Financial Accounting Principles and Analysis
Referencing Styles :
Harvard | Pages :
Big Business Tobacco (BBT) is a large Australian producer of tobacco products
including a market-leader brand of cigarettes. With the continuing development of
Asian countries such as China and its move to a market-based economy, the company
has made the decision to sell its cigarettes in this larger market from the beginning of
next month. The cigarettes will be sold in packs of 40.
Mary Bender, marketing manager, is discussing the design of the cigarette packet for
the Asian market with Randall Hedges, the company’s public relations manager.
Having agreed on the basic design of the pack, Hedges raised the issue of whether to
include the normal health warning on the pack, which has to be displayed under
Australian law. He emphasised recent medical findings which predicted many
hundreds of thousands of deaths from cigarette smoking in the next few years,
particularly in the developing countries.
Mary Bender was strongly opposed to including a ‘health hazard’ warning on the packs
destined for parts of the Asian market. She explained: ‘In this business it is the bottom
line (i.e. profits) which matters — we have to think of our shareholders. BBT stands to
lose a considerable market share to competitors if it includes such a warning. Besides,
it is not a legal requirement in many Asian countries to display a health warning on
cigarette packs. If Asian law is subsequently amended then we will be one of the first
to comply. Besides, the managing director supports me on this one.’
Hedges expressed a final opinion: ‘The Company could be better off in the long term
by being seen to be acting with corporate responsibility, and demonstrating some
concern for its consumers. Besides, such warnings have not been detrimental to the
company’s performance in Australia, where health warnings have been common for
1. Who are the major stakeholders in the debate on the health warnings on
2. What are the main ethical issues involved in the debate?
3. If you were Randall Hedges, what would you do?
From humble beginnings, Phil expanded his backyard business in Melbourne to produce and
sell sports drink bottles for AFL, cricket, Rugby League and Rugby Union football teams in
2012. Due to the success of his product and the fact that he was dealing with very wealthy
football clubs, he was advised to form a proprietary company limited by shares so as to
maintain his credibility.
To comply with a previous requirement in the Corporations Act (whereby a company requires
two directors), he insisted that his wife Josephine (a school teacher) become a director. Phil
was not renowned for his accounting skills, and he overlooked the tax liabilities for the
company over the following two years. Earlier this year case ended up in court, with the
Australian Taxation Office claiming that both Phil and Josephine are individually and jointly
liable for the tax payable by the company.
1. Do you think Phil and/or Josephine should be liable for overlooking the tax liabilities
for the company? Why or why not?
2. What responsibilities do you think Phil and Josephine have as directors of the
The following list of items relate to the business of Jay Street Wear:
1. cash paid into the business by Jay to begin operations
2. racks purchased to display merchandise to customers
3. building leased for 2 years, with rent payable monthly in advance
4. streetwear items purchased from a manufacturer
5. amount owing to the manufacturer for merchandise purchased
6. insurance premium on the merchandise paid in advance
7. cash withdrawn by Jay for personal use
8. wages paid to casual employee
9. amount borrowed long-term from the bank
10. cash sales of merchandise to customers
1. Identify the elements of the financial statements (asset, liability, income, expense and
equity) impacted by each of the transactions.
2. List the cash flow classification (operating, investing or financing) and direction (inflow
or outflow) for each transaction
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