Question 1) (5 marks) Large Mart has recentlypurchased and installed a filter system through...

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Accounting

Question 1) Large Mart has recentlypurchased and installed a filter system through which all exhaustfumes from its Personal Computer (PC) factory are passed beforebeing released into the atmosphere. The filter system was purchasedand installed because the Australian Environmental ProtectionAgency (EPA) threatened to close the factory unless all exhaustedfumes were filtered.
The Chief Executive Officer (CEO) has asked the CFO whether ornot the filter system represents and asset of the company. The CFOis not sure if the filter system is an asset because he reviewedthe Australian Conceptual Framework document and is concerned thatthe filter system may not meet the future economic benefitrequirement that is part of the asset definition. The main reasonfor the CFO’s concerns is that the filter system is not actuallyused in the production process.
a) Provide a detaileddiscussion of whether or not the filter system that was purchasedand installed in the Large Mart factory meets the future economicbenefit requirement that is included in the asset definitioncriteria, AND provide a detailed description ofthe future economic benefits (if any exist) that the filter systemis producing.
b) Determine whether or notthe filter system can be recognised as an asset in the books ofLarge Mart. When making this decision provide a detaileddiscussion that outlines how each of the asset definition criteriais (or is not) fulfilled.

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a With regard to future economic benefit from the filter Paragraph 414 of the accounting conceptual framework clearly states that The economic benefits produced by an economic resource here the filter could be include the filter definitely has the potential to generate future cash inflows or save cash outflow to the entity by the following See Answer

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In: AccountingQuestion 1) (5 marks) Large Mart has recentlypurchased and installed a filter system through which...Question 1) Large Mart has recentlypurchased and installed a filter system through which all exhaustfumes from its Personal Computer (PC) factory are passed beforebeing released into the atmosphere. The filter system was purchasedand installed because the Australian Environmental ProtectionAgency (EPA) threatened to close the factory unless all exhaustedfumes were filtered.The Chief Executive Officer (CEO) has asked the CFO whether ornot the filter system represents and asset of the company. The CFOis not sure if the filter system is an asset because he reviewedthe Australian Conceptual Framework document and is concerned thatthe filter system may not meet the future economic benefitrequirement that is part of the asset definition. The main reasonfor the CFO’s concerns is that the filter system is not actuallyused in the production process.a) Provide a detaileddiscussion of whether or not the filter system that was purchasedand installed in the Large Mart factory meets the future economicbenefit requirement that is included in the asset definitioncriteria, AND provide a detailed description ofthe future economic benefits (if any exist) that the filter systemis producing.b) Determine whether or notthe filter system can be recognised as an asset in the books ofLarge Mart. When making this decision provide a detaileddiscussion that outlines how each of the asset definition criteriais (or is not) fulfilled.