FR - Introduction, Revenue, EPS, Stat. of Cash Flow

On 1 October 20X4, Hoy Co had $2·5 million of equity share capital (shares of 50 cents each) in issue.

No new shares were issued during the year ended 30 September 20X5, but on that date there were outstanding share options which had a dilutive effect equivalent to issuing 1·2 million shares for no consideration.

Hoy’s profit after tax for the year ended 30 September 20X5 was $1,550,000.

In accordance with IAS 33 Earnings Per Share, what is Hoy’s diluted earnings per share for the year ended 30 September 20X5?

• $0·25

• $0·41

• $0·31

• $0·42

Derringdo is a broadband provider which receives government assistance to provide broadband to remote areas. Derringdo invested in a new server at a gross cost of $800,000 on 1 October 20X2. The server has an estimated life of ten years with a residual value equal to 15% of its gross cost. Derringdo uses straight-line depreciation on a time apportioned basis.

The company received a government grant of 30% of its cost price of the server at the time of purchase. The termsof the grant are that if the company retains the asset for four years or more, then no repayment liability will be incurred. Derringdo has no intention of disposing of the server within the first four years. Derringdo’s accounting policy for capital-based government grants is to treat them as deferred credits and release them to income over the life of the asset to which they relate.

What is the net amount that will be charged to operating expenses in respect of the server for the year ended 31 March 20X3?

• $10,000

• $28,000

• $22,000

• $34,000

Derringdo is a broadband provider which receives government assistance to provide broadband to remote areas. Derringdo invested in a new server at a gross cost of $800,000 on 1 October 20X2. The server has an estimated life of ten years with a residual value equal to 15% of its gross cost. Derringdo uses straight-line depreciation on a time apportioned basis.

The company received a government grant of 30% of its cost price of the server at the time of purchase. The termsof the grant are that if the company retains the asset for four years or more, then no repayment liability will be incurred. Derringdo has no intention of disposing of the server within the first four years. Derringdo’s accounting policy for capital-based government grants is to treat them as deferred credits and release them to income over the life of the asset to which they relate.

What amount will be presented under non-current liabilities at 31 March 20X3 in respect of the grant?

• $228,000

• $216,000

• $240,000

• $204,000

Derringdo is a broadband provider which receives government assistance to provide broadband to remote areas. Derringdo invested in a new server at a gross cost of $800,000 on 1 October 20X2. The server has an estimated life of ten years with a residual value equal to 15% of its gross cost. Derringdo uses straight-line depreciation on a time apportioned basis.

The company received a government grant of 30% of its cost price of the server at the time of purchase. The termsof the grant are that if the company retains the asset for four years or more, then no repayment liability will be incurred. Derringdo has no intention of disposing of the server within the first four years. Derringdo’s accounting policy for capital-based government grants is to treat them as deferred credits and release them to income over the life of the asset to which they relate.

Derringdo also sells a package which gives customers a free laptop when they sign a twoyear contract for provision of broadband services. The laptop has a stand-alone price of $200 and the broadband contract is for $30 per month.

In accordance with IFRS 15 Revenue from contracts with customers, what amount will be recognised as revenue on each package in the first year?

• $439

• $281

• $461

• $15

Derringdo is a broadband provider which receives government assistance to provide broadband to remote areas. Derringdo invested in a new server at a gross cost of $800,000 on 1 October 20X2. The server has an estimated life of ten years with a residual value equal to 15% of its gross cost. Derringdo uses straight-line depreciation on a time apportioned basis.

The company received a government grant of 30% of its cost price of the server at the time of purchase. The termsof the grant are that if the company retains the asset for four years or more, then no repayment liability will be incurred. Derringdo has no intention of disposing of the server within the first four years. Derringdo’s accounting policy for capital-based government grants is to treat them as deferred credits and release them to income over the life of the asset to which they relate.

Determining the amount to be recognised in the first year is an example of which step in the IFRS 155-step model?

• Determining the transaction price

• Recognising revenue when a performance obligation is satisfied

• Identifying the separate performance obligations

• Allocating the transaction price to the performance obligations

Derringdo is a broadband provider which receives government assistance to provide broadband to remote areas. Derringdo invested in a new server at a gross cost of $800,000 on 1 October 20X2. The server has an estimated life of ten years with a residual value equal to 15% of its gross cost. Derringdo uses straight-line depreciation on a time apportioned basis.

The company received a government grant of 30% of its cost price of the server at the time of purchase. The termsof the grant are that if the company retains the asset for four years or more, then no repayment liability will be incurred. Derringdo has no intention of disposing of the server within the first four years. Derringdo’s accounting policy for capital-based government grants is to treat them as deferred credits and release them to income over the life of the asset to which they relate.

Derringdo is carrying out a transaction on behalf of another entity and the finance director is unsure whether Derringdo should be regarded as an agent or a principal in respect of this transaction.

Which of the following would indicate that Derringdo is acting as an agent?

• Derringdo is primarily responsible for fulfilling the contract.

• Derringdo is not exposed to credit risk for the amount due from the customer.

• Derringdo is responsible for negotiating the price for the contract.

• Derringdo will not be paid in the form of commission

The following information relates to the position at 31 March 20X9 of a contract where performance obligations are satisfied over time.

$

Contract price 900,000

At 31 March:

Costs to date 720,000

Estimated costs to complete 480,000

Progress payments invoiced 400,000

Percentage complete 60%

What amount should appear as ‘contract asset/liability’ in respect of this contract in the statement of financial position as at 31 March 20X9?

• $20,000 contract asset

• $4,00,000 contract asset

• $2,20,000 contract asset

• $4,20,000 contract asset

Which of the following should be capitalised in the initial carrying amount of an item of plant?

(1) Cost of transporting the plant to the factory

(2) Cost of installing a new power supply required to operate the plant

(3) Cost of a three-year plant maintenance agreement

(4) Cost of a three-week training course for staff to operate the plant

• 1 and 3

• 1 and 2

• 2 and 4

• 3 and 4

When a parent is evaluating the assets of a potential subsidiary, certain intangible assets can be recognised separately from goodwill, even though they have not been recognised in the subsidiary’s own statement of financial position.

Which of the following is an example of an intangible asset of the subsidiary which may be recognised separately from goodwill when preparing consolidated financial statements?

• A new research project which the subsidiary has correctly expensed to profit or loss but the directors of the parent have reliably assessed to have a substantial fair value

• A global advertising campaign which was concluded in the previous financial year and from which benefits are expected to flow in the future

• A contingent asset of the subsidiary from which the parent believes a flow of future economic benefits is possible

• A customer list which the directors are unable to value reliably

Financial statements represent transactions in words and numbers. To be useful, financial information must represent faithfully these transactions in terms of how they are reported.

Which of the following accounting treatments would be an example of faithful representation?

• Charging the rental payments for an item of plant to profit or loss where the rental agreement meets the criteria for a right of use asset

• Including a convertible loan note in equity on the basis that the holders are likely to choose the equity option on conversion

• Treating redeemable preference shares as part of equity in the statement of financial position

• Derecognising factored trade receivables sold without recourse to the seller