Figure 7.18 shows a liquid-level system in which two tanks have cross-sectional areas A1 and A2, respectively. The volume flow rate into tank 1 is qi. A pump is connected to the bottom….
Would your answer to (b) change if the loan agreement with Portsmith Bank did not specify a minimum level for MattCom Ltd’s interest coverage ratio?
Explain which of the following items is material in accordance with the requirements of
AASB 108 ‘Accounting Policies, Changes in Accounting Estimates and Errors’.
(a) During a routine computer system check, it was discovered that corruption of sales
data had led to an understatement of sales revenue by $180 000 for MattCom Ltd
during the reporting period ended 30 June 2018. Total sales revenue for the period
was $1 500 000.
(b) MattCom Ltd issued 500 5% $100 debentures during the reporting period ended
30 June 2013. At the time of issue, the market value of each debenture was $100.
At 30 June 2018, total liabilities were equal to $1.25 million. The issue of the
debentures significantly increased the likelihood of MattCom Ltd failing to meet
the required interest coverage ratio specified in a loan agreement with Portsmith
(c) Would your answer to (b) change if the loan agreement with Portsmith Bank did not
specify a minimum level for MattCom Ltd’s interest coverage ratio?
(d) During the reporting period ended 30 June 2018, the financial situation of MattCom
Ltd deteriorated significantly due to increased competition and a shrinking market for its products. There is no evidence that MattCom’s situation will improve in the
future. During this time, the directors revalued equipment upwards by $47 000. At
the time of revaluation, recorded equity was $940 000.