Question 1 Reporting Environment and Conceptual Framework Required:

Hunter Ltd is a public company listed on the ASX. Hunters accounts are prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). Hunter Ltd applies accrual accounting, uses a perpetual inventory system and measures assets on a historical cost basis, except for investment properties held by associates and certain financial instruments which have been measured at fair value

Explain how Hunter Ltd should account for the following items, justifying your answers by reference to the revised Conceptual Frameworks definitions and recognition criteria. Provide a journal entry if appropriate.

A) Sold items to a customer for $50,000, which cost Hunter Ltd $30,000. The customer was issued an invoice for $50,000 on the date of sale with 30-day payment terms.

B.) Hunter Ltd licenses subscription access to software that it has developed at a cost of $1 000 per month. Customers are able to cancel their subscriptions at any time. A new customer paid $12 000 for a full years access.

C.) Hunter Ltds CEO has a friend (Emily) who owns a company, Cole Ltd. Hunter Ltd owes Cole Ltd $10,000 and because Emily won the lottery, she has written to Hunter Ltd stating that in appreciation of Hunter Ltds long term support, Hunter Ltd no longer needs to repay the debt.

D.) Hunter Ltd wants to support its local community. The local community group is organizing a fundraiser and seeking donations from the public. Hunter Ltd meets with the group and agrees to match donations dollar for dollar. It puts out a press release which is reported in the local newspaper along with a photo of the CEO and the chair of the community group. Hunter Ltd cannot know for sure how much money will be donated by the public. In past years donations have ranged from $40 000 to $50 000.