ACCTG 311 Financial Accounting Assignment 2 Questions 2025 | UoA

ACCTG 311 Assignment Submission Instructions

An electronic version of your assignment must be TYPED and submitted on Canvas. Please follow the instructions below to submit your assignment. 

• Save your assignment as a PDF file.
• Rename your assignment file to your last name, followed by a comma and your first name. For example, Smith, Kate (the last name is Smith and the first name is Kate).
• Upload the file on Canvas by going to Assignments, then click on Assignment 02. You will see the "Submit Assignment" button on the right-hand side of the webpage. A message box will appear, and click on the "Choose File" button to locate your assignment file, which you renamed in the above steps and click OK. Finally, click the "Submit Assignment" button in the new message box to submit your file.
• After submission, open the file on Canvas to make sure that a complete version of your assignment answers is viewable on Canvas. 

Note:

• You can only submit one file per person. If you want to replace the existing file, simply repeat step 4 above. You can do this any time BEFORE the due time.
• DO NOT LEAVE your submission till the last few minutes. For example, if you try to submit Assignments at NZT 3:55 pm and fail the submission on Canvas due to online traffic, it will be regarded as a late submission and NOT be accepted for marking.

Question 1 

Choose one listed company from NZX Company Research via the UOA library. Analyse the share price movement on the announcement day of the company's most recent full-yearfinancial result. 

NOTE: You cannot use Spark New Zealand Limited (NZSX code: SPK) because SPK was discussed in detail in the workshop. 

Required: 

(a)Calculate the company's forecast error in EPS for the most recent full-year financial result using the "random walk model". 

(b)Calculate the company's abnormal return in share price on the announcement day of its most recent full-year result using the "market model". For simplicity, assume the following for the market model: 

• Coefficient a is equal to 0, and
• Coefficient b is equal to 1. 

(c)Briefly explain if your calculations in parts (a) and (b) are consistent with the key findings in the Ball and Brown (1968) study. 

(Total for Question 1: 3 marks)

Question 2

Below is an extract from The Warehouse Group's trading update announced at 8:30 am on 3 March 2025:

"The Warehouse Group today announced its preliminary H1 FY25 results and provided an update on the outlook for the balance of FY25.

FY25 H1 Group sales were $1.607 billion, down 1.6% compared to FY24 H1. While sales showed an improving trend over the period, with Q2 easing to a small decline of -0.9% year on year, gross margins remain under pressure. While management continues to focus on containing costs in line with its sales performance, these gains have been insufficient to offset gross margin declines.

FY25 H1 (to 26 January 2025) earnings before interest and tax (EBIT, pre-IFRS16) are expected to be in the range of $18 million - $20 million (subject to audit review).

A full update on first half trading will be provided at the Group's FY25 Interim Results on Friday 21 March." 

Required:

Referring to information theory, predict and briefly explain how the above announcement might influence The Warehouse's share price on 3 March 2025. For simplicity, assume that no other information was released to the market at the same time. (Maximum words: 200) (4 marks)

(b) Referring to information theory, predict and briefly explain the anticipated change in The Warehouse's. For simplicity, assume that no other information will be released to the market at the same time. (Maximum words: 200)

Question 3 

(a)Explain the following agency problems that can arise in the relationship between shareholders and managers. 

• Dividend retention (1 mark, maximum words: 50)
• Horizon problem (2 marks, maximum words: 100)
• Risk aversion (2 marks, maximum words: 100) 

(b)Referring to agency theory, discuss how a manager's bonus plan can reduce the two agency problems listed in part (a). (Maximum words: 200) (3 marks) 

(Total for Question 3: 8 marks) 

Question 4 

Company X borrowed $3 million to finance an investment. The lender insisted on a debt covenant in the loan agreement, specifying that the ratio of total liabilities to total tangible assets should not exceed 60%. Company X's ratio of total liabilities to total tangible assets was 60.2% for the current financial year, before accounting for the cost of a new billboard construction. If the cost of the billboard construction were recognised as an asset, the ratio of total liabilities to total tangible assets would be reduced by 0.3%.

Required 

(a)How does the opportunistic view of the agency theory explain the manager's decision to capitalise the cost of new billboard construction as an asset? (Maximum words: 150) (3 marks) 

(b)If you are an accountant questioning the manager's decision in part (a), use the DECIDE model to discuss what steps you could take to make ethical decisions. Utilise the fundamental principles of the NZICA Codes of Ethics to identify the key ethical issues. (Maximum words: 250) (3 marks) 

(Total for Question 4: 6 marks)