The fundamental qualitative characteristics that financial information must possess to be useful to the primary users of general purpose financial reports—identified in the Conceptual Framework are ‘relevance’ and ‘faithful representation’.
a) Provide one example where information is relevant but not faithfully represented. (3 marks, maximum 100 words)
b) Provide one example where information is not relevant but is faithfully represented. (3 marks, maximum 100 words)
c) Provide one example where information is relevant and faithfully represented. (4 marks, maximum 150 words)
a) What is a social contract and how does it relate to organisational legitimacy? (6 marks, maximum 300 words)
b) Explain two ways organisations can use corporate disclosure policy to maintain or regain organisational legitimacy? (4 marks, maximum 200 words)
Diamond Ltd acquired an item of polishing equipment on 1 July 2015 for $440,000. The equipment is expected to have a useful life of 10 years and the straight-line method of depreciation is to be used. It has salvage value of $40,000. On 1 July 2017, the equipment is deemed to have a fair value of $424,000 and revaluation is undertaken in accordance with the Diamond Ltd policy of measuring property, plant and equipment at fair value. The asset is still usable for next 8 years but the salvage value is determined to be zero. The asset is sold for $356,000 on 1 July 2019.
Provide the journal entries necessary at the following dates to account for the above transactions and events. (Ignore narrations). Show your working. (10 marks)