ACFI2012 Accounting for Corporate Entities

Newcastle Business School

Part A: Essay (40 marks)

NovoMed Limited (NML) is a publicly listed company on the Australian Securities Exchange (ASX) in Australia. NovoMed focuses on developing medicine for global pandemics using innovative medical devices. Specifically, NovoMed is developing the NovoSorb technology for use in a range of biodegradable medical devices. Due to the growth of the business, the company wants to expand its business to other markets and list on other stock exchange markets such as London Stock Exchange Group (LSEG) in the UK, New York Stock Exchange (NYSE) in the US, and Shanghai Stock Exchange (SSEC) in China. NovoMed seeks advice on reporting its intangible assets, especially the treatment of R&D expenditure. You are required to write an essay (800 words) to respond to NovoMed's concern. You need to address the following key questions in your essay.


Identify possible accounting treatments for R&D expenditure in these four countries and explore the possible strengths and weaknesses of each treatment. Among those treatments in four countries, you need to give your own opinion on which treatment is the most suitable for the company from their own perspective and why. You must refer to the learning materials and at least three academic articles.

Note: Please use an essay format for your discussion (i.e introduction, discussion and conclusion). Textbooks such as Loftus, Leo, Daniliuc, Boys, Luke, Ang, Byrnes: Financial Reporting, 4th Edition (2021), or websites do not qualify as an academic article. APA 7th is required with an appropriate reference list. You will lose marks from incorrect in-text citation or referencing (reference is only required for Part A).

Part B: (60 marks)

Following the case of NovoMed Limited company, NovoMed has successfully listed on NYSE in the US and is issuing a prospectus to potential investors for a new share issue. NovoMed is in the business of developing medicine for global pandemics.

The prospectus is dated 1 January 202X and invites the public to apply for 900,000 ordinary shares at $10 per share. The terms of the share issue are $4 on application, $2.50 on allotment, $2 on the first call, and $1.50 on a second call.

If the issue is oversubscribed, the directors can make a pro-rata issue of shares, and the excess application money will be applied to allotment and calls.

On 1 March 202X, applications closed, and NovoMed received applications for 1,200,000 shares. The table below summarizes the applications received:

Applicant Name Shares applied for Paid to per share Shares initially allotted JohnSmith 500,000 $4.00 300,000
JaneDoe 400,000 $6.50 200,000
BobJohnson 300,000 $7.00 200,000

On 20 March the shares were allotted and on 1 April all outstanding allotment money was received.

On 15 April share issue costs of $60,000 were paid.

On 1 October the first call is made on the ordinary shares and on 15 November all the call money was received except for the call on 500,000 shares. The shares were forfeited on 5 December and reissued at $4.50 (as fully paid) on 30 December with costs associated with the forfeited shares of $2,000 paid on 31 December 202X.


a) Prepare a schedule that shows a breakup of the following items:

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Applicant Name

John Smith

Jane Doe Bob Johnson

Shares Shares Cash Received Applied Allotted


400,000 300,000


b) Prepare journal entries to reflect all transactions for the year end 31 Dec. 202X. Note: the entries should be displayed in date order of the underlying transaction. The detailed calculations and relevant description should be listed below each entry.

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