Moiz Ali Abbas

SP18-BBA-165

Issues in financial accounting

QUESTION 1

Calculation of cost of non current assets

Purchase price 100000

dismanting cost 5000

2 +

Transportation cost 1000

Plant refurbishment 1000

Reinstallation cost 850

_______________

ANS

COST OF PURCHASED PLANT = 107850

QUESTION 2

Depreciation is computed on diminishing balance basis. That is carrying amount times depreciation rate.

Carrying Amount at 1 July 2019 = 15.78 + 4.53 = 20.31 M

Depreciation for year ending 30 June 2020 = 20.31 x 20% = 4.062

Accumulated Depreciation = 4.062 + 4.8 = 8.862 Million

Question 4

Revaluation gain or loss 30 june 2020 would be

Cost of trucks 20 million

Depreciation charged = 20 divide by 10 *3= 6

Carrying amount= 14M

Revalued amount=22M

---------------------

GAIN ON REVALUATION =8.6M

Question 6

BBA VII AND Co Limited’s financial position statement for year 2020 is showing Deferred tax liability
of Rs. 360 Million and Current tax liability of Rs. 150 Million. Similarly, deferred tax amount of Rs. 420
Million and current tax liability of Rs. 170 Million is declared in Year 2021. Current year tax expense in
the statement of Profit & loss for year ended June 30, 2021 is showing Rs. 280 Million. How much tax
was paid during July 01, 2020 till Jun 30, 2021.

(4 Points)

200 Million

250 Million

320 Million

190 Million

Year

Deferred Tax

Current Tax

2020

360, 000, 000

150, 000, 000

2021

420, 000, 000

170, 000, 000

Gross profit = 280, 000, 000

Deferred Tax= 150, 000, 000 + 170, 000, 000= 320, 000, 000

On 1 July 2019, BBA (pvt) Ltd borrowed Rs. 5 Million for one year, for finance the construction of a
new Plant & Machinery. The interest rate on the loan is 6% and is payable on maturity of the loan.
Construction work started immediately from 1 July 2019. The asset was available for use on 30 June
2020 having a construction cost of Rs. 6 Million. What is the carrying amount of the Plant & Machinery
in BBA (pvt) Ltd's statement of financial position as at 30 June 2020?

Rs. 6 Million

Rs. 6.1 Million

Rs. 6.2 Million

Rs. 6.23 Million

Carrying Amount is the amount which an asset is recognized after deducting any accumulated
depreciation or loss.

Amount borrowed = Rs 5 million.

Amount not borrowed = Rs (6M - 5M)

=Rs 1 million.

Total interest = 6/100% × Rs 5 million

= 0.3 Million

Acquisition cost =

Rs (5 + 1 + 0.3) million = Rs 6.3 million.

Carrying amount = Rs (6.3 - 0.3) million

= Rs 6 Million.

Question 20

We value our inventory in the lower between cost and net realizable value. Because it can only be sold
for 900 due to the damage, we will write-down our inventory to this value.

Question

Building purchased = $ 2 million ; using straight line depreciation

• Estimated life = 20 years • Used years by building = 5 years • Selling cost of building = $ 1 million •
Cost incurred = $ 50,000 or $ 0.05 million • PV of net cash flows the building = $ 1.2 milliom

Do journal entries for impairment gain/loss with amount

Ans

First, we need to determine the carrying amount. The building's cost is $2 million, useful life is 20 years
and has been used for 5 years so far. This means that accumulated depreciation is $2/20×5 or 0.5 million
and carrying amount is $1.5 million (i.e. $2 million minus $0.5 million).
Second, we need to determine the recoverable amount. Recoverable amount is the higher of fair value
less costs to sell and value in use. Fair value less costs to sell in this scenario is $1 million minus $0.05
million or $0.95 million. Value in use is the present value of future cash flows which amounts to $1.2
million. Recoverable amount is the higher of $0.95 million and $1.2 million.

Carrying amount is $1.5 million while recoverable amount is $1.2 million. An impairment loss of $0.3
million is to be recognized. The journal entry would be:

Impairment Loss 300,000

Accumulated Impairment Losses 300,000