WorksheetsIAS 2, IAS 16 & IAS 40
Total questions: 11
Worksheet time: 23mins
Q1: A company purchases inventory with a cost of R10 000 on credit. Please select the correct journal entry.
Option A
Option B
Option C
None of the options provided.
Q2: AppleLeaf (Pty) Ltd is a well-known retailer that specializes in selling a specific type of green chairs. They purchased 100 of these green chairs from a manufacturer in the UK at a price of £100 each which was correctly translated to R2 000 per chair on the 1 January 2020.
Import duties of R100 000 were incurred and the cost of transportation of the green chairs to AppleLeaf’s warehouse cost R10 000. AppleLeaf also incurred R8 000 administrative overheads. The manufacturer gave AppleLeaf a trade discount of £10 on each green chair which was correctly translated to R200 per chair.
Ignore VAT implications. AppleLeaf has a 30 June year end.
Calculate the cost at which the inventory will initially be recognized in AppleLeaf’s financial records.
R310 000
R318 000
R290 000
R282 000
Q3: Kangaroo Ltd (Kangaroo) manufactures and sells sports boats. Their normal capacity is 1 000 boats per year and total cost of production is R200 000 per one boat, before fixed overhead allocation.
Kangaroo pays the factory production manager a salary of R1 000 000 per year.
Kangaroo produced 1 200 boats instead of 1 000 because of huge once-off order in the 2022 financial year.
Kangaroo considers production that exceeds 10% of normal production abnormally high production.
Calculate the total cost per unit of inventory:
R200 000
R201 000
R200 909
R200 833
Some other amount.
Q4: XYZ Ltd sells inventory worth R34 000 to Mr Xaba, who pays cash for the inventory on the date of purchase. XYZ applies a markup of 20% on the cost of inventory.
How will the journal entry look?
Option A
Option B
Option C
None of the options provided.
Q5: The Conceptual Framework defines a liability as:
A present obligation of the entity to transfer an economic resource because of past events.
A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
An amount the entity may have to pay after the end of the reporting period.
None of the above.
The following information relates to question 6 and 7:
Q6: On 1 June 2022 Kepler Corporation acquired a specialized manufacturing machine with a useful life of 15 years at a cost of R1 200 000. The estimated residual value of the machine is negligible.
As part of routine maintenance, the machine undergoes inspection every two years, incurring an inspection cost of R100 000. The inspection cost is treated as a separate component and is depreciated over the interval until the next inspection.
The first inspection took place on 01 December 2023 and cost R120 000.
Kepler Corporation has a financial year end of 31 December 2023.
Which of the following depreciation amounts will be recognized in Kepler Corporation's financial records in respect to the machine during the year ending 31 December 2023 (Round amounts off to the nearest Rand)
R80 000
R123 333
R124 167
RNil
The following information relates to question 6 and 7:
Q7: On 1 June 2022 Kepler Corporation acquired a specialized manufacturing machine with a useful life of 15 years at a cost of R1 200 000. The estimated residual value of the machine is negligible.
As part of routine maintenance, the machine undergoes inspection every two years, incurring an inspection cost of R100 000. The inspection cost is treated as a separate component and is depreciated over the interval until the next inspection.
The first inspection took place on 01 December 2023 and cost R120 000.
Kepler Corporation has a financial year end of 31 December 2023.
Is the following statement true or false: If the cost of the inspection at R100 000 was not identifiable when the asset was acquired on 1 June 2022, an estimated cost of a future similar inspection may be used as an indication of what the cost of that existing inspection component was on 1 June 2022.
True
False
Q8: Which of the following statements regarding IAS 16 is correct?
The cost price of an asset acquired through an exchange transaction should be the carrying amount of the asset given up, provided that there is no fair value information for both of the assets acquired and disposed of on the date of the exchange.
Depreciation should commence when an asset is used in the manner intended by management.
If the assets residual value is smaller than the assets carrying amount, depreciation should cease.
The depreciable amount of an asset is determined after adding it residual value.
None of the provided options.
Q9: Hozier Ltd, a company that manufacturers lab grown diamonds, utilised surplus funds to purchase an office building in the central district of Johannesburg. The capacity of the office building is 5 000 m squared and is fully let to independent parties. Each lease is for a 20-year term.
The estimated useful life at the date of completion on 1 April 2023 was 18 years. The payment for the acquisition of this office building was settled on completion date, 1 April 2023.
How will the above office building be classified in the books of Hozier for the 2023 financial year:
Owner-occupied property (IAS 16)
Inventory (IAS 2)
Investment property (IAS 40)
None of the above standards.
Q10: TechMach Ltd acquired a cutting-edge robotic assembly machine on 1 January 2023 to enhance its manufacturing process. The machine had an initial plant cost of R23 000 000, which included VAT.
TechMach Ltd received a trade discount of 10% on the purchase price excluding VAT. Various additional costs were incurred to prepare the asset for use in its current location and condition, as follows:
The cost break-down of the asset is included in the attached image.
Additional information:
- The VAT rate applicable for the 2023 financial year end is 15%.
The initial cost of the machine, excluding VAT, will be:
R18 494 000
R23 000 000
R18 267 000
R18 574 000
Q11: What do you think the ultimate winner of these quizzes should receive as a prize (be reasonable in your answer):
