AC3193

BSc DEGREES AND GRADUATE DIPLOMAS IN ECONOMICS, MANAGEMENT,

FINANCE AND THE SOCIAL SCIENCES, THE DIPLOMA IN ECONOMICS AND
SOCIAL SCIENCES AND THE CERTIFICATE IN EDUCATION IN SOCIAL
SCIENCES

Summer 2022 Online Assessment Instructions

AC3193 Accounting: markets and organisations

Wednesday 11 May 2022: 09:00 - 13:00 (BST)

The assessment will be a closed-book take-home online assessment within

a 4-hour window. The expected time/effort to answer all questions is 3 hours.

Candidates should answer FOUR of the following EIGHT questions: ONE from
Section A, ONE from Section B, ONE from Section C and ONE further question
from any section. All questions carry equal marks.

Extracts from compound interest tables are given after the final question on this
paper.

Each essay-based answer must not exceed 1,000 words. Anything beyond
1,000 words will not be read. In-text references will count towards the word
count.

You should complete this paper using word processing software (i.e. Microsoft
Word). This should be saved as a .doc or .docx file and then uploaded to the
exam software as ONE individual file. Please ensure that your candidate
number is written clearly at the top of each page. Please do not write your
name anywhere on any part of your submission.

For all questions (Q1 to Q8): Please note you may hand-write calculations,
formulae, or diagrams, but these should be scanned or copied and included as
images in the Word document that you submit. Please ensure that any images
are inserted at the appropriate point of your document and correctly aligned (i.e.
markers will not need to rotate images to read them)

If you choose to answer Q1 and/or Q2, please handwrite your solutions and
append an image of the workings into your submission to ensure that you only
submit a single document for all your answers.
Workings should be submitted for all questions requiring calculations. Any
necessary assumptions introduced in answering a question are to be stated.

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You may use any calculator for any appropriate calculations, but you may not
use any computer software to obtain solutions. Credit will only be given if all
workings are shown.

You have until 13:00 (BST) on Wednesday 11 May 2022 to submit your answers.
However, you are advised not to leave your submission to the last minute in order to
allow sufficient time to submit your work.

If you think there is any information missing or any error in any question, then
you should indicate this but proceed to answer the question stating any
assumptions you have made.

The assessment has been designed with a duration of 4 hours to provide a more
flexible window in which to complete the assessment. As a closed-book exam, the
expected amount of effort required to complete all questions is no more than 3
hours. Organise your time well. You are assured that in terms of answering all
questions, there will be no benefit in you going beyond the expected 3 hours of
effort. Your assessment has been carefully designed to help you show what you
have learned in the hours allocated.

This is a closed-book assessment but we recognise that some students have the
ability to memorise sentences or entire paragraphs of text. As such, under closed-
book conditions, examiners will be within their rights to consider plagiarism may have
taken place if they encounter any strings of sentences taken from ANY source which
are closely paraphrased or directly quoted and which are not referenced.

You are not expected to compile a full bibliography for any answer, but if you are
recalling a direct quote from ANY source (including books, journals, internet sources,
the subject guide, or lecture notes), then you must use quotation marks and add a
reference to identify the author, and preferably also the year. If you are paraphrasing
closely you must also attempt to reference where possible, and at least provide a
basic reference to indicate the author. Please ensure that ahead of taking your
examination, you have read the additional guidance on referencing under exam
conditions which is available at:

Recognised Teaching Centre students - Avoiding plagiarism: Referencing in EMFSS

examinations (london.ac.uk)

2U Online students – course wall on VLE (Digital Campus)

By accessing this question paper, you agree not to commit any assessment offence.
Assessment offences include (but are not limited to) committing plagiarism and the
use or access of any paid-for or any other services offering live assistance
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you or another student an advantage in the examination. As such, any exchanging
with others of exam questions; or any accessing of websites, blogs, forums or any
other form of oral or written communication with others which involves any
discussion of live examination questions or potential answers/solutions to
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exam questions will be considered an assessment offence.

The University of London will conduct checks to ensure the academic integrity of
your work. Many students that break the University of London’s assessment
regulations did not intend to cheat but did not properly understand the University of
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considers all forms of plagiarism, whether deliberate or otherwise, a very
serious matter and can apply severe penalties that might impact on your
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The University of London’s Procedure for the Consideration of Allegations of

Assessment Offences is available online at:

Assessment Offence Procedures - University of London

© University of London 2022

 AC3193

AC3193 Accounting: Markets and Organizations

Candidates should answer FOUR of the following EIGHT questions: ONE from Section
A, ONE from Section B, ONE from Section C and ONE further question from any
section. All questions carry equal marks.

Extracts from compound interest tables are given after the final question on this paper.

Please find questions on the following page.

Page 1 of 8
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Section A: Answer at least ONE question.

Question 1
a) What is Hicks’ model of income and how does its approach to measurement differ
from income defined by historic cost accounting?
5 marks

b) How was Hicks’ income number 1 modified to deal with (i) an unexpected change in
interest rates and (ii) windfall gains?
7 marks

c) Florence Ltd has decided to start a new business project, expecting annual
cashflows of £6,000 per annum to be generated in perpetuity with interest rates
expected to remain at 10% indefinitely. The company receives £6,000 at the end of
year 1 but a turn of events mean that the company had to revise its expectations.
The company forecasts that it will now receive £12,000 per annum in perpetuity. The
rate of interest will also change at the end of year 1 to 20% and is expected to
remain so in perpetuity. These revised estimates are not expected to change for the
foreseeable future. You should assume that all cashflows arise at the end of each
year.

Required:
Calculate the following.

(i) Hicks’ income number 1 ex ante

(ii) Hicks’ income number 1 ex post
(iii) Hicks’ income number 2 ex post version A; You should reconcile this answer with
Hicks’ income number 1 ex ante
(iv) Hicks’ income number 2 ex post version B; You should reconcile this answer with
Hicks’ income number 1 ex ante

13 marks
Total: 25 marks

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Question 2
Clarise Ltd. is an artisan whiskey distillery. The company has three small-batch
distilleries across Scotland and is considering what to do with their distilleries. The
company has a cost of capital of 10% per annum and their management has given you
the following information.

Highlands’ distillery:
This is one of the company’s oldest distilleries. The distillery generates sales of £45,000
a year on an annual cost base of £17,000. There is a small but steady market for
Highland single malt that the company produces. The company’s sales director is
confident that the level of sales and cost base can be indefinitely maintained into the
future. The accounting or net book value of the distillery is £200,000. The company has
the option of disposing of this distillery immediately for £84,000 and it will cost £6,000 to
do so. A similar distillery nearby has recently sold for £320,000.

Islay distillery:
This is the company’s breadwinner. The distillery generates a contribution, net of costs,
of £240,000 a year and is expected to do so for the next ten years. The machinery used
also has an expected useful life of ten years, and can be sold for £600,000 at the end of
its life. The accounting or net book value of the distillery is £800,000. If the distillery
were to be disposed of in its current condition today, it would fetch £1,000,000 before
transaction costs of £20,000. A similar distillery is currently on sale for £940,000.

Speyside distillery:
The company has acquired this distillery as part of its merger with another distiller. The
type of whiskey made is not a specialism of the company, and it is weighing up the
various costs and benefits of disposing of the distillery. Currently, the distiller generates
a contribution, net of costs, of £50,000 a year and can be expected to do so for five
years. The machinery used has a similar useful life (five years), and can be sold for
£230,000 at the end of its life. The accounting or net book value of the distillery is
£470,000. If the distillery were to be disposed in its current condition today, it would
fetch £400,000 before transaction costs of £10,000. A similar distillery is currently on
sale for £435,000.

Required:
a) What is deprival value and how can it be used in financial decision-making?
4 marks

b) Calculate the deprival values of all three distilleries to the nearest £1.
12 marks

c) On the basis of your answer in (b) and by stating any additional assumptions you
have made, what do you think the company should do with each of the distilleries?
4 marks

d) What are the challenges faced by users of corporate financial reports if deprival
values were used to value non-current assets?
5 marks
Total: 25 marks

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Section B: Answer at least ONE question.

Question 3
(i) Overview and critically assess Laughlin’s (1995 “Empirical research in accounting:
alternative approaches and a case for “middle-range” thinking”, Accounting,
Auditing and Accountability Journal, 8(1), pp.63–87) articulation of different
approaches to the development of accounting theories in research, noting what he
adds to prior studies.
20 marks

(ii) Do we need to consider philosophy of method in research seeking to develop

accounting theory?
5 marks

Question 4
(i) What do you understand by critical accounting theory?
18 marks
(ii) Assess two contributions to critical accounting theory.
7 marks

Question 5
Outline and assess key different theoretical arguments put forward for and against
accounting regulation.
25 marks

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Section C: Answer at least ONE question.

Question 6
The Board of Directors of Meenatopolis Ltd, is discussing an important item on their
agenda. George Kouhy, the Managing Director, is concerned about various aspects of
control at the company pertaining to planning and budgeting.

George is concerned to hear reports of different kinds of targets being set in the
organization. In some departments, targets seem to be far too challenging. In others,
targets seem to be far too easy. In some departments, it seems managers and employees
together set their own budgets, which concerns him.

George is also puzzled because he sees planning and budgeting in terms of targets not
forecasts but he understands that the Chief Management Controller, Barry Jobsworth,
has implemented a practice involving forecasting financials and then seeking to act upon
these forecasts as a mode of control.

There are different opinions. The Finance Director, Tim Welden, thinks the budgets
should be set as a completely fresh exercise every six months, whereas the Sales
Director, Zoe Hartson, thinks the budgeting system should be scrapped. For her, there is
little relationship between the company’s goals and the narrow financial budget targets
and her appreciation of ‘Beyond Budgeting’ leads her to suggest budgets can be
counterproductive.

George puts these points to Barry.

Required:
Putting yourself in Barry’s position, write an initial response to all the above issues.
25 marks

Page 5 of 8
© University of London 2022
Question 7
At the Board of Magnetics Ltd, the directors are debating ethical issues.

The Managing Director sees no conflict between pursuing profits and corporate social
responsibility - because, even to survive, a business must satisfy all key stakeholders.
The Finance Director suggests that the key thing is to follow professional ethical codes.

The Marketing Director argues that companies can try to convince their stakeholders to
support ethical strategies.

The Operations Director sees a key ethical issue that needs to be addressed, budgetary
slack in budgeting. The Managing Director adds another ethical issue in management
control - not challenging flawed control indicators.

Required:
Discuss the ethical issues and how they might be resolved. Your answer should draw
on relevant academic and practitioner literature.
Total: 25 marks

Question 8
If a company expands into a new environment, such as a new country, how might
management control systems be adapted?
Total: 25 marks

Page 6 of 8
© University of London 2022
 Present Value interest factor per £1.00 due at the end of n years for interest rate of:
% 1 2 3 4 5 6 7 8 9 10
n
1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909
2 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826
3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751
4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683
5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621
6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564
7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513
8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467
9 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424
10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386
11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350
12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319
13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290
14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263
15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239
16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218
17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198
18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180
19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164
20 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149
21 0.811 0.660 0.538 0.439 0.359 0.294 0.242 0.199 0.164 0.135
22 0.803 0.647 0.522 0.422 0.342 0.278 0.226 0.184 0.150 0.123
23 0.795 0.634 0.507 0.406 0.326 0.262 0.211 0.170 0.138 0.112
24 0.788 0.622 0.492 0.390 0.310 0.247 0.197 0.158 0.126 0.102
25 0.780 0.610 0.478 0.375 0.295 0.233 0.184 0.146 0.116 0.092

% 11 12 13 14 15 16 17 18 19 20
n
1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694
3 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579
4 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482
5 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402
6 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335
7 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279
8 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233
9 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194
10 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162
11 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135
12 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112
13 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093
14 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078
15 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065
16 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054
17 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045
18 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038
19 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031
20 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026
21 0.112 0.093 0.077 0.064 0.053 0.044 0.037 0.031 0.026 0.022
22 0.101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018
23 0.091 0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015
24 0.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019 0.015 0.013
25 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010

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© University of London 2022
 Present Value interest factor for an annuity of £1.00 for a series of n years for interest
rate of:
% 1 2 3 4 5 6 7 8 9 10
n
1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909
2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736
3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487
4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170
5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791
6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355
7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868
8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335
9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759
10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145
11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495
12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814
13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103
14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367
15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606
16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824
17 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.022
18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201
19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365
20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514
21 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.017 9.292 8.649
22 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.201 9.442 8.772
23 20.456 18.292 16.444 14.857 13.489 12.303 11.272 10.371 9.580 8.883
24 21.243 18.914 16.936 15.247 13.799 12.550 11.469 10.529 9.707 8.985
25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.823 9.077

% 11 12 13 14 15 16 17 18 19 20
n
1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528
3 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106
4 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589
5 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991
6 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326
7 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605
8 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837
9 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031
10 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192
11 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327
12 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439
13 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533
14 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611
15 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675
16 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730
17 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775
18 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812
19 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843
20 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870
21 8.075 7.562 7.102 6.687 6.312 5.973 5.665 5.384 5.127 4.891
22 8.176 7.645 7.170 6.743 6.359 6.011 5.696 5.410 5.149 4.909
23 8.266 7.718 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4.925
24 8.348 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937
25 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948

END OF PAPER

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