TACC606 (NA) – ACCOUNITNG THEORY AND APPLICATIONS – Essaylink

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SAMPLE EXAM PAPER
Please note that the objective of the sample paper is to assist you in your final exam
preparation. The sample exam paper is similar in format and style of questions that may be
examined in the final exam. However, questions and topics in the final exam may be
different, so you should revise all the learning materials, such as book chapters, lecture notes
and tutorial questions covered in this subject.
FINAL EXAMINATION

Room Number: Seat Number:
Student ID: Student Name:
Unit: TACC606 (NA) – ACCOUNITNG THEORY AND APPLICATIONS
Date:
Time Allowed: 3 hours plus 10 minutes reading time
Total Number
of Questions:
4 Theoretical questions
Total Marks: 100 marks
Instructions: 1. Students are advised to read the exam paper carefully before commencing to
answer questions.
2. Type your name and student ID in the section provided above.
3. You may commence answering questions at any time.
4. You have 10 minutes after the conclusion of the exam period to upload your
completed answer document through Turnitin on Moodle. Answers received
after the 10-minute upload period will not be accepted.
5. Type your answers into this document using MS Word.
6. All answers must be submitted in English
7. The completed exam paper file name must be changed to “Student ID_Unit
Code.docx” before upload.
8. This is an open-book and open-web exam. You may use any available
resource in answering questions.
9. You must type answers in your own words. Penalties will apply where
plagiarism is detected. Do not copy and paste from the internet or from
any other source that is not your own work.

Question 1 (25 marks)
a) Define ‘earnings management’. Do you consider it to be good or bad? Why?
(10 marks)
b) Explain and discuss what is meant by the positive accounting theory and its relationship to
corporate governance. (15 marks)
Question 2 (25 marks)
a) Explain the meaning of sustainability and outline why corporations might consider it in
their business operations. (10 marks)
b) A company has a copper mine in South Africa. It purchased the mining rights ten years
ago for $20 million and has been operating the mine for the past ten years. It is estimated that
there are about 8 million tons of copper in the mine. Because of a fall in world copper prices,
the company has closed the mine indefinitely. At current world copper prices, the mine is
uneconomic because the costs involved in extracting the copper are greater than the selling
price. As the mine is in a remote and unpopulated areas there is no alternate use and it would
not be able to be sold. If copper prices rise by more than 25 per cent, the company has stated
that the mine would be reopened. In the foreseeable future (next 10 years or so) it is
estimated there is a 20% probability that copper prices will rise sufficiently for extraction to
be profitable.
Explain whether this mine would meet the definition and recognition criteria of an asset,
applying the principles in the Proposed Framework (2018 Conceptual Framework).
(15 marks)
Question 3 (25 marks)
a) Outline and discuss three cultural aspects that can differ across countries. How do these
cultural differences relate to differences in accounting systems?
(15 marks)
b) Regulatory and Political Influence on Accounting Practice.Those in favour of regulating the
provision of financial accounting argue that accounting is a public good and that without
regulation, there is a problem of ‘free‐riders’. Explain what is meant by the notions of public
goods and free‐riders, and why proponents of regulation use them to support their views.
Assess the merits of their argument. (10 marks)
Question 4. (25 marks)
a) When Kezza Ltd approached Steffs Banking Corporation Ltd for an unsecured loan of $100
million, Kezza Ltd had a good credit rating. However, the economy was depressed and Steffs
Banking Corporation Ltd was concerned about lending such a large sum. You have been asked
by Steffs Banking Corporation Ltd to provide a short report to the finance manager, Mike
Hanshe, explaining how debt agreements and restrictive covenants can be used to safeguard
debt in general. Mike wants the report to explain which agency costs of debt are controlled by
specific covenants. Furthermore, he is interested to know how accounting numbers can be used
in the debt covenants to help control any opportunistic behaviour on the part of Kezza Ltd.
(15 marks)
b) What is the difference between normative and positive accounting theory? Give examples
of each.
(10 marks)
END OF EXAMINATION

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