous year?

5. Determine whether any of the non-current liabilities are secured.

6. How much of the non-current borrowings are due to be repaid within 2 years? Between 2 years and 5 years? Beyond 5 years?

7. Are there any non-current provisions? If so, what, in very general terms, do these represent?

Part B

Refer to the 2013 annual report of Country Road Limited on its website, countryroad (or google ‘annual report 2013 country road'), and answer the following questions using the consolidated income statement and balance sheet/ statement of financial position and notes to the consolidated financial statements.

1. The Country Road Limited income statement shows a deduction (in brackets) for income tax expense. Would this expense item be seen in the income statement of a partnership? Explain your answer.

2. In the statement of changes in equity regarding retained earnings, how is the total profit available appropriated? How does the allocation of the total profit available for appropriation in a partnership differ from that shown for Country Road Limited? Explain the reasons for any differences.

3. Refer to the balance sheet (statement of financial position) of Country Road Limited and the note titled ‘issued capital'. How do these differ from that of a typical partnership? Explain.

4. Country Road Limited is required to produce a statement of cash flows (cash flow statement) and include this in its annual financial statements. Would the typical partnership be required to prepare such a statement? Why or why not? Would a typical partnership prepare such a statement? Explain.

Assessment Task 2

Question 1

Richard has an extensive olive grove in the Hunter Valley region of NSW. He has around 12,000 trees established and has recently purchased his neighbour's adjoining property with a view to expansion.

His business is flourishing and his two sons, David and Liam, have recently moved from Sydney to help him expand the business. They see opportunities opening up in new markets and would like to become further involved in the business. They want the family business to be in a form that would allow it to expand as necessary and also make it easier to raise the capital required for this expansion. They have also heard that there are tax benefits in operating a business through a company structure rather than as a sole trader or partnership. They persuade their father to take advice on turning the family business into a family-run company. There is some contention regarding the naming of the company. Richard prefers to name the company after themselves - "Ridali" - whereas David and Liam prefer the name "Rich's Guaranteed Olives", in honour of their father.

Advise Richard and his sons of the steps that need to be taken to incorporate and register a company.

Question 2

Terry was an employee of Cosmo Mining Services Pty Ltd (CMS). CMS is a subsidiary of Cosmo Mine Ltd (CM) as CM owns 120 of the 200 issued shares in CMS. CMS owns and operates a lead, zinc and copper mine at Gunbarrel, Western Queensland. CM has an arrangement with the New Vision Bank Ltd whereby it leases all of the mining equipment and then subleases the equipment to CMS which pays CM a leasing charge per annum equal to the bank's leasing costs plus 10 per cent.

Recently, CMS has attracted considerable media attention as scientists have discovered that CMS's mining activities have contaminated a nearby river which supplies the water to the mine and Gunbarrel. A number of Gunbarrel residents and former employees, including Terry, have contracted cancer because they drank the contaminated water. The CMS shareholders call a general meeting for the purpose of addressing CMS's potential liability to its employees (current and former) as well as the residents of Gunbarrel. The CMS shareholders unanimously vote in favour of selling CMS's business to a newly formed company, Lazarus Pty Ltd, and winding up of CMS.

Advise Terry if he can take action against Lazarus Pty Ltd, CMS and/or CM.