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WorksheetsFR - Ch-2 to 8 (2023)
Total questions: 49
Worksheet time: 3hrs 23mins
Using the requirements set out in IAS 10 Events after the Reporting Period, which of the following would be classified as an adjusting event after the reporting period in financial statements ended 31 March 20X4 that were approved by the directors on 31 August 20X4?
A reorganisation of the enterprise, proposed by a director on 31 January 20X4 and agreed by the Board on 10 July 20X4.
A strike by the workforce which started on 1 May 20X4 and stopped all production for 10 weeks before being settled.
The receipt of cash from a claim on an insurance policy for damage caused by a fire in a warehouse on 1 January 20X4. The claim was made in January 20X4 and the amount of the claim had not been recognised at 31 March 20X4 as it was uncertain that any money would be paid. The insurance enterprise settled with a payment of $1.5 million on 1 June 20X4.
The enterprise had made large export sales to the USA during the year. The year-end receivables included $2 million for amounts outstanding that were due to be paid in US dollars between 1 April 20X4 and 1 July 20X4. By the time these amounts were received, the exchange rate had moved in favour of the enterprise.
Target is preparing its financial statements for the year ended 30 September 20X7. Target is facing a number of legal claims from its customers with regards to a faulty product sold. The total amount being claimed is $3.5 million. Target’s lawyers say that the customers have an 80% chance of being successful.
According to IAS 37 Provisions, Contingent Liabilities and Contingent Assets, what amount, if any, should be recognised in respect of the above in Target’s statement of financial position as at 30 September 20X7? $_____________,000
$3,500,000
$3,50,000
$2,800,000
None of them
Identify whether the statements below are true or false:
True, True
True, False
False, False
False, True
Candel Co is being sued by a customer for $2 million for breach of contract over a cancelled order. Candel Co has obtained legal opinion that there is a 20% chance that Candel Co will lose the case. Accordingly Candel Co has provided $400,000 ($2 million × 20%) in respect of the claim. The unrecoverable legal costs of defending the action are estimated at $100,000. These have not been provided for as the case will not go to court until next year. What is the amount of the provision that should be made by Candel Co in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets?
$80,000
$20,00,000
$21,00,000
$100,000
Which of the following events taking place after the year end but before the financial statements were authorised for issue would require adjustment in accordance with IAS 10 Events After the Reporting Period?
Three lines of inventory held at the year end were destroyed by flooding in the warehouse.
The directors announced a major restructuring.
Two lines of inventory held at the year end were discovered to have faults rendering them unsaleable.
The value of the company's investments fell sharply.
Identify whether the following statements are true or false in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets?
True, True, False, True
True, False, True, False,
False, False, True, False
False, True, False, True,
The draft financial statements of Plethora plc for the year to 31 December 20X9 are being prepared and the accountant has requested your advice on dealing with the following issues.
(i) Plethora plc has an administration building which it no longer needs. On 1 July 20X9 Plethora plc entered into an agreement to lease the building out to another company. The building cost $600,000 on 1 January 20X0 andis being depreciated over 50 years, based on the IAS 16 cost model. Plethora plc applies the fair value model under IAS 40 Investment property and the fair value of the building wasjudged to be $800,000 on 1 July 20X9. This valuation had not changed at 31 December 20X9.
(ii) Plethora plc owns another building which has been leased out for a number of years. It had a fair value of $550,000 at 31 December 20X8 and $740,000 at 31 December 20X9.
(iii) Plethora plc owns a retail business which has suffered badly during the recession. Plethora plc treats this business as a separate cash generating unit.
An impairment review has been carried out as at 31 December 20X9 and the recoverable amount of the cash generating unit is estimated at $1.3m
What is the amount of the revaluation surplus that will be recognised in respect of the building in (i)?
$200,000
$314,000
$308,000
Nil
The draft financial statements of Plethora plc for the year to 31 December 20X9 are being prepared and the accountant has requested your advice on dealing with the following issues.
(i) Plethora plc has an administration building which it no longer needs. On 1 July 20X9 Plethora plc entered into an agreement to lease the building out to another company. The building cost $600,000 on 1 January 20X0 andis being depreciated over 50 years, based on the IAS 16 cost model. Plethora plc applies the fair value model under IAS 40 Investment property and the fair value of the building wasjudged to be $800,000 on 1 July 20X9. This valuation had not changed at 31 December 20X9.
(ii) Plethora plc owns another building which has been leased out for a number of years. It had a fair value of $550,000 at 31 December 20X8 and $740,000 at 31 December 20X9.
(iii) Plethora plc owns a retail business which has suffered badly during the recession. Plethora plc treats this business as a separate cash generating unit.
An impairment review has been carried out as at 31 December 20X9 and the recoverable amount of the cash generating unit is estimated at $1.3m
In respect of the building in (ii), how will the increase in value from $550,000 to $740,000 be accounted for?
Credited to profit or loss
Credited to the revaluation surplus
Credited to retained earnings
Credited to an investment property reserve
The draft financial statements of Plethora plc for the year to 31 December 20X9 are being prepared and the accountant has requested your advice on dealing with the following issues.
(i) Plethora plc has an administration building which it no longer needs. On 1 July 20X9 Plethora plc entered into an agreement to lease the building out to another company. The building cost $600,000 on 1 January 20X0 andis being depreciated over 50 years, based on the IAS 16 cost model. Plethora plc applies the fair value model under IAS 40 Investment property and the fair value of the building wasjudged to be $800,000 on 1 July 20X9. This valuation had not changed at 31 December 20X9.
(ii) Plethora plc owns another building which has been leased out for a number of years. It had a fair value of $550,000 at 31 December 20X8 and $740,000 at 31 December 20X9.
(iii) Plethora plc owns a retail business which has suffered badly during the recession. Plethora plc treats this business as a separate cash generating unit.
An impairment review has been carried out as at 31 December 20X9 and the recoverable amount of the cash generating unit is estimated at $1.3m
When an impairment review is carried out, a potentially impaired asset is measured at what amount?
Fair value
Value in use
Recoverable amount
Carrying amount
(i) The land and building were revalued on 1 October 20X3 with $80 million attributable to the land and $200 million to the building. At that date the estimated remaining life of the building was 25 years. A further revaluation was not needed until 1 October 20X8 when the land and building were valued at $85 million and $180 million respectively. The remaining estimated life of the building at this date was 20 years.
(ii) Plant is depreciated at 20% per annum on cost with time apportionment where appropriate. On 1 April 20X9new plant costing $45 million was acquired. In addition, this plant cost $5 million to install and commission. No plant is more than four years old.
(iii) The telecommunications licence was bought from the government on 1 October 20X7 and has a ten-year life.It is amortised on a straight line basis. In September 20X9, a review of the sales of the products related to the licence showed them to be very disappointing. As a result of this review the estimated recoverable amount of the licence at 30 September 20X9 was estimated at only $100 million.
There were no disposals of non-current assets during the year to 30 September 20X9.
What is the carrying amount of the land and buildings at 30 September 20X9?
$256m
$265m
$240m
$271m
(i) The land and building were revalued on 1 October 20X3 with $80 million attributable to the land and $200 million to the building. At that date the estimated remaining life of the building was 25 years. A further revaluation was not needed until 1 October 20X8 when the land and building were valued at $85 million and $180 million respectively. The remaining estimated life of the building at this date was 20 years.
(ii) Plant is depreciated at 20% per annum on cost with time apportionment where appropriate. On 1 April 20X9new plant costing $45 million was acquired. In addition, this plant cost $5 million to install and commission. No plant is more than four years old.
(iii) The telecommunications licence was bought from the government on 1 October 20X7 and has a ten-year life.It is amortised on a straight line basis. In September 20X9, a review of the sales of the products related to the licence showed them to be very disappointing. As a result of this review the estimated recoverable amount of the licence at 30 September 20X9 was estimated at only $100 million.
There were no disposals of non-current assets during the year to 30 September 20X9.
What is the depreciation charge on the plant for the year ended 30 September 20X9?
$30m
$25m
$20m
$35m
(i) The land and building were revalued on 1 October 20X3 with $80 million attributable to the land and $200 million to the building. At that date the estimated remaining life of the building was 25 years. A further revaluation was not needed until 1 October 20X8 when the land and building were valued at $85 million and $180 million respectively. The remaining estimated life of the building at this date was 20 years.
(ii) Plant is depreciated at 20% per annum on cost with time apportionment where appropriate. On 1 April 20X9new plant costing $45 million was acquired. In addition, this plant cost $5 million to install and commission. No plant is more than four years old.
(iii) The telecommunications licence was bought from the government on 1 October 20X7 and has a ten-year life.It is amortised on a straight line basis. In September 20X9, a review of the sales of the products related to the licence showed them to be very disappointing. As a result of this review the estimated recoverable amount of the licence at 30 September 20X9 was estimated at only $100 million.
There were no disposals of non-current assets during the year to 30 September 20X9.
Having revalued its property Advent is required to make certain disclosures in respect of the revaluation.
Which one of the following is NOT one of these disclosures?
Effective date of revaluation
Professional qualifications of Valuer
Basis used to revalue assets
Carrying amount of assets if no revaluation had taken place
(i) The land and building were revalued on 1 October 20X3 with $80 million attributable to the land and $200 million to the building. At that date the estimated remaining life of the building was 25 years. A further revaluation was not needed until 1 October 20X8 when the land and building were valued at $85 million and $180 million respectively. The remaining estimated life of the building at this date was 20 years.
(ii) Plant is depreciated at 20% per annum on cost with time apportionment where appropriate. On 1 April 20X9new plant costing $45 million was acquired. In addition, this plant cost $5 million to install and commission. No plant is more than four years old.
(iii) The telecommunications licence was bought from the government on 1 October 20X7 and has a ten-year life.It is amortised on a straight line basis. In September 20X9, a review of the sales of the products related to the licence showed them to be very disappointing. As a result of this review the estimated recoverable amount of the licence at 30 September 20X9 was estimated at only $100 million.
There were no disposals of non-current assets during the year to 30 September 20X9.
What is the amount of the impairment loss on the licence?
$200m
$170m
$140m
$60m
Systria is preparing its financial statements for the year ended 31 December 20X7 and has a number of issues to deal with regarding non-current assets.
(ii) During the year to 31 December 20X7 Systria acquired Dominica for $10 million, its tangible assets being valued at $7 million and goodwill on acquisition being $3 million. Assets with a carrying amount of $2.5 millionwere subsequently destroyed. Systria has carried out an impairment review and has established that Dominicacould be sold for $6 million, while its value in use is $5.5 million.
(iii) A freehold property originally costing $100,000 with a 50-year life has accumulated depreciation to date of $20,000. The asset is to be revalued to $130,000 at 31 December 20X7.
Which set of double entries is required to record the revaluation in (iii)?
DR Accumulated depreciation $20,000 / CR Revaluation surplus $20,000
DR Property at cost $50,000 / CR Revaluation surplus $50,000
DR Accumulated depreciation $20,000 DR Property at cost $30,000 / CR Revaluation surplus $50,000
DR Revaluation surplus $50,000 / CR Accumulated depreciation $20,000 CR Property at cost $30,000
Systria is preparing its financial statements for the year ended 31 December 20X7 and has a number of issues to deal with regarding non-current assets.
(ii) During the year to 31 December 20X7 Systria acquired Dominica for $10 million, its tangible assets being valued at $7 million and goodwill on acquisition being $3 million. Assets with a carrying amount of $2.5 millionwere subsequently destroyed. Systria has carried out an impairment review and has established that Dominicacould be sold for $6 million, while its value in use is $5.5 million.
(iii) A freehold property originally costing $100,000 with a 50-year life has accumulated depreciation to date of $20,000. The asset is to be revalued to $130,000 at 31 December 20X7.
What will be the depreciation charge on the asset in (iii) for the year ended 31 December 20X8?
$2,000
$2,600
$3,250
$2,750
Which of the following best explains what is meant by ‘capital expenditure’?
Expenditure on non-current assets, including repairs and maintenance
Expenditure on expensive assets
Expenditure relating to the issue of share capital
Expenditure relating to the acquisition or improvement of non-current assets
What is the purpose of charging depreciation in financial statements?
To allocate the cost of a non-current asset over the accounting periods expected to benefit from its use
To ensure that funds are available for the eventual replacement of the asset
To reduce the cost of the asset in the statement of financial position to its estimated market value
To account for the ‘wearing-out’ of the asset over its life
Artem Co prepares financial statements to 30 June each year.
During the year to 30 June 20X5, the company spent $550,000 on new plant as follows:
$'000
Plant cost 525
Delivery to site 3
Building alterations to accommodate the plant 12
Costs of initial testing of the new plant 2
Plant operator training costs 8
Artem Co's fixtures and fittings were purchased on 1 July 20X2 at a cost of $50,000. The directors have depreciated them on a straight-line basis over an estimated useful life of eight years assuming a $5,000 residual value. At 1 July 20X4, the directors realise that the remaining useful life of the fixtures is five years. There is no change to the estimated residual value.
Artem Co began a research project in October 20X3 with the aim of developing a new type of machine. If successful, Artem Co will manufacture the machines and sell them to customers as well as using them in their own production processes. During the year ended 30 June 20X4, costs of $25,000 were incurred on conducting feasibility studies and some market research. During the year ended 30 June 20X5, a further $80,000 was incurred on constructing and testing a prototype of the machine.
In accordance with IAS 16 Property, Plant and Equipment, what is the value of additions to plant for Artem Co for the year ended 30 June 20X5?
Rs.5,40,000
Rs.5,42,000
Rs.5,39,000
Rs.528,000
Artem Co prepares financial statements to 30 June each year.
During the year to 30 June 20X5, the company spent $550,000 on new plant as follows:
$'000
Plant cost 525
Delivery to site 3
Building alterations to accommodate the plant 12
Costs of initial testing of the new plant 2
Plant operator training costs 8
Artem Co's fixtures and fittings were purchased on 1 July 20X2 at a cost of $50,000. The directors have depreciated them on a straight-line basis over an estimated useful life of eight years assuming a $5,000 residual value. At 1 July 20X4, the directors realise that the remaining useful life of the fixtures is five years. There is no change to the estimated residual value.
Artem Co began a research project in October 20X3 with the aim of developing a new type of machine. If successful, Artem Co will manufacture the machines and sell them to customers as well as using them in their own production processes. During the year ended 30 June 20X4, costs of $25,000 were incurred on conducting feasibility studies and some market research. During the year ended 30 June 20X5, a further $80,000 was incurred on constructing and testing a prototype of the machine.
Which of the following is TRUE in relation to the change in the remaining useful life of the fixtures and fittings?
It is a change of accounting policy which should be retrospectively applied.
It is a change of accounting policy which should be disclosed in the notes to the financial statements.
It is a change of accounting estimate which should be retrospectively applied.
It is a change of accounting estimate which should be prospectively applied.
Artem Co prepares financial statements to 30 June each year.
During the year to 30 June 20X5, the company spent $550,000 on new plant as follows:
$'000
Plant cost 525
Delivery to site 3
Building alterations to accommodate the plant 12
Costs of initial testing of the new plant 2
Plant operator training costs 8
Artem Co's fixtures and fittings were purchased on 1 July 20X2 at a cost of $50,000. The directors have depreciated them on a straight-line basis over an estimated useful life of eight years assuming a $5,000 residual value. At 1 July 20X4, the directors realise that the remaining useful life of the fixtures is five years. There is no change to the estimated residual value.
Artem Co began a research project in October 20X3 with the aim of developing a new type of machine. If successful, Artem Co will manufacture the machines and sell them to customers as well as using them in their own production processes. During the year ended 30 June 20X4, costs of $25,000 were incurred on conducting feasibility studies and some market research. During the year ended 30 June 20X5, a further $80,000 was incurred on constructing and testing a prototype of the machine.
Using the pull down list, select what is the depreciation charge for the fixtures and fittings for Artem Co for the year ended 30 June 20X5 in accordance with IAS 16?
$7,500
$9,000
$7,750
$6,750
To which of the following items does IAS 41 Agriculture apply?
(i) A change in fair value of a herd of animals relating to the unit price of the animals.
(ii) Logs held in a wood yard.
(iii) Farm land which is used for growing vegetables.
(iv) The cost of developing a new type of crop seed which is resistant to tropical diseases.
All four
(i) only
(i) and (ii) only
(ii) and (ii) only
Which one of the following events which occur after the reporting date of an entity but before the financial statements are authorised for issue are classified as ADJUSTING events in accordance with IAS 10 Events after the Reporting Period?
A change in tax rate announced after the reporting date, but affecting the current tax liability
The discovery of a fraud which had occurred during the year
The destruction of a factory by fire
None
Identify whether the statements below are true or false:
1. IAS 10 Events After the Reporting Period covers the period from the reporting date to the annual general meeting
2. According to IAS 10 Events After the Reporting Period, any nonadjusting event should be disclosed as a note in the financial statements
True, False
False, True
True, True
False, False
Aphrodite has a year end of 31 December and operates a factory which makes computer chips for mobile phones. It purchased a machine on 1 July 20X3 for $80,000 which had a useful life of ten years and is depreciated on the straight-line basis, time apportioned in the years of acquisition and disposal. The machine was revalued to $81,000 on 1 July 20X4. There was no change to its useful life at that date.
A fire at the factory on 1 October 20X6 damaged the machine, leaving it with a lower operating capacity. The accountant considers that Aphrodite will need to recognise an impairment loss in relation to this damage. The accountant has ascertained the following information at 1 October 20X6:
(1) The carrying amount of the machine is $60,750.
(2) An equivalent new machine would cost $90,000.
(3) The machine could be sold in its current condition for a gross amount of $45,000. Dismantling costs would amount to $2,000.
(4) In its current condition, the machine could operate for three more years which gives it a value in use figure of $38,685.
In accordance with IAS 16 Property, Plant and Equipment, what is the depreciation charged to Aphrodite’s statement of profit or loss in respect of the machine for the year ended 31 December 20X4?
$9,000
$8,000
$8,263
$8,500
Aphrodite has a year end of 31 December and operates a factory which makes computer chips for mobile phones. It purchased a machine on 1 July 20X3 for $80,000 which had a useful life of ten years and is depreciated on the straight-line basis, time apportioned in the years of acquisition and disposal. The machine was revalued to $81,000 on 1 July 20X4. There was no change to its useful life at that date.
A fire at the factory on 1 October 20X6 damaged the machine, leaving it with a lower operating capacity. The accountant considers that Aphrodite will need to recognise an impairment loss in relation to this damage. The accountant has ascertained the following information at 1 October 20X6:
(1) The carrying amount of the machine is $60,750.
(2) An equivalent new machine would cost $90,000.
(3) The machine could be sold in its current condition for a gross amount of $45,000. Dismantling costs would amount to $2,000.
(4) In its current condition, the machine could operate for three more years which gives it a value in use figure of $38,685.
The accountant has decided that it is too difficult to reliably attribute cash flows to this one machine and that it would be more accurate to calculate the impairment on the basis of the factory as a cash-generating unit.
In accordance with IAS 36 Impairment of Assets, which TWO of the following are TRUE regarding cash generating units?
A cash-generating unit to which goodwill has been allocated should be tested for impairment every five years.
A cash-generating unit must be a subsidiary of the parent
There is no need to consistently identify cash-generating units based on the same types of asset from period to period.
A cash-generating unit is the smallest identifiable group of assets for which independent cash flows can be identified.
Schrute owns a herd of cattle, which produce milk. Schrute then turns this into cheese.
On 1 April 20X5, Shrute purchased a flock of sheep for $100,000, which included transaction costs of $5,000. At 31 March 20X6, the flock was valued at $120,000. Every time animals are sold there is a 5% commission fee payable to the national farming agency.
Shrute uses the historical cost model and charges all depreciation as an operating expense.
In addition to this, Schrute uses a number of items of specialised farm machinery. This machinery cost Schrute $200,000 on 1 April 20X2 and has a 10-year useful life. At 31 March 20X6, there is only one supplier who still sells this machinery and the current price of new machinery is $300,000.
Which of the following items held by Schrute will be accounted for under the provisions of IAS 41 Agriculture? (i) Herd of cattle
(ii) Milk
(iii) Cheese
(i) only
(ii) and (iii) only
(i) and (ii) only
All three items
Promoil’s financial statements for the year ended 30 September 20X8 were authorised for issue by its directors on 6 November 20X8 and the Annual General Meeting will be held on 6 December 20X8.
On 1 October 20X7, Promoil acquired an oil platform at a cost of $30 million. The estimated cost of removing the platform at the end of the asset’s life on 30 September 20Y7 will be $15 million. The present value of $1 in 10 years using Promoil’s cost of capital of 8% is $0.46.
On 12 October 20X8 a fire destroyed Promoil’s largest warehouse. The carrying amount of the warehouse was $10 million. Promoil expects to be able to recover $9 million from its insurers and its going concern is not in doubt.
A single class of inventory held at another warehouse was valued at its cost of $460,000 and sold for $280,000 on 10 October 20X8.
On 18 November 20X8 the government announced tax changes which have the effect of increasing Promoil’s deferred tax liability by $650,000 as at 30 September 20X8.
Which of the following is correct in respect of IAS 10 Events After the Reporting Period regarding the tax changes?
This is a non-adjusting event and no disclosure is required
This is an adjusting event
This is neither an adjusting or non-adjusting event
This is an adjusting event and the financial statements should be reissued
Sakho owned a 1 year old herd of cattle on 1 January. At this date, the fair value less costs to sell were $70,000. At 31 December, the fair value of a 1 year old herd of cattle is $75,000, and the fair value of a 2 year old herd of cattle is $80,000. If Sakho sold the cattle, commission of 5% would be payable.
What is the correct accounting treatment for the cattle at 31 December according to IAS 41 Agriculture?
Revalue to $71,250 taking gain of $1,250 to the revaluation surplus
Revalue to $76,000, taking gain of $6,000 to the statement of profit or loss
Revalue to $76,000, taking gain of $6,000 to the revaluation surplus
Revalue to $71,250, taking gain of $1,250 to the statement of profit or loss
Candel Co is being sued by a customer for $2 million for breach of contract over a cancelled order. Candel Co has obtained legal opinion that there is a 20% chance that Candel Co will lose the case. Accordingly Candel Co has provided $400,000 ($2 million × 20%) in respect of the claim. The unrecoverable legal costs of defending the action are estimated at $100,000. These have not been provided for as the case will not go to court until next year.
What is the amount of the provision that should be made by Candel Co in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets?
$500,000
$400,000
$100,000
Nil
Which of the following events taking place after the year end but before the financial statements were authorised for issue would require adjustment in accordance with IAS 10 Events After the Reporting Period?
Three lines of inventory held at the year end were destroyed by flooding in the warehouse.
The directors announced a major restructuring.
Two lines of inventory held at the year end were discovered to have faults rendering them unsaleable.
The value of the company's investments fell sharply.
Which of the following events which occur after the reporting date of a company but before the financial statements are authorised for issue are classified as ADJUSTING events in accordance with IAS 10 Events After the Reporting Period?
change in tax rate announced after the reporting date, but affecting the current tax liability
The destruction of a factory by fire
The determination of the sale proceeds of an item of plant sold before the year end
None of these
At what amount is a biological asset measured on initial recognition in accordance with IAS 41 Agriculture?
Production cost
Fair value
Cost less estimated costs to sell
Fair value less estimated costs to sell
Metric owns an item of plant which has a carrying amount of $248,000 as at 1 April 20X3. It is being depreciated at 12.5% per annum on a reducing balance basis.
The plant is used to manufacture a specific product which has been suffering a slow decline in sales. Metric has estimated that the plant will be retired from use on 31 March 20X7.
On 1 April 20X4, Metric had an offer from a rival to purchase the plant for $200,000.
At what value should the plant appear in Metric’s statement of financial position as at 31 March 20X4?
$2,48,000
$2,00,000
$2,14,600
$2,17,000
Riley acquired a non-current asset on 1 October 20X9 at a cost of $100,000 which had a useful life of ten years and a nil residual value. The asset had been correctly depreciated up to 30 September 20Y4. At that date the asset was damaged and an impairment review was performed. On 30 September 20Y4, the fair value of the asset less costs to sell was $30,000 and the expected future cash flows were $8,500 per annum for the next five years. The current cost of capital is 10% and a five year annuity of $1 per annum at 10% would have a present value of $3.79.
What amount would be charged to profit or loss for the impairment of this asset for the year ended 30 September 20Y4?
$50,000
$32,215
$17,785
$17,758
As at 30 September 20X3 the value of Dune’s property in its statement of financial position comprised:
Cost (useful life 15 years) $45 million
Accumulated depreciation $6 million
On 1 April 20X4, Dune decided to sell the property. The property is being marketed by a property agent at a price of $42 million, which was considered a reasonably achievable price at that date. The expected costs to sell have been agreed at $1 million. Recent market transactions suggest that actual sale prices achieved for this type of property in the current market conditions are 10% less than the price at which they are marketed.
At 30 September 20X4 the property has not been sold.
At what value should the property be reported in Dune’s statement of financial position as at 30 September 20X4?
$36 million
$37.5 million
$36.8 million
$42 million
BN has an asset that was classified as held for sale at 31 March 20X2. The asset had a carrying amount of $900 and a fair value of $800. The cost of disposal was estimated to be $50.
According to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which value should be used for the asset as at 31 March 20X2?
$750
$800
$850
$900
According to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations which of the following represent criteria for an asset to be classified as held for sale?
(i) Available for immediate sale in its present condition.
(ii) Sale is highly probable.
(iii) The sale is expected to be completed within the next month.
(iv) The sale is expected to be completed within the next month.
All of the above
(i), (ii) and (iii)
(i), (ii) and (iv)
(ii), (iii) and (iv)
Complete the statement using the options provided.
The RECOVERABLE AMOUNT of an asset is the higher of .................. and ......................... under IAS 36.
Fair value and Value in use
Fair value less costs of disposal and Value in use
Market value and Value in use
None of the above
Dempsey Co owns a pharmaceutical business with a year-end of 30 September 20X4. Dempsey Co commenced the development stage of a new drug on 1 January 20X4. $40,000 per month was incurred until the project was completed on 30 June 20X4, when the drug went into immediate production. The directors became confident of the project’s success on 1 March 20X4. The drug has an estimated life span of five years and time-apportionment is used by Dempsey where applicable.
What amount will Dempsey charge to profit or loss for development costs, including any amortisation, for the year ended 30 September 20X4?
$12,000
$98,667
$48,000
$88,000
Sybil has acquired a subsidiary Basil in the current year. Basil has a brand which has been reliably valued by Sybil at $500,000, and a customer list which Sybil has been unable to value.
Which of these describes how Sybil should treat these intangible assets of Basil in their consolidated Financial Statements?
They should be included in goodwill.
The brand should be capitalised as a separate intangible asset, whereas the customer list should be included within goodwill.
Both the brand and the customer list should be capitalised as separate intangible assets.
The customer list should be capitalised as a separate intangible asset, whereas the brand should be included within goodwill.
Amco Co carries out research and development. In the year ended 30 June 20X5 Amco Co incurred total costs in relation to project X of $750,000, spending the same amount each month up to 30 April 20X5, when the project was completed. The product produced by the project went on sale from 31 May 20X5.
The project had been confirmed as feasible on 1 January 20X5, and the product produced by the project was expected to have a useful life of five years.
What is the carrying amount of the development expenditure asset as at 30 June 20X5?
$295,000
$725,000
$300,000
$0
Which one of the following would be classified as a liability?
Dexter's business manufactures a product under licence. In 12 months' time the licence expires and Dexter will have to pay $50,000 for it to be renewed.
Reckless purchased an investment 9 months ago for $120,000. The market for these investments has now fallen and Reckless's investment is valued at $90,000.
Carter has estimated the tax charge on its profits for the year just ended as $165,000.
Expansion is planning to invest in new machinery and has been quoted a price of $570,000
The Conceptual Framework identifies four enhancing qualitative characteristics of financial information. For which of these characteristics is disclosure of accounting policies particularly important?
Verifiability
Timeliness
Comparability
Understandability
Which of the following is NOT a purpose of the IASB’s Conceptual Framework?
To assist the IASB in the preparation and review of IFRS
To assist auditors in forming an opinion on whether financial statements comply with IFRS
To assist in determining the treatment of items not covered by an existing IFRS
To be authoritative where a specific IFRS conflicts with the Conceptual Framework
Recognition is the process of including within the financial statements items which meet the definition of an element according to the IASB’s Conceptual Framework for Financial Reporting.
Which of the following items should be recognised as an asset in the statement of financial position of a company?
A skilled and efficient workforce which has been very expensive to train. Some of these staff are still in the employment of the company.
A highly lucrative contract signed during the year which is due to commence shortly after the year end
A government grant relating to the purchase of an item of plant several years ago, which has a remaining life of four years
A receivable from a customer which has been sold (factored) to a finance company. The finance company has full recourse to the company for any losses.
Comparability is identified as an enhancing qualitative characteristic in the IASB’s Conceptual Framework for Financial Reporting.
Which of the following does NOT improve comparability?
Restating the financial statements of previous years when there has been a change of accounting policy
Prohibiting changes of accounting policy unless required by an IFRS or to give more relevant and reliable information
Disclosing discontinued operations in financial statements
Applying an entity's current accounting policy to a transaction which an entity has not engaged in before
he accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework.
During the year ended 31 March 20X6, Lisbon experienced the following transactions or events.
A Sold an asset to a finance company and leased it back for the remainder of its useful life. The accountant has decided that this should be treated as a secured loan.
B The company’s statement of profit or loss prepared using historical costs showed a loss from operating its shops, but the company is aware that the increase in the value of its properties during the period far outweighed the operating loss
C Inventory has up to this year been valued using FIFO but the accountant is considering changing to the weighted average method for the year to 31 March 20X6.
The accountant is aware that some members of the Board of Lisbon have little understanding of accounting and he is worried about his presentation of the financial statements at the Board meeting.
How should he deal with this situation?
A In doing his presentation he should omit any complex issues, so that everybody can understand what he is saying.
He should open his presentation with the advice that some of them may not understand all of it.
He should classify, characterise and present the information clearly and precisely.
He should deliver his presentation just to those who are financially qualified.
The accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework.
During the year ended 31 March 20X6, Lisbon experienced the following transactions or events.
A Sold an asset to a finance company and leased it back for the remainder of its useful life. The accountant has decided that this should be treated as a secured loan.
B The company’s statement of profit or loss prepared using historical costs showed a loss from operating its shops, but the company is aware that the increase in the value of its properties during the period far outweighed the operating loss
C Inventory has up to this year been valued using FIFO but the accountant is considering changing to the weighted average method for the year to 31 March 20X6.
Which concept or qualitative characteristic has influenced the decision in (A) above
Faithful representation
Verifiability
Accruals
Comparability
The accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework.
During the year ended 31 March 20X6, Lisbon experienced the following transactions or events.
A Sold an asset to a finance company and leased it back for the remainder of its useful life. The accountant has decided that this should be treated as a secured loan.
B The company’s statement of profit or loss prepared using historical costs showed a loss from operating its shops, but the company is aware that the increase in the value of its properties during the period far outweighed the operating loss
C Inventory has up to this year been valued using FIFO but the accountant is considering changing to the weighted average method for the year to 31 March 20X6.
In looking at issue (B) above, the accountant decides that the properties should be revalued. Which concept or qualitative characteristic has been applied in making this decision?
Materiality
Going concern
Relevance
Timeliness
