Assessment DescriptionAssume that you are a team of graduate accountants working for Pinnacle Pty Ltd, an independent consulting & accounting firm located at 11 George Street, Sydney, NSW 2000.Among other things, your firm provides its clients with advice regarding accounting issues, including applying the Australian Accounting Standards in preparing Financial Reports. You must prepare a Statement of Advice (SoA) for National Ltd to address several accounting issues raised by Ms. Sullivan Sampson on behalf of the company’s directors. Ms. Sampson has raised these issues in a letter in the following three pages.The maximum length for the SoA is 2,000 words (+/- 10%). You should address all the technical issues in your advice, followed by a Reference List. Marks will be awarded based on two components:Technical component 30% – This includes the technical discussion in your SoA, the explanation of each issue, and the sources used. You must analyse the information provided and recommend the correct accounting treatment. You must justify your recommendations by referencing specific paragraphs of relevant accounting standards. You must explain the rationale behind each accounting standard requirement.Communication Skills (Writing Skills) component 10% – marks will be awarded based on your ability to gather information and effectively communicate strategies to the client as part of the SoA. It will also cover the generic skill of writing, clear meaning, structure and organisation, appropriate tone and grammar, spelling, and punctuation, etc., throughout the whole assignment.Refer to the rubrics at the end of this document for a breakdown of marks.Kaplan Business School Assessment 3 Case Study 2023Letter received from Ms. Sullivan Sampson (National Ltd)Ms. Sullivan SampsonOn behalf of the Directors of National Limited 58 Dixon Avenue, Warwick Farm NSW 21231 July 2023The ManagerPinnacle Pty Ltd, Accounting firm11 George Street, Sydney, NSW 2000Dear Sir/MadamI am writing to seek your advice regarding numerous accounting issues for the year ended 30 June 2023. As you know, most of our directors have limited accounting knowledge and are a bit confused with the accounting treatment for several items that our junior accountant has proposed. Our senior accountant is on sick leave, and we are unsure when she will be back. Thedirectors want to ensure that the junior accountant’s proposal is in line with the requirements ofthe Australian Accounting Standards. They would also like to understand the reasoning behind the appropriate accounting treatments. The items of concern are as follows:Item 1During the year, the company developed a new project called “Jonny King”. We commenced work to improve water filtering services on 1 July 2022, resulting in a patent for the Jonny King filter process in June 2023. The company expects approximately 10% increased sales revenue from selling Jonny King filters in the current water filtering market. Our marketing director says there is a possibility we can recognise the following costs (all) as anasset, but he has not been clear on how to make this determination. Can you please explain whether all the cost below can be recognised as part of an asset? Please explain the requirements with examples that would be relevant to this case.July 2022 Research conducted to develop filters $340 000Sep 2022 The search for application of research findings $114,000Nov 2022 Formulation of improved Jonny King filters $97,000Dec 2022 Purchase of machinery to construct Jonny King filters* note 1 $300,000Jan 2022 Design and construction of final selection of possible alternatives $156 000Feb 2023 Operation of a pilot plant that is not for commercial production $79 000Apr 2023 Testing of pre-use Jonny King filters $270,000July to April Total wages paid to scientists and technicians* note 2 $1,799,000June 2023 Registration of a trade design fees $1 500June 2023 Lawyer fees incurred to protect Jonny King filters brand against cheap copies$15 000June 2023 Selling and administrative costs allocated $410,000June 2023 Initial operating losses $160,000Kaplan Business School Assessment 3 Case Study 2023* Note 1: The machine was purchased on 1 December 2022 with a useful life of 6 years and no residual value. * Note 2: The breakdown of Wages paid is as follows:July2022September2022November2022January2023February2023April2023 Total$189,000 $240,000 $250,000 $330,000 $390,000 $400,000 $1,799,000Item 2On 12 May 2023, the board of directors decided to close down a division making a particular product. On 28 May 2023 a detailed plan for closing down the division was agreed by the board; letters were sent to customers warning them to seek an alternative source of supply and redundancy notices were sent to the staff of the division. Some staff will be relocated, and thecompany will pay for relocation costs to relevant staff. The lease on the old factory continues for the next four months until it is closed. Unfortunately,the lease cannot be cancelled, and the factory cannot be re-let to another user.The costs associated with this shutdown are expected to be as follows:(a) Payout of staff annual leave $450,000.(b) Redundancy payout $800,000.(c) For those staff who will be moving to another division, retraining will be required at a cost of $500,000.(d) As another division is located 200km from the division being closed down, National Ltd agreed to pay for the costs of relocating those employees to another division. (e) The lease on old factory has five years to run. The cost of terminating the lease is expected to be $300,000.(f) The financial and management information systems of the division being closed need to be reconfigured to be comparable with another system, so that it can be used in the new division. This is estimated to cost approximately $1 million. (g) Expected loss due to closing down $979,000.The above costs will be paid during August 2023. We are unsure whether we need to include the above costs in the 2023 annual reports. Please explain any disclosure requirements for such events as at 30 June 2023. Kaplan Business School Assessment 3 Case Study 2023Item 3As you know, we have recently become a listed company, and as a result of this, we issued 1,000,000 ordinary shares to the public for the first time at an issue price of $10. The shares were payable as follows:$5 payable on application (closed on 28 January 2023)$2 payable on allotment (received by 31 March 2023)$3 payable on call made on 15 June 2023 and payable by 30 June 2023All applicants paid only application money except a holder with 10,000 shares who paid $10 (full share price).On 31 March 2023, we have recorded share capital of $10,000,000 in the book. However, we are unsure whether this amount has been correctly accounted, therefore advice on journal entries will be highly appreciated. In addition, the call money due date was on 30 June and one of shareholders is not able to pay the call money on 4,000 shares he purchased. The prospectus state that shares will be forfeited and refund would be made to those who failed to pay call money. The underwriters informed us that they could sell 4,000 shares at $9 per share with a fee of $2,900. It would be great if you could provide journal entries of the share issue process as examples in your explanations. Yours sincerely, Sullivan Sampso