Assessment 3- CASE STUDY ANALYSIS

Assessment 3- CASE STUDY ANALYSIS

Chose only 1 of the 2 questions provided.

The group or individual assignment is intended to expose students toproblem-based /case study analysis wherethey can apply the IRACmethod to structure and present their analysis.

The case study analysis will give students the opportunity to take a semi-realistic workplace scenario and apply the course materials and learning outcome to it. Further, this would enable them to get feedback which is highly relevant as a guide and practice for the case studies they are given to analyse in the exam.

This assignment is also expected to enhance studentsDiscipline Knowledge, Communication Proficiency (Written report), Workplace Skills and Values (teamwork skills), Information Literacy and Analysis (research skills) and Problem-solving Skills.

You must also paraphrase rules and facts to avoid plagiarism, please see the schools policy on integrity.

There is no word count but as a general guide approximately 600-800 words.

Question 1

BCJA Pty Ltd has three directors, Bev, Christopher and Jonathan, who are also the shareholders. The company is in the business of providing tours of places of interest to the public in Melbourne. Bev is the managing director of the company. Bev also looks after the administration matters of the company. To expand the business, the company needed a loan of $150,000 to acquire new vehicles and office space and computers. Bev approached the National Australia Bank Ltd for a loan. The constitution states that the managing director can only obtain a loan up to $100,000 and any amounts above that must be approved by the shareholders.

The Bank was happy to lend the money to the company as they had been the bankers for the company for a long time and there was adequate security for the loan. The documents for the loan were signed by Bev. The funds were deposited in to the companys bank account 2 days later.

Christopher who was recently married was building his new home and was short of funds. He therefore borrowed the funds from the company to pay for his new home. The bank manager at the National Australia Bank Ltd knew that Christopher was building a new house and was looking for additional funds to complete the house. Bev and Jonathan found out about this and fired Christopher and removed him as a director. As the remaining directors of the company, they refuse to pay for the loan as they did not get the money.

You are the accountants for BCJA Pty Ltd. Advise whether the company is liable to repay the $150,000 to the National Australia Bank Ltd. You MUST refer to relevant case law or legislation where appropriate.

OR

Question 2

You are the accountant for The Biggest Loser Pty Ltd, a health and fitness company. The directors and shareholders are Michelle, Hayley and Stephen. Michelle is the managing director and manages the day-to-day operations. Hayley who was an Olympic champion swimmer has no tertiary qualifications oversees marketing and sales. Stephen is a non-executive director and takes no active part in the affairs of the company. He is a good friend of Michelle and is only acting as a director to help Michelle. He is a qualified sports scientist.

From the accounts that you have prepared, the company has traded profitably for the last three years. However, a competitor recently opened up a fitness and health centre in the same suburb and the companys profits have decreased significantly. The cash flow budgets you have prepared for the company show that it will not have sufficient cash in the next 18 months unless it raises fees or reduces costs.

Hayley thinks that the company should relocate and move to bigger premises in a new area where there is no competition. She is confident she can generate more sales for the company. Without telling either Michelle or Stephen she inspects a new building and comes to the view that it is the perfect building and location. She has not looked at any other buildings. If she had read and understood the financial accounts, she would have realised that the rent was too expensive for the company, unless the income increases by three-fold. The reason she was keen on the building was that it was owned by her brother Ian who is desperate to sell so he can clear his business debts.

Hayley has been helping him meet his loan repayments.

Hayley does not think the additional rent will be an issue as she can generate more sales to cover the costs. Hayley calls a board meeting and tell the other two directors of the proposal. She does not disclose to them she has only looked at one property and that it is owned by her brother. There is no independent valuation done of the property. All she provides to the other directors is an analysis that you as the accountant have prepared showing the estimated increase in income less the increased expenses and still showing a profit for the year.

Because Stephen is busy with his practice and Michelle is busy worrying about other issues, they do not ask many questions and accept Hayleys recommendation. However, all did not turn out well. The building needed a substantial fit out and customers were no longer keen buy health products because of recent adverse publicity. Advise whether any of the directors have breached their statutory obligations as company directors. You MUST refer to relevant case law or legislation where appropriate.