Which one of the following assets may be classified as a non-current asset in the financial statements of a business?

What is the purpose of charging depreciation in financial statements?

Wetherby Co purchased a machine on 1 July 20X7 for $500,000. It is being depreciated on a straight-line basis over its useful life of ten years. Residual value is estimated at $20,000. On 1 January 20X8, following a change in legislation, Wetherby Co fitted a safety guard to the machine. The safety guard cost $25,000 and has a useful life of five years with no residual value. What amount will be charged to profit or loss for the year ended 31 March 20X8 in respect of depreciation on this machine?

Maitlis Co prepares its financial statements to 31 October each year. On 1 February 20X5, Maitlis Co met the criteria to classify its bakery division, a major line of business, as held for sale. It recognised a loss of $45,000 on that classification. Maitlis Co completed the disposal of the bakery division on 31 October 20X5. The carrying amount of the net assets of the bakery were $612,000 on the date of sale and Maitlis Co received proceeds of $700,000 on completion of the sale. The bakery made a loss of $34,000 in the period to 31 October 20X5. You can ignore the effects of taxation.
Required :-
What is the total amount of profit or loss on discontinued operations that should be presented on the face of the statement of profit or loss and other comprehensive income?

According to IAS 38 Intangible assets, which of the following statements about research and

development expenditure are correct?

1 Research expenditure, other than capital expenditure on research facilities, should be recognised

as an expense as incurred.

2 In deciding whether development expenditure qualifies to be recognised as an asset, it is

necessary to consider whether there will be adequate finance available to complete the project.

3 Development expenditure recognised as an asset must be amortised over a period not exceeding

five years.

Joe incurred the following costs when researching and developing a new product for his business.
Assuming the criteria in IAS 38 Intangible assets are met, what value can be capitalised?

Which TWO of the following items would be classed as an intangible asset in a statement of financial position?

BC Co purchases a patent on 1 January 20X2 for $25,000. It is anticipated that the patent will be beneficial to the business for 10 years, after which time it will be worthless.

What is the carrying amount of the intangible non-current asset to be included in the Statement of Financial Position at 31 December 20X6?

How does the Conceptual Framework define an asset?

Which of the following would correctly describe the net realisable value of a two year old asset?

The Conceptual Framework identifies four enhancing qualitative characteristics of financial information.

For which of these characteristics is disclosure of accounting policies particularly important?

Which of the following is the underlying assumption in preparing financial statements identified in 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?

Which TWO of the following ratios are most likely to provide a bank with information about a potential client’s ability to make repayments on a loan?

1. Asset turnover

2. Gearing

3. Interest cover

4. ROCE

5. Gross profit margin

6. EPS

Penfold uses several properties that are leased under short-term leases.

Identify, by clicking on the relevant boxes in the table below, how the ratios would be affected if the leases were extended beyond 12 months.

1. ROCE - INCREASE Or DECREASE

2. Gearing - INCREASE Or DECREASE

Raycroft operates a nuclear power station.

The power station is due to be decommissioned on 31 December 20X8 but will be fully operational up to that date. It has been estimated that the cost of decommissioning the power station and cleaning up any environmental damage, as required by legislation, will be $60 million. Raycroft recognised a provision for the present value of this expenditure at 31 December 20X0. A suitable discount rate for evaluating costs of this nature is 12%, equivalent to a present value factor after eight years of 0.404. The decommissioning cost will be depreciated over eight years.

What is the total charge to profit or loss in respect of this provision for the year ended 31 December 20X1?

Which of the following items would qualify for treatment as a change in accounting estimate according to IAS 8 Accounting policies, changes in accounting estimates and errors?

Which one of the following would be included in the cost of inventories of goods for resale in accordance with IAS 2 Inventories?

Elite Leisure is a private limited liability company that operates a single cruise ship. The ship was acquired on 1 October 20W6 (ten years before 20X6).

At 30 September 20X4 no further capital expenditure had been incurred on the ship.

In the year ended 30 September 20X4 the ship had experienced a high level of engine trouble which had cost the company considerable lost revenue and compensation costs. The measured expired life of the propulsion system at 30 September 20X4 was 30,000 hours. Due to the unreliability of the engines, a decision was taken in early October 20X4 to replace the whole of the propulsion system at a cost of $140 million. The expected life of the new propulsion system was 50,000 hours and in the year ended 30 September 20X5 the ship had used its engines for 5,000 hours.

At the same time as the propulsion system replacement, the company took the opportunity to do a limited upgrade to the cabin and entertainment facilities at a cost of $60 million and repaint the ship’s fabric at a cost of $20 million. After the upgrade of the cabin and entertainment area fittings it was estimated that their remaining life was five years (from the date of the upgrade). For the purpose of calculating depreciation, all the work on the ship can be assumed to have been completed on 1 October 20X4. All residual values can be taken as nil.

At 30 September 20X4 the ship is 8 years old. What is the carrying amount of the ship at that date?

Elite Leisure is a private limited liability company that operates a single cruise ship. The ship was acquired on 1 October 20W6 (ten years before 20X6).

At 30 September 20X4 no further capital expenditure had been incurred on the ship.

In the year ended 30 September 20X4 the ship had experienced a high level of engine trouble which had cost the company considerable lost revenue and compensation costs. The measured expired life of the propulsion system at 30 September 20X4 was 30,000 hours. Due to the unreliability of the engines, a decision was taken in early October 20X4 to replace the whole of the propulsion system at a cost of $140 million. The expected life of the new propulsion system was 50,000 hours and in the year ended 30 September 20X5 the ship had used its engines for 5,000 hours.

At the same time as the propulsion system replacement, the company took the opportunity to do a limited upgrade to the cabin and entertainment facilities at a cost of $60 million and repaint the ship’s fabric at a cost of $20 million. After the upgrade of the cabin and entertainment area fittings it was estimated that their remaining life was five years (from the date of the upgrade). For the purpose of calculating depreciation, all the work on the ship can be assumed to have been completed on 1 October 20X4. All residual values can be taken as nil.

Apart from depreciation, what is the total charge to profit or loss for the year ended 30 September 20X5?

Elite Leisure is a private limited liability company that operates a single cruise ship. The ship was acquired on 1 October 20W6 (ten years before 20X6).

At 30 September 20X4 no further capital expenditure had been incurred on the ship.

In the year ended 30 September 20X4 the ship had experienced a high level of engine trouble which had cost the company considerable lost revenue and compensation costs. The measured expired life of the propulsion system at 30 September 20X4 was 30,000 hours. Due to the unreliability of the engines, a decision was taken in early October 20X4 to replace the whole of the propulsion system at a cost of $140 million. The expected life of the new propulsion system was 50,000 hours and in the year ended 30 September 20X5 the ship had used its engines for 5,000 hours.

At the same time as the propulsion system replacement, the company took the opportunity to do a limited upgrade to the cabin and entertainment facilities at a cost of $60 million and repaint the ship’s fabric at a cost of $20 million. After the upgrade of the cabin and entertainment area fittings it was estimated that their remaining life was five years (from the date of the upgrade). For the purpose of calculating depreciation, all the work on the ship can be assumed to have been completed on 1 October 20X4. All residual values can be taken as nil.

Elite Leisure’s ship has to have a safety check carried out every five years at a cost of $50,000 in order to be licensed to operate. How should this be accounted for?

A company's gross profit as a percentage of sales increased from 24% in the year ended 31 December 20X1 to 27% in the year ended 31 December 20X2.

Which of the following events is most likely to have caused the increase?

Which of the following transactions would result in an increase in capital employed?

Which of the following is a ratio which is used to measure how much a business owes in relation to its size?

Why is analysis of financial statements carried out?

What is the acid test ratio of Edward Co given the information below?

EDWARD CO TRIAL BALANCE (EXTRACT)

After proposing a final dividend, Kenilworth Co has a current ratio of 2.0 and a quick ratio of 0.8.

If the company now uses its positive cash balance to pay that final dividend, what will be the effect upon these two ratios?

Thatch plc's current ratio this year is 1.33:1 compared to that of 1.25:1 last year. Which of the following would be possible explanations?

1 Thatch made an unusually large sale immediately prior to the year end.

2 Thatch paid its payables earlier than usual out of a bank overdraft.

3 Thatch made an unusually large purchase of goods for cash immediately prior to the year end and these goods remain in inventory.

4 Thatch paid its payables earlier than usual out of a positive cash balance.

Which of the following statements is correct?

Relevant & faithful representation is part of the?

The process for developing an International Financial Reporting Standard involves a number of stages. During the early stages of a project, the IASB will undertake consultation on the key issues. Which of the following is correct regarding the early stages of the process:

Which TWO of the following statements would be an advantage of adopting IFRS?

In accordance with the Conceptual Framework which of the following is/are true in relation to the enhancing characteristic of comparability?

(1) Permitting alternative accounting treatments for the same economic phenomenon enhances comparability

(2) Comparability requires uniformity

Which one of the following would NOT be an advantage of adopting IFRS?

Which of the following statements regarding systems of regulation of accounting are true?

The process for developing an International Financial Reporting Standard involves a number of stages. Following receipt and review of comments on a Discussion Paper, what will be the next step undertaken by the IASB?

The process for developing an International Financial Reporting Standard involves a number of stages. Following receipt and review of comments on a Discussion Paper, what will be the next step undertaken by the IASB?

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 applying the principle of comparability, how should the change of inventory valuation basis be accounted for?

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.

Because loss on operating the shops, the accountant is considering the issue of going concern. If it were decided that Lisbon was no longer a going concern at 31 March 20X6, which of the following would apply in accordance with the Conceptual Framework?

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?