3, Fa1 Question Book 2021 (Gen 5) - G I Cho Sinh Viên

2021 - 2022
ACCO-3032
Financial
Accounting 1
Ngo Nhu Vinh PhD, FCCA, CPA, SIRM

Email: n.n.vinhacco@iife.edu.vn
Nguyen Thu Hao MSc, FCCA, CPA
Email: n.t.haoacco@iife.edu.vn
Page 1 of 76
Contents
CHAPTER 1: IAS 02 INVENTORY ........................................................................................................ 3
CHAPTER 2: IAS 16 PROPERTY PLAN AND EQUIPMENT ......................................................... 13
CHAPTER 3: IAS 38 INTANGIBLE ASSET ....................................................................................... 20
CHAPTER 4: IAS 40 INVESTMENT PROPERTIES .......................................................................... 28
CHAPTER 5: IAS 36 IMPAIRMENT OF ASSET................................................................................ 32
CHAPTER 6: IFRS 15 REVENUE ......................................................................................................... 40
CHAPTER 7: IAS 10 EVENT AFTER REPORTING PERIOD ......................................................... 48
CHAPTER 8: PRESENTATION FINANCIAL STATEMENT .......................................................... 53
CHAPTER 9: IAS 07 STATEMENT OF CASH FLOW ...................................................................... 65
CHAPTER 10: CONCEPTUAL FRAMEWORK ................................................................................. 74
Page 2 of 76
CHAPTER 1: IAS 02 INVENTORY
LEARNING OBJECTIVE
a) Recognise the need for adjustments for inventory in preparing financial statements.
b) Record opening and closing inventory.
c) Identify the alternative methods of valuing inventory.
d) Understand and apply the IASB requirements for valuing inventories.
e) Recognise which costs should be included in valuing inventories.
f) Understand the use of continuous and period end inventory records.
g) Calculate the value of closing inventory using FIFO (first in, first out) and AVCO (average cost) –
both periodic weighted average and continuous weighted average.
h) Understand the impact of accounting concepts on the valuation of inventory.
i) Identify the impact of inventory valuation methods on profit and on assets.
Page 3 of 76
PART A: THEORY QUESTION
Question 1: What is inventory in accordance to IAS 02? (2 marks)
Question 2: List and explain 5 types inventory of an:

- Real estate company
- Film production company
- A car manufacturing company
- A university
- A trading company
Question 3: List and explain method of valuation closing inventory?
Question 4: Explain how to determine net realizable value?
Question 5: List 4 example indicators of net realiable value lower than cost and explain how to
obtain evidence for those indicators?
Question 6: Explain with appropriate journal entry the main difference between periodical and
perpetual inventory? How to determine cost of goods sold in accordance these methods?
Question 7: Explain why LIFO is not permitted in accordance to IAS 02?
Question 8: Explain how these transaction below impact on value of closing inventory
i. The production cost of the item has been falling.
ii. The selling price of the item has been rising.
iii. The item is becoming obsolete.
iv. Demand for the item is increasing.
Page 4 of 76
Question 9:
Which of the following costs may be included when arriving at the cost of finished goods inventory
for inclusion in the financial statements of a manufacturing company? Explain why? (2 marks per
items)
YES NO
Carriage inwards
Carriage outwards
Depreciation of factory plant
Finished goods storage costs
Factory supervisors' wages
Page 5 of 76
PART B: PRACTICE QUESTION
Question 1:
A company values its inventory using the first in, first out (FIFO) method. At 1 May 20X2 the company
had 700 engines in inventory, valued at $190 each.
During the year ended 30 April 20X3 the following transactions took place:
20X2
1 July Purchased 500 engines at $220 each
1 November Sold 400 engines for $160,000
20X3
1 February Purchased 300 engines at $230 each
15 April Sold 250 engines for $125,000
Required:
a. Explain, with journals, the accounting treatment of the above transactions,
b. Determine following elements on financial statement
• Value of closing inventory
• Cost of sale in statement of profit or loss
Question 2:
An inventory record card shows the following details. The entity use FIFO method for valuation of closing
inventory.
February 1 50 units in stock at a cost of $40 per unit
7 100 units purchased on credit at a cost of $45 per unit
14 80 units sold on credit at a price of $60 per unit
21 50 units purchased on credit at a cost of $50 per unit
28 60 units sold on credit at a price of $65 unit
Required:
a. Explain, with journals, the accounting treatment of the above transactions, and prepare
extracted financial statements for the year. (12 marks)
b. If net realizable value of closing inventory $25 per unit, determine closing inventory, cost of
sale, gross profit? and provide necessary journal entry? (5 marks)
Page 6 of 76
Question 3:
The information below relates to inventory item Z. The entity AVCO (periodic) for valuation of closing
inventory.
1.March 50 units held in opening inventory at a cost of $40 per unit
17.March 50 units purchased at a cost of $50 per unit
31.March 60 units sold at a selling price of $100 per unit
Required:
extracted financial statements for the year (8 marks)
b. If net realizable value of closing inventory $25 per unit, determine closing inventory, cost of
sale, gross profit? and provide necessary journal entry?
Question 4:
A firm has the following transactions with its product R. The entity periodic weighted average cost
(AVCO) for valuation of closing inventory.
1 January 20X1 Opening inventory: nil
1 February 20X1 Buys 10 units at $300 per unit
11 February 20X1 Buys 12 units at $250 per unit
1 April 20X1 Sells 8 units at $400 per unit
1 August 20X1 Buys 6 units at $200 per unit
1 December 20X1 Sells 12 units at $400 per unit
Required:
extracted financial statements for the year (15 marks)
Page 7 of 76
Question 5:
ABC has year end at 30 June 20X3, however, the accountant has prepared financial statement based on
inventory counted 7 July 20X3 with corresponding sale and cost of sale to this date. Value of closing
inventory counted at 7 July 20X3 was $500,000.
Between 30 June and 7 July 20X6, the following transactions took place.
$
Purchase of goods 11,750
Sale of goods (mark up on cost at 15%) 14,950
Goods returned by ABC to supplier 1,500
Required: Determine value of closing inventory for the year ended 30 June 20X3 (15 marks)
Question 6:
ABC has year end at 31 October 20X3, however, the accountant has prepared financial statement based on
inventory counted 4 November 20X3 with corresponding sale and cost of sale to this date. Value of closing
inventory counted at 4 November 20X3 was $500,000.
Between 1 November 20X3 and 4 November 20X3 the following transactions took place:
1 Goods costing $38,400 were received from suppliers.
2 Goods that had cost $14,800 were sold for $20,000.
3 A customer returned, in good condition, some goods which had been sold to him in October for $600
and which had cost $400.
4 The company returned goods that had cost $1,800 in October to the supplier, and received a credit note
for them.
Required: Determine value of closing inventory for the year ended 31 October 20X3 (15 marks)
Question 7:
ABC has year end at 31 December 20X1, however, the accountant has prepared financial statement based
on inventory counted 4 January 20X2 with corresponding sale and cost of sale to this date. Value of
closing inventory counted at 4 January 20X2 was $527,300.
The following transactions occurred between January 1 and January 4.
$
Purchases of goods 7,900
Sales of goods (gross profit margin 40% on sales) 15,000
Goods returned to a supplier 800
Required: Determine value of closing inventory for the year ended 31 December 20X1 (15 marks)
Question 8
Page 8 of 76
At 31 March 20X7 Tentacle had 12,000 units of product W32 in inventory, included at cost of $6 per unit.
During April and May 20X7 units of W32 were being sold at a price of $5.40 each, with sales staff
receiving a 15% commission on the sales price of the product.
Required:
- Calculate net reliable value of closing inventory at year end
- Determine value of correct value closing inventory in accordance to IAS 02
- Propose adjustment accounting entry if necessary in accordance to IAS 02
Question 9:
The closing inventory at cost of a company at 31 January 20X3 amounted to $284,700.
The following items were included at cost in the total:
400 coats, which had cost $80 each and normally sold for $150 each. Owing to a defect in manufacture,
they were all sold after the reporting date at 50% of their normal price. Selling expenses amounted to 5%
of the proceeds.
800 skirts, which had cost $20 each. These too were found to be defective. Remedial work in February
20X3 cost $5 per skirt, and selling expenses for the batch totalled $800. They were sold for $28 each.
Required:
Question 10:
The closing inventory of X amounted to $116,400 excluding the following two inventory lines:
400 items which had cost $4 each. All were sold after the reporting period for $3 each, with selling
expenses of $200 for the batch.
200 different items which had cost $30 each. These items were found to be defective at the end of the
reporting period. Rectification work after the statement of financial position amounted to $1,200, after
which they were sold for $35 each, with selling expenses totalling $300.
Required:
Page 9 of 76
Question 11:
You are preparing the financial statements for a business. The cost of the items in closing inventory is
$41,875. This includes some items which cost $1,960 and which were damaged in transit. You have
estimated that it will cost $360 to repair the items, and they can then be sold for $1,200.
Required:
Question 12:
S sells three products – Basic, Super and Luxury. The following information was available at the year end.
Basic Super Luxury
$ per unit $ per unit $ per unit
Original cost 6 9 18
Estimated selling price 9 12 15
Selling and distribution 1 4 5

costs
units units units
Units of inventory 200 250 150
Required:
Question 13:
In preparing its financial statements for the current year, a company's closing inventory was understated by
$300,000.
Required: Explain the effect of this error on current year profit and next year profit if it remains
uncorrected (4 marks)
Page 10 of 76
Question 14:
Caminas has the following products in inventory at the year end.
Product Quantity Cost Selling price Selling cost
A 1,000 $40 $55 $8
B 2,500 $15 $25 $4
C 800 $21 $23 $5
Required:
- Propose adjustment accounting entry if necessary, in accordance to IAS 02
Question 15:
Mobistart restores and sell vintage motorcycles. At 30.11.2006, the entity has 3 motyrcycles in inventory:
MODEL DETAILS
triumph this item cost $4,800, and at 30 novermber 2006 tony had also spent
$750 on repairs. the entity has not sold it but confident that it will be
able to sell in January 2007 for $7,500. it will cost the entity $400 to
transport the motorcycle to the event.
Ducati The entity bought for $6,800, at that date, it estimated repairs cost of
$1,100. By 30 November 2006, the entity has spent $1,800 on repairs
and expected sell on 2 December 2006 for $8,000
Norton The entity bought this item for $8,500. It estimated that it will have to
spend $1,200 on repairs, after which it could be sell for $11,500
Required:
Page 11 of 76
Question 16:
Diaz Co’s trial balance as at 31 December 20X8 indicated the entity has $8.6m inventory at 31 December
20X8.
The inventory count was completed on 31 December 20X8, but two issues have been noted. First, products
with a sales value of $0·6m had been incorrectly excluded from the count. Second, items costing $0·2m
which had been included in the count were damaged and could only be sold for 50% of the normal selling
price. Diaz Co makes a mark-up of 50% on both of these items.
Required:
Page 12 of 76
CHAPTER 2: IAS 16 PROPERTY PLAN AND EQUIPMENT
LEARNING OBJECTIVE
b) Recognise the difference between current and non-current assets.

c) Explain the difference between capital and revenue items.
d) Classify expenditure as capital or revenue expenditure.
e) Prepare ledger entries to record the acquisition and disposal of non-current assets.
f) Calculate and record profits or losses on disposal of non-current assets in the statement of profit or
loss including part exchange transactions.
g) Record the revaluation of a non-current asset in ledger accounts, the statement of profit or loss and
other comprehensive income and in the statement of financial position.
h) Calculate the profit or loss on disposal of a revalued asset.
i) Illustrate how non-current asset balances and movements are disclosed in financial
statements.
j) Explain the purpose and function of an asset register.
a) Understand and explain the purpose of depreciation.
b) Calculate the charge for depreciation using straight line and reducing balance methods.
c) Identify the circumstances where different methods of depreciation would be appropriate.
d) Illustrate how depreciation expense and accumulated depreciation are recorded in ledger accounts.
e) Calculate depreciation on a revalued non-current asset including the transfer of excess
depreciation between the revaluation surplus and retained earnings.
f) Calculate the adjustments to depreciation necessary if changes are made in the estimated useful
life and/or residual value of a non-current asset.
g) Record depreciation in the statement of profit or loss and statement of financial position.
Page 13 of 76
Question 1: Give definition of PPE in accordance to IAS 16?
Question 2: List recognition criteria of PPE in accordance to IAS 16?
Question 3: List and explain following depreciation method:

- Straight line method
- Reducing balance method
- Production unit
Question 4: Explain following term:

- Useful life
- Residual value
- Carrying amount
Question 5: Explain circumstances of derecognition of PPE in accordance to IAS 16?
Question 6: Explain 3 circumstance in which subsequence costs are capitalized as PPE in accordance to
IAS 16?
Question 7: What are the main differences between revaluation model and cost model in accordance to
IAS 16?
Page 14 of 76
Question 1:
The plant and machinery at cost account of a business for the year ended 30 June 20X4 was as follows:
PLANT AND MACHINERY – COST
$ $
20X3 20X3
1 Jul Balance 240,000 30 Sep Transfer disposal account 60,000
20X4 20X4
1 Jan Cash – purchase of plant 160,000 30 Jun Balance 340,000
400,000 400,000
The company's policy is to charge depreciation at 20% per year on the straight line balance basis, with
proportionate depreciation in the years of purchase and disposal.
Required:
A, Explain key transactions incurred with non-current asset during the year? (4 marks)
B, Determine the depreciation charge for the year ended 30 June 20X4 (show working)? (4 marks)
Question 2:
Evans Co purchased a machine with an estimated useful life of 10 years for $76,000 on 30 September 20X5.
The machine had a residual value of $16,000.
Required: Explain, with journals, the accounting treatment of the above transactions, and prepare
extracted financial statements for the year 31 December 20X6 (5 marks)
Question 3:
B acquired a lorry on 1 May 20X0 at a cost of $30,000. The lorry has an estimated useful life of four
years, and an estimated resale value at the end of that time of $6,000. B charges depreciation on the
straight line basis, with a proportionate charge in the period of acquisition.
extracted financial statements for the year 30 September 20X0?
Page 15 of 76
Question 4:
Gamma purchases a motor vehicle on 30 September 20X1 for $15,000 on credit. Gamma has a policy of
depreciating motor vehicles using the reducing balance method at 15% per annum, pro rata in the years of
purchase and sale.
extracted financial statements for the year 30 November 20X1? (4 marks)
Question 5:
A purchase an asset for $250,000 on 1.1.X1. It has an estimated useful life of 5 years and depreciated using
reducing balance method at rate 40%. On 1.1.20X2 it was decided to change the method to straight line.
extracted financial statements for the year 31.12.20X1 and 31.12.20X2?
Question 6:
Baxter Co purchased an asset for $100,000 on 1.1.X1. It had an estimated useful life of 5 years and it was
depreciated using the straight line method. On 1.1.X2 Baxter Co revised the remaining estimated useful life to
8 years.
Question 7:
Senakuta Co purchased a machine with an estimated useful life of 5 years for $34,000 on 30 September 20X5.
Senakuta Co planned to scrap the machine at the end of its useful life and estimated that the scrap value at the
purchase date was $4,000. On 1 October 20X8, Senakuta revised the scrap value to $2,000 due to the
decreased value of scrap metal.
extracted financial statements for the year 30.9.20X9?
Question 8:
Senakuta Co purchased a machine with an estimated useful life of 5 years for $34,000 on 30 September 20X5.
Senakuta Co planned to scrap the machine at the end of its useful life and estimated that the scrap value at the
purchase date was $4,000. On 1 October 20X6, Senakuta revised the scrap value to $2,000 due to the
decreased value of scrap metal.
extracted financial statements for the year 30 September 20X6 and 30 September 20X7 (15 marks)
Question 9:
Page 16 of 76
A company purchased an asset on 1 January 20X3 at a cost of $1,000,000. It is depreciated over 50 years by
the straight line method (nil residual value), with a proportionate charge for depreciation in the year of
acquisition and the year of disposal. At 31 December 20X3 the asset was re-valued to $1,200,000. There was
no change in the expected useful life of the asset. The asset was sold on 30 June 20X4 for $1,195,000.
extracted financial statements for the year 31.12.20X3, 31.12.20X4
Question 10:
A company bought a property four years ago on 1 January.20X0 for $ 170,000. Since then property prices
have risen substantially and the property has been revalued at $210,000 at 31.12.20X0.
The property was estimated as having a useful life of 20 years when it was purchased.
Question 11:
Gusna Co purchased a building on 1 January 20X1 for $750,000. At the date of acquisition, the useful life of
the building was estimated to be 25 years and depreciation is calculated using the straight-line method. At 31
December 20X2, an independent valuer valued the building at $1,000,000 and the revaluation was recognised
in the financial statements. Gusna’s accounting policies state that excess depreciation arising on revaluation of
non-current assets can be transferred from the revaluation surplus to retained earnings.
extracted financial statements for the year 31.12.20X2
Question 12:
Banjo Co purchased a building on 30 June 20X8 for $1,250,000. At acquisition, the useful life of the building
was 50 years. Depreciation is calculated on the straight-line basis. 10 years later, on 30 June 20Y8 when the
carrying amount of the building was $1,000,000, the building was revalued to $1,600,000. Banjo Co has a
policy of transferring the excess depreciation on revaluation from the revaluation surplus to retained earnings.
extracted financial statements for the year 30 June 20Y9 (10 marks)
Page 17 of 76
Question 13:
Alpha sells machine B for $50,000 cash on 30 April 20X4. Machine B cost $100,000 when it was purchased
and has a carrying amount of $65,000 at the date of disposal.
extracted financial statements for the year 30 April 20X4?
Question 14:
At 30.6.20X3, a non-current asset (cost $15,000, accumulated depreciation $10,000 at 31 December 20X2
with useful life 5 years) is given in part exchange for a new asset costing $20,500. The agreed trade-in value of
asset given was $5,500, remaining amount paid by cash. New asset has useful life 8 years.
extracted financial statements for the year 31.12.20X3.
Question 15:
The carrying amount of a company's non-current assets was $200,000 at 1 August 20X0. During the year
ended 31 July 20X1, the company sold non-current assets for $25,000 on which it made a loss of $5,000. The
depreciation charge for the year was $20,000.
extracted financial statements for the year 31 July 20X1?
Question 16:
A manufacturing company receives an invoice on 29 February 20X2 for work done on one of its machines.
$25,500 of the cost is actually for a machine upgrade, which will improve efficiency. The accounts department
do not notice and charge the whole amount to maintenance costs. Machinery is depreciated at 25% per annum
on a straight-line basis, with a proportional charge in the years of acquisition and disposal.
Question 17:
Wetherby purchased a machine on 1 July 20X7 for $500,000. It is being depreciated on a straight line basis
over its expected life of ten years. Residual value is estimated at $20,000. On 1 January 20X8, following a
change in legislation, Wetherby 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.
extracted financial statements for the year 31 March 20X8?
Question 18:
Page 18 of 76
A business purchased a motor car on 1 July 20X3 for $20,000. It is to be depreciated at 20 per cent per year on
the straight line basis, assuming a residual value at the end of five years of $4,000, with a proportionate
depreciation charge in the years of purchase and disposal.
The $20,000 cost was correctly entered in the cash book but posted to the debit of the motor vehicles repairs
account.
extracted financial statements for the year 30.6.20X4? (8 marks)
Question 19:
Y purchased some plant on 1 January 20X0 for $38,000. The payment for the plant was correctly entered in
the cash book but was entered on the debit side of the plant repairs account.
Y charges depreciation on the straight line basis at 20% per year, with a proportionate charge in the years of
acquisition and disposal, and assuming no scrap value at the end of the life of the asset.
extracted financial statements for the year 31 March 20X0?
Question 20:
On 1 October 20X5 Dearing acquired a machine under the following terms.
Manufacturer's base price 1,050,000
Trade discount (applying to base price only) 20%
Freight charges 30,000
Electrical installation cost 28,000
Staff training in use of machine 40,000
Pre-production testing 22,000
Purchase of a three-year maintenance contract 60,000
On 1 October 20X6 Dearing decided to upgrade the machine by adding new components at a cost of $200,000.
This upgrade led to a reduction in the production time per unit of the goods being manufactured using the
machine.
The machine has useful life 10 years with residual value $10,000
Question 21
Page 19 of 76
Foster has built a new factory incurring the following costs:
$'000
Land 1,200
Materials 2,400
Labour 3,000
Architect's fees 25
Surveyor's fees 15
Site overheads 300
Apportioned administrative overheads 150
Testing of fire alarms 10
Business insurance for first year 12
Required:
a. Determine amount capitalised in respect of the factory? (5 marks) and explain why
above items should be included or excluded in cost of the factory? (5 marks)
b. Explain how to record other cost that not included in cost of the factor? (5 marks)
Page 20 of 76
CHAPTER 3: IAS 38 INTANGIBLE ASSET
LEARNING OBJECTIVE
o Recognise the difference between tangible and intangible non-current assets.

o Identify types of intangible assets.
o Identify the definition and treatment of “research costs” and “development costs” in
accordance with IFRS ® Standards.
o Calculate amounts to be capitalised as development expenditure or to be expensed from
given information.
o Explain the purpose of amortisation.
o Calculate and account for the charge for amortisation.
o Determine present value and future value
Page 21 of 76
Question 1: Give definition of intangible asset in accordance to IAS 38?
Question 2: List and explain recognition criteria of intangible asset in accordance to IAS 38?
Question 3: List recognition criteria for capitalized of internal generated intangible asset?
Question 4: Explain accounting treatment for expenditure on research phases and expenditure on
development phases?
Question 5: Explain key difference for accounting treatment with finite and indefinite useful life
intangible asset?
Question 6:
According to IAS 38 Intangible assets, which of the following are intangible non-current assets in the
financial statements of Iota Co? Explain how those items presented in financial statement.
a. A patent for a new glue purchased for $20,000 by Iota Co (4 marks)
b. A licence to broadcast a television series, purchased by Iota Co for $150,000 (4 marks)
c. A state of the art factory purchased by Iota Co for $1.5million (4 marks)
Question 7:
According to IAS 38 Intangible assets, which of the following statements about research and
development expenditure are correct? (IF IT IS INCORRECT, CORRECT IT)
a. Research expenditure, other than capital expenditure on research facilities, should be recognised as an
expense as incurred. (2 marks)
b. 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. (2 marks)
c. Development expenditure recognised as an asset must be amortised over a period not exceeding five
years. (2 marks)
Page 22 of 76
Question 8:
According to IAS 38 Intangible assets, which of the following statements about research and
development expenditure are correct? (IF IT IS INCORRECT, CORRECT IT)
a. If certain conditions are met, an entity may decide to capitalise development expenditure. (2 marks)
b. Capitalised development expenditure must be disclosed in the statement of financial position under
intangible non-current assets. (2 marks)
Question 9
Discuss whether the following items can be recognised as intangible assets in reference to
the IAS 38 recognition criteria.
1, A patent purchased by Green Ltd for $40,000 which allowing them to manufacture a specific vaccine for the
next ten years. (5 marks)
2, Sunshine Publishing has developed several titles over the last decade. The most recent of these was a daily
paper called ‘Healthy life’. The costs associated with developing this title were $210,000. (5 marks)
Question 10: Control criteria

Entity A acquires a pharmaceutical company. A critical factor in the entity’s decision to
acquire the company was the reputation of its team of research chemists, who are renowned in their
field of expertise.
Required: Discuss whether entity could recognize intangible asset in relation to the acquiree’s
team of research chemists.
Question 11:
Entity B acquires a football club. A critical factor in the entity’s decision to acquire the club was the
reputation of its players, many of whom are regularly selected to play for their country. A footballer
cannot play for a club unless he is registered with the relevant football authority. It is customary to
see exchange transactions involving players’ registrations.
Page 23 of 76
Question 12:
How to accounting following items on financial statement:
A, Software that is embedded in computer-controlled equipment that cannot operate without it is an
integral part of the related hardware
B, application software that is being used on a computer
C, a database that is stored digitally where the value of the physical medium is wholly insignificant
compared to that of the data collection
S, Research and development expenditure may result in an asset with physical substance (e.g. a
prototype)
Question 13:
Entity A (the licensee) signs a contract with a licensor for the exclusive rights to broadcast matches in
a long-established sporting competition covering the whole season for a number of years. The entity
is required to pay agreed amounts at the start of each season, with the rights to that season and future
seasons reverting to the licensor if payment is not made on time. Entity A concludes that an
obligation does not exist until the beginning of each season for the amount payable to secure rights
for that season.
Question 14:
Entity B (the licensee) signs a contract with a film production company (the licensor) whereby the
entity agrees to pay amounts in the future for a specified number of films that the licensor will release
in that year, but neither the licensee not the licensor knows which films will be released when they
sign the contract.
Page 24 of 76
Question 15:
Which following cost should include or exclude from initial cost of an intangible asset
1. its purchase price,
2. import duties
3. non-refundable purchase taxes,
4. trade discounts
5. rebates
6. costs of employee benefits arising directly from bringing the asset to its working
condition;
7. professional fees arising directly from bringing the asset to its working condition; and
8. costs of testing whether the asset is functioning properly.
9. costs of introducing a new product or service, including costs of advertising and promotional
activities;.
10. costs of conducting business in a new location or with a new class of customer, including
costs of staff training;
11. administration and other general overhead costs;
12. costs incurred in using or redeploying an intangible asset;
13. costs incurred while an asset capable of operating in the manner intended by
management has yet to be brought into use; and
14. initial operating losses, such as those incurred while demand for the asset’s output builds up.
15. training costs,
16. advertising and promotional activities
17. relocation or reorganisation costs
Page 25 of 76
Question 1:
Theta Co purchased a patent on 1 July 20X3 for $250,000. Theta Co expects to use the patent for ten years,
after which it will be valueless.
extracted financial statements for the year 31.12.20X3? (2 marks)
Question 2:
PF purchased a quota for carbon dioxide emissions for $15,000 on 30 April 20X6 and capitalised it as an
intangible asset in its statement of financial position. PF estimates that the quota will have a useful life of 3
years.
extracted financial statements for the year 31 December 20X6?
Question 3:
PF purchased 30 quota for carbon dioxide emissions for $15,000 per quota on 1.4.20X6 and capitalised it as
an intangible asset in its statement of financial position. PF estimates that the quota will have a useful life of 5
years.
Question 4:
Beta Ltd is a taxi firm which owns a number of taxi licenses issued by the city. On 1.1.20X2, the Company
bought 40 licenses for $1,000 per license from another taxi firm. Each license is valid for 20 years.
Question 5:
At 1.1.20X1 XY Co has development expenditure of $500,000. Its policy is to amortise development
expenditure at 2% per annum. Accumulated amortisation at 1.1.20X1 is $20,000.
Page 26 of 76
Question 6:
The following balances existed in the accounting records of Koppa Co, at 31 December 20X7.
$'000
Development costs capitalised, 1 January 20X7 180
Research and development expenditure for the year 162
In preparing the company's statement of profit or loss and other comprehensive income and statement of
financial position at 31 December 20X7 the following further information is relevant.
The $180,000 total for development costs as at 1 January 20X7 relates to two projects:
$'000
Project 836: completed project 82
(balance being amortised over the period expected to benefit from it.
Amount to be amortised in 20X7: $20,000)
Project 910: in progress 98
180
The research and development expenditure for the year is made up of:
$'000
Research expenditure 103
Development costs on Project 910 which continues to satisfy the

requirements in IAS 38 for capitalisation 59
162
extracted financial statements for the year the year ended 31 December 20X7?
Page 27 of 76
Question 7:
A company had $20 million of capitalized development expenditure at cost brought forward at 1 October
20X7 in respect of products currently in production (accumulated amortization of capitalized development
expenditure at 1 October 20X7 is 0) and a new project began on the same date.
The research stage of the new project lasted until 31 December 20X7 and incurred $1.4 million of costs. From
that date the project incurred development costs of $800,000 per month. On 1 April 20X8 the directors became
confident that the project would be successful and yield a profit well in excess of costs. The project was still in
development at 30 September 20X8. Capitalised development expenditure is amortised at 20% per annum
using the straight line method.
Question 8:
Dempsey's year end is 30 September 20X4. Dempsey commenced the development stage of a project to
produce a new pharmaceutical drug on 1 January 20X4. Expenditure of $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;
time apportionment is used by Dempsey where applicable.
Page 28 of 76
CHAPTER 4: IAS 40 INVESTMENT PROPERTIES
LEARNING OBJECTIVE
1, Definition and recognition of investment property

2, Explain how to record investment property
3, List and explain how to account investment property in accordance to fair value model and cost
model?
4, Explain how to account derecognition of investment property
4, Explain how to account when transferring between asset including inventory, property plant and
equipment and investment property.
5, Explain meaning of fair value and how to determine fair value
Page 29 of 76
Question 1: Give definition of investment property in accordance to IAS 40?
Question 2: List and explain recognition criteria of investment property in accordance to IAS 40?
Question 3: What are the main differences between fair value model and cost model in accordance to IAS 40?
Question 4: What are the main differences between fair value model in IAS 40 and revaluation model in IAS
16?
Question 5: How to record below items in financial statement?

A A property intended for sale in the ordinary course of business (2 marks)
B A property being constructed for a customer (2 marks)
C A property owned by Buildco and leased out to a subsidiary
Question 6: Which one of the following is NOT TRUE concerning the treatment of investment
properties under IAS 40? If the statement not true, correct it?
A Following initial recognition, investment property can be held at either cost or fair value. (2 marks)
B If an investment property is held at fair value, this must be applied to all of the entity's investment property.
(2 marks)
C An investment property is initially measured at cost, including transaction costs. (2 marks)
D A gain or loss arising from a change in the fair value of an investment property should be recognised in
other comprehensive income. (2 marks)
Page 30 of 76
Question 1:
On 1 Jan 2010, Plethora plc bought an administration building with $10m, this building has expected useful
life 40 years and nil residual value.
On 31.12.2012, Plethora no longer needs this building and decided convert this building for rental. At this date
it assessed fair value of the building $15m
The entity earn rental income from the building for the year ended 31.12.2013 was $2m and fair value of the
building at 31.12.2013 was $16m
The entity earn rental income from the building for 3 month from January 2014 to march 2014 was $1m and
decided sell the building at 1.4.2014 for $20m in cash
Required:
Explain, with journals, the accounting treatment of the above transactions, and prepare extracted
financial statements for the year ended 31.12.2010, 31.12.2011, 31.12.2012, 31.12.2013, 31.12.2014
Question 2:
On 1 Jan 20X0, Carter acquired a 30-floor-office building and used for an administrative purpose. The
building had cost of $9m, was useful economic life of 30 years. On 30 June 20X8, the company converted 10
floors of this building and let it out to a third party to earn annual rental fee of $0.5m. The fair value of this
building was judged to be of $0.3m per floor on 30 June 20X8. At the year-end date of 31 December 20X8 the
fair value of the building was estimated at $0.32 million per floor.
Carter uses the fair value model for investment property.
Assumption: value of each floor is equal
Required:
financial statements for the year ended 31 December 20X8 (10 marks)
Page 31 of 76
Question 3:
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.
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 and is 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
was judged to be $800,000 on 1 July 20X9. This valuation had not changed at 31 December 20X9.
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.
Required:
financial statements for the year ended 31 December 20X9 (10 marks)
Question 4:
Speculate owns the following properties at 1 April 2012:
Property A: On 1 April 2012, Speculate purchased an office building and used for administrative purposes
with a depreciated historical cost of $2 million, useful economic life of 20 years. On 1 October 2012, Speculate
decided to let it out to a third party and reclassified as an investment property applying Speculate’s policy of
the fair value model. An independent valuer assessed the property to have a fair value of $2·3 million at 1
October 2012, which had risen to $2·34 million at 31 March 2013.
Property B: Another office building used for normal commercial rent. At 1 April 2012, it had a fair value of
$1·5 million which had risen to $1·65 million at 31 March 2013.
Required:
a, Explain, with journals, the accounting treatment of the above transactions, and prepare
extracted financial statements for the year ended 31 March 2013. (10 marks)
b, On 1.5.2014, the entity disposal property B for $2m in cash. Explain, with journals, the
accounting treatment of this transaction. (2marks)
Page 32 of 76
CHAPTER 5: IAS 36 IMPAIRMENT OF ASSET
LEARNING OBJECTIVE
a) Define, calculate and account for an impairment loss.

b) account for the reversal of an impairment loss on an individual asset
c) Identify the circumstances that may indicate impairments to assets.
d) Describe what is meant by a cash generating unit.
e) State the basis on which impairment losses should be allocated and allocate an impairment
loss to the assets of a cash generating unit.
Page 33 of 76
Question 1: If an impairment review is carried out, how to measure a potentially impaired asset?
Question 2: Explain how to determine the recoverable amount of an asset?
Question 3: When does the company need to carry the impairment review for
- PPE
- Investment property
- Intangible asset (IA with finite UFL)
- Intangible asset (IA with infinite UFL and goodwill)
Question 4: List and explain 3 external indicators that indicate impairment of asset (6 marks)
Question 5: List 3 internal indicators that indicate impairment of asset (6 marks)
Question 6: Why do we need to test impairment of cash generating unit? (2 marks)
Question 7: When does the company need to carry the impairment review for Cash Generating unit?
Question 8:
By 27 September 20X7 internal evidence had emerged suggesting that Dearing's machine was impaired.
Which one of the following would be internal evidence of impairment? Explain why it is an indicator of
impairment?
A The economic performance of the machine had declined.
B There were legal and regulatory changes affecting the operating of the machine.
C There was an unexpected fall in the market value of the machine.
D New technological innovations were producing better machines.
Question 9:
IAS 36 Impairment of Assets suggests how indications of impairment might be recognised.
Which TWO of the following would be external indicators that one or more of an entity's assets may be
impaired? Explain reasons why they are indicators of impairment loss?
a) An unusually significant fall in the market value of one or more assets
b) Evidence of obsolescence of one or more assets
c) An increase in market interest rates used to calculate value in use of the assets
Page 34 of 76
Question 10:
Which of the following is an indicator of impairment or not indicator of impairment under IAS 36
Impairment of Assets? Explain reasons why?
A Advances in the technological environment in which an asset is employed have an adverse impact on its
future use
B An increase in interest rates which increases the discount rate an entity uses
C The carrying amount of an entity's net assets is lower than the entity's number of shares in issue multiplied
by its share price
D The estimated net realisable value of inventory has been reduced due to fire damage although this value is
greater than its carrying amount
Page 35 of 76
Question 1:
On 30 September 20X7 the impairment review was carried out. The following amounts were established in
respect of the machine:
Carrying amount 850,000
Value in use 760,000
Fair value 850,000
Costs of disposal 30,000
Required: Explain, with journals, the accounting treatment of the above transactions in accordance to
IAS 36 Impairment of asset, and prepare extracted financial statements for the year ended 30
September 20X7 (10 marks)
Question 2:
A machine has a carrying amount of $85,000 at the year end of 31 March 20X9. Its market value is $78,000
and costs of disposal are estimated at $2,500. A new machine would cost $150,000. The company which owns
the machine expects it to produce net cash flows of $30,000 per annum for the next three years. The company
has a cost of capital of 8%.
Required: Explain, with journals, the accounting treatment of the above transactions in accordance to
IAS 36 Impairment of asset, and prepare extracted financial statements for the year ended 31 March
20X9 (10 marks)
Question 3:
The following information relates to an item of plant at 31 December 20X9
(i) Its carrying amount in the statement of the financial position is $3 million.
(ii) The company has received an offer of $2.7 million from a company in Japan interested in buying the plant.
(iii) The present value of the estimated cash flows from continued use of the plant is $2.6 million.
(iv) The estimated cost of shipping the plant to Japan is $50,000.
Required:
Explain, with journal entry, how to account for above transaction in accordance to IAS 36: Impairment
of asset and prepare extracted financial statements for the year ended 31.12.20X9? (10 marks)
Page 36 of 76
Question 4:
At 30 September 20X9 Sandown's trial balance showed a brand at cost of $30 million, less accumulated
amortisation brought forward at 1 October 20X8 of $9 million. Amortisation is based on a ten-year useful life.
An impairment review on 1 April 20X9 concluded that the brand had a value in use of $12 million and a
remaining useful life of three years. However, on the same date Sandown received an offer to purchase the
brand for $15 million.
Required:
Question 5:
Riley acquired a non-current asset on 1 October 20X0 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 20X4. At that date the
asset was damaged and an impairment review was performed. On 30 September 20X4, the fair value of the
asset less costs of disposal 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.
Required:
Question 6:
A business which comprises a single cash-generating unit has the following assets at 31 December 20X9
$'m
Goodwill 3
Patent 5
Property 10
Plant and equipment 15
Net current assets 2
Following an impairment review it is estimated that the value of the patent is $2 million and the recoverable
amount of the business is $24 million.
Required: Explain, with journal entry, how to account for above transaction in accordance to IAS 36:
Impairment of asset and prepare extracted financial statements for the year ended 31 December 20X9
(10 marks)
Page 37 of 76
Question 7:
The draft financial statements of Plethora plc for the year to 30 June 20X0 are being prepared and the
accountant has requested your advice on dealing with the following issues.
Plethora plc owns a retail business which has suffered badly during the recession. Plethora plc treats this
business as a separate cash generating unit.
The carrying amounts of the assets comprising the retail business are:
$’000
Building 900
Inventory 70
Other current assets 130
Goodwill 40
An impairment review has been carried out as at 30 June 20X0 and the recoverable amount of the cash
generating unit is estimated at $1.3m.
Required:
of asset and prepare extracted financial statements for the year ended 30 June 20X0 (10 marks)
Question 8:
A cash-generating unit at 31 July 20X0 comprises the following assets:
$'000
Building 700
Goodwill 90
Current assets 20
One of the machines, carried at $40,000, is damaged and will have to be scrapped. The recoverable amount of
the cash-generating unit is estimated at $750,000.
Required:
of asset and prepare extracted financial statements for the year ended 31 July 20X0 (10 marks)
Page 38 of 76
Question 9:
The net assets of Fyngle, a cash generating unit (CGU) at 31 March 20X6 are:
Property, plant and equipment 200,000
Allocated goodwill 50,000
Product patent 20,000
Net current assets (at net realisable value) 30,000
As a result of adverse publicity, Fyngle has a recoverable amount of only $200,000.

Required:
of asset and prepare extracted financial statements for the year ended 31 March 20X6 (10 marks)
Page 39 of 76
CHAPTER 6: IFRS 15 REVENUE
LEARNING OBJECTIVE
a) Explain and apply the principles of recognition of revenue:

(i) Identification of contracts
(ii) Identification of performance obligations
(iii) Determination of transaction price
(iv) Allocation of the price to performance obligations
(v) Recognition of revenue when/as performance obligations are satisfied.
b) Explain and apply the criteria for recognising revenue generated from contracts where performance
obligations are satisfied over time or at a point in time.
c) Describe the acceptable methods for measuring progress towards complete satisfaction of a
performance obligation.
d) Explain and apply the criteria for the recognition of contract costs.
e) Apply the principles of recognition of revenue, and specifically account for the following types of
transaction:
i) principal versus agent
ii) repurchase agreements
iii) bill and hold arrangements
iv) consignments
f) Prepare financial statement extracts for contracts where performance obligations are satisfied over
time.
Page 40 of 76
Question 1: List and explain 5 principles of recognition of revenue (5 marks)
Question 2: Explain the meaning of performance obligation? (2marks)
Question 3: How can a performance obligation be satisfied in case of:

- Sales of goods
- Providing telecommunication services
- Perform construction contract
Page 41 of 76
Question 1:
On 1 Jan 20X0, a mobile phone company gives customers a free handset when they sign a two-year contract
for provision of network services. The handset has a stand-alone price of $100 and the contract is for $20 per
month, paid in arrears on annual basis.
Required:
Required: Explain, with journal entry, how to account for above transaction in accordance to IFRS 15:
Revenue from contract with customer and prepare extracted financial statements for the year ended 31
December 20X0 and 31 December 20X1 (10 marks)
Question 2:
On 1 April 20X0, A mobile phone company gives customers a handset WITH $500 when they sign a THREE-
year contract for provision of network services. The handset has a stand-alone price of $1500 and the contract
is for $150 per month, paid in arrears on annual basis.
Required:
Explain, with journal entry, how to account for above transaction in accordance to IFRS 15: Revenue
from contract with customer and prepare extracted financial statements for the year ended 31 March
20X1 and 31 March 20X2 (10 marks)
Question 3:
On 1.4.20X7, a mobile phone company gives customers a FREE handset AND a memory card when they sign
a THREE-year contract for provision of network services with price $160 per months. The handset has a
stand-alone price of $1000, the memory card has standard alone price $50 and the network service has
standard alone price is for $400 per quarter. The payment is made in arrears on annual basis.
Required:
from contract with customer and prepare extracted financial statements for the year ended 31 March
20X8 and 31 March 20X9 (10 marks)
Question 4:
A company entered into a contract on 1 January 20X5 to build a factory. The total contract revenue was $2.8
million. At 31 December 20X5 the contract was certified as 35% complete. Costs incurred during the year
were $740,000 and costs to complete are estimated at $1.4 million. $700,000 has been billed to the customer
but not yet paid.
December 20X5 (10 marks)
Page 42 of 76
Question 5:
The following details apply to a contract where performance obligations are satisfied over time at 31
December 20X5.
Total contract revenue 120,000
Costs to date 48,000
Estimated costs to completion 48,000
Amounts invoiced 50,400
The contract is agreed to be 45% complete at 31 December 20X5.

Required:
from contract with customer and prepare extracted financial statements for the year ended 31
Question 6:
Springthorpe entered into a three-year contract on 1 January 20X2 to build a factory. This is a contract where
performance obligations are satisfied over time. The percentage of performance obligations satisfied is
measured according to certificates issued by a surveyor. The contract price was $12 million. At 31 December
20X2 details of the contract were as follows.
$m
Costs to date 9
Estimated costs to complete 6
Amounts invoiced 4
Certified complete 40%
Required:
from contract with customer and prepare extracted financial statements for the year ended 31
Page 43 of 76
Question 7:
Yling entered into a contract in respect of which performance obligations are satisfied over time on 1 January
20X4. The contract is expected to last 24 months. The price which has been agreed for the contract is $5
million. At 30 September 20X4 the costs incurred on the contract were $1.6 million and the estimated
remaining costs to complete were $2.4 million. On 20 September 20X4 Yling received a payment from the
customer of $1.8 million which was equal to the total of the amounts invoiced. Yling calculates the stage of
completion of its performance obligations on contracts on the basis of amounts invoiced to the contract price.
Sep 20X4 (10 marks)
Question 8:
Yling entered into a contract in respect of which performance obligations are satisfied over time on 1/4/20X4.
The contract is expected to last 24 months. The price which has been agreed for the contract is $5 million. At
30 September 20X4 the costs incurred on the contract were $1 million and the estimated remaining costs to
complete were $60,000 per month for remained months. On 20 September 20X4 Yling received a payment
from the customer of $1.8 million which was $200,000 below to the total of the amounts invoiced. Yling
calculates the stage of completion of its performance obligations on contracts on the basis of cost incurred.
Question 9:
Yling entered into a contract in respect of which performance obligations are satisfied over time on 1 January
20X4. The contract is expected to last 24 months. The price which has been agreed for the contract is $5
million. At 30 September 20X4 the costs incurred on the contract were $1.6 million and the estimated
remaining costs to complete were $4.4 million. On 20 September 20X4 Yling received a payment from the
customer of $1.8 million which was equal to the total of the amounts invoiced. Yling calculates the stage of
completion of its performance obligations on contracts on the basis of amounts invoiced to the contract price.
Page 44 of 76
Question 10:
Haggrun Co has a construction contract in progress, the details of which are as follows
Start contruction of the asset: 1.4.20X2 Happy Happy

31.12.20X2 31.12.X3
(first year) (second year)
$'000 $'000
Total contract revenue 300 320
Costs incurred to date 90 120
Estimated costs to completion 135 100
Payments invoiced 116 160
Amount received 110 140
Agreed work certified 150 240
Required:
a. Explain, with journal entry, how to account for above transaction in accordance to IFRS 15:
Revenue from contract with customer and prepare extracted financial statements for the year
ended 31 December 20X2 (10 marks)
b. Explain, with journal entry, how to account for above transaction in accordance to IFRS 15:
Revenue from contract with customer and prepare extracted financial statements for the year
ended 31 December 20X3 (10 marks)
Page 45 of 76
Question 11:
Bridgenorth has undertaken a $5 million contract to repair a railway tunnel. The contract was signed on 1 April
20X8 and the work is expected to take two years. This is a contract where performance obligations are
satisfied over time and progress in satisfying performance obligations is to be measured according to % of
work completed as certified by a surveyor. Bridgenorth has an enforceable right to payment for performance
completed to date.
At 31 December 20X9 the details of the contract were as follows:
20X9 ($) 20X8 ($)
Total contract value 5,000,000 5,000,000
Costs to date 3,600,000 2,300,000
Estimated costs to completion 700,000 2,100,000
Work invoiced to date 3,000,000 2,000,000
Cash receive d to date 2,400,000 1,500,000
% certified complete 75% 40%
Required:
a. Explain, with journal entry, how to account for above transaction in accordance to IFRS
15: Revenue from contract with customer and prepare extracted financial statements for
the year ended 31 December 20X8 (5 marks)
b. Explain, with journal entry, how to account for above transaction in accordance to IFRS
15: Revenue from contract with customer and prepare extracted financial statements for
the year ended 31 December 20X9 (5 marks)
Page 46 of 76
Question 12:
Newmarket's revenue as shown in its draft statement of profit or loss for the year ended 31 December 20X9 is
$27 million. This includes $8 million for a consignment of goods sold on 31 December 20X9 on which
Newmarket will incur ongoing service and support costs for two years after the sale.
The supply of the goods and the provision of service and support are separate performance obligations under
the terms of IFRS 15 Revenue from contracts with customers.
The cost of providing service and support is estimated at $800,000 per annum. Newmarket applies a 30%
mark-up to all service costs.
Amount of $8million was invoiced to customer and fully received on 31 December 20X9.
Question 13:
$270 million.
Revenue includes an amount of $20 million for cash sales made through Newmarket 's retail outlets during the
year on behalf of Francais (Newmarket received $2m commisison fee related to this sale). Newmarket, acting
as agent, is entitled to a commission of 10% of the selling price of these goods.
Question 14:
$270 million with cost of sale $200m and closing inventory $30m
Revenue includes an amount of $22 million related to 20m inventory transfer to Francais 's retail outlets.
Francais will sell this inventory with price of $22m (Franciais received 10% commisison fee related to sale).
At year end, Francais has sold 80% of inventory and received cash, but this amount has not paid to
Newmarket.
Page 47 of 76
CHAPTER 7: IAS 10 EVENT AFTER REPORTING PERIOD
LEARNING OBJECTIVE
1. Define an event after the reporting period in accordance with IFRS Standards.
2. Classify events as adjusting or non-adjusting.
3. Distinguish between how adjusting and non-adjusting events are reported in the financial
statements.
Page 48 of 76
Question 1: what is an event after reporting period in accordance with IAS10? (2marks)
Question 2: What is the difference between adjusting events and non-adjusting events in accordance
with IAS10. Give one example for each type of event. (2marks)
Page 49 of 76
Question 1
1. After reporting date, the entity received valuation report and valuation of property providing
evidence of impairment in value at the reporting period
2. Sale of inventory held at the end of the reporting period for less than cost
3. Discovery of fraud or error affecting the financial statement
4. The insolvency of a customer with a debt owing at the end of the reporting period which is still
outstanding
Required:
Explain, with journal entry (if any), how to account for above transaction in accordance to IFRS 10:
Events after reporting period (8 marks)
Question 2
The accounting treatment of the following material events after the reporting period needs to be determined.
1. The bankruptcy of a major customer, with a substantial debt outstanding at the end of the
reporting period
2. A fire destroying some of the company's inventory (the company's going concern status is not
affected)
3. An issue of shares to finance expansion after reporting date
4. Sale for less than cost of some inventory held at the end of the reporting period
5. Sale for MORE than cost of some inventory held at the end of the reporting period
Required:
Page 50 of 76
Question 3
In finalising the financial statements of a company for the year ended 30 June 20X4, which of the
following material matters should be adjusted for? and explain how these transactions are recorded in
financial statement?
1. A customer who owed $180,000 at the end of the reporting period went bankrupt in July 20X4.
2. The sale in August 20X4 for $400,000 of some inventory items valued in the statement of
financial position at $500,000.
3. The sale in August 20X4 for $600,000 of some inventory items valued in the statement of
financial position at $500,000
4. A factory with a value of $3,000,000 was seriously damaged by a fire in July 20X4. The factory was
back in production by August 20X4 but its value was reduced to $2,000,000.
5. The company issued 1,000,000 ordinary shares in August 20X4.
Required:
Question 4
The financial statements of Overexposure Co for the year ended 31 December 20X1 are to be approved
on 31 March 20X2. Before they are approved, the following events take place.
1. On 14 February 20X2 the directors took the strategic decision to sell their investment in Quebec
Co despite the fact that this investment generated material revenues.
2. On 15 March 20X2, a fire occurred in the eastern branch factory which destroyed a material
amount of inventory. It is estimated that it will cost $505,000 to repair the significant damage
done to the factory.
3. On 17 March 20X2, a customer of Overexposure Co went into liquidation. Overexposure has
been advised that it is unlikely to receive payment for any of the outstanding balances owed by
the customer at the year end.
Required:
Page 51 of 76
Question 5:
The financial statements of Four Seasons Ltd. for the year ended 31 December 20X1 are to be approved
on 31 March 20X2. The following events take place after the reporting period and before the financial
statement are approved:
1. The insolvency of a customer with a debt owing at the Statement of Financial Position date which
is still outstanding.
2. Sale of inventory held at the Statement of Financial Position date for less than cost
3. A valuation of property providing evidence of impairment in value at the Statement of Financial
Position date.
4. Discovery of fraud or error affecting the financial statements
Required:
Question 6:
The financial statements of Four Seasons Ltd. for the year ended 31 December 20X1 are to be approved on 31
March 20X2. The following events take place after the reporting period and before the financial statement are
approved:
1. A factory with a value of $1,000,000 was destroyed by fire
2. Some inventory in the Statement of Financial Position at $300,000 was sold for $290,000
3. The company issued 1,000,000 ordinary shares
Required:
Page 52 of 76
CHAPTER 8: PRESENTATION FINANCIAL STATEMENT
LEARNING OBJECTIVE
1. Statements of financial position

a) Recognise how the accounting equation, accounting treatments (as stipulated within relevant IAS 02,
16, 38, 40, 36, IFRS 15, IAS 10) and business entity concept underlie the statementof financial position.
b) Understand the nature of reserves.
c) Identify and report reserves in a companystatement of financial position.
d) Prepare a statement of financial position or extracts as applicable from given information using
accounting treatments as stipulated within relevant IAS 02, 16, 38, 40, 36, IFRS 15, IAS 10
e) Understand why the heading retained earnings appears in a company statement of financial position.
2. Statements of profit or loss and other comprehensive income
a) Prepare a statement of profit or loss and other comprehensive income or extracts as applicable from
given information using accounting treatments as stipulated within relevant IAS 02, 16, 38, 40, 36, IFRS
15, IAS 10
b) Understand how accounting concepts apply to revenue and expenses.
c) Calculate revenue, cost of sales, gross profit, profit for the year, and total comprehensive income from
given information.
d) Disclose items of income and expenditure in the statement of profit or loss.
e) Record income tax in the statement of profit or loss of a company.
f) Understand the interrelationship between the statement of financial position and the statement of profit
or loss and other comprehensive income.
g) Identify items requiring separate disclosure on the face of the statement of profit or loss.
3. Disclosure notes
a) Explain the purpose of disclosure notes
b) Draft the following disclosure notes
i) Non current assets including tangible and
intangible assets
ii) Provisions
iii) Events after the reporting period
iv) Inventory
Page 53 of 76
Question 1:
Fresco : Trial balance as at 31 March 20X2 $'000 $'000
Equity shares of 50 cents each 45,000
Share premium 74,200
Retained earnings at 1 April 20X1 5,100
Property (12 years) – at cost 48,000
Plant and equipment – at cost 47,500
Investment property - fair value at 1 April 20X1 10,000
Accumulated amortisation of property at 1 April 20X1 16,000
Accumulated depreciation of plant and equipment at 1 April 20X1 33,500
Inventory at 31 March 20X2 25,200

Trade receivables 28,500
Bank (liability) 1,400
Trade payables 27,300
Revenue 280,800
Cost of sales 280,800
Distribution costs 16,100
Administrative expenses 26,900
Bank interest 300
The following notes are relevant:

(i) Revenue as shown in its draft statement of profit or loss includes $8 million for a consignment of goods
sold on 31 March 20X2 on which the entity will incur ongoing service and support costs for two years after the
sale.
The supply of the goods and the provision of service and support are separate performance obligations under
the terms of IFRS 15 Revenue from contracts with customers.
Page 54 of 76
The cost of providing service and support is estimated at $800,000 per annum. The entity applies a 30% mark-
up to all service costs.
(ii) Non-current assets:
To reflect a marked increase in property prices, Fresco decided to revalue its property on 1 April 20X1. The
directors accepted the report of an independent surveyor who valued the property at $36 million on that date.
Fresco has not yet recorded the revaluation.
1, The remaining life of the property is eight years at the date of the revaluation.
2, Fresco makes an annual transfer to retained profits to reflect the realization of the revaluation surplus.
3, Plant and equipment is depreciated at 20% per annum using the reducing balance method.
4, No depreciation/amortisation has yet been charged on any non-current asset for the year ended 31 March
20X2. Depreciation and amortisation are charged to cost of sales.
(iii) The investment property has fair value at 31.3.20X2 was $12m.
(iv) The above figures do not include the estimated provision for income tax on the profit for the year $3m.
Required:
(a) Prepare the statement of profit or loss and other comprehensive income for Fresco for the year
ended 31 March 20X2. (8 marks)
(b) Prepare the statement of financial position of Fresco as at 31 March 20X2. (12 marks)
Page 55 of 76
Question 2:
Fresco : Trial balance as at 31 March 20X2 $'000 $'000
Investment property - fair value at 1 April 20X1 10,000
Accumulated amortisation of property at 1 April 20X1 16,000

Bank (liability) 1,400
Revenue 280,800
Bank interest 300
(i) Non-current assets:

To reflect a marked increase in property prices, Fresco decided to revalue its property on 31.3.20X2. The
directors accepted the report of an independent surveyor who valued the property at $34 million on that date.
Fresco has not yet recorded the revaluation.
The remaining life of the property is eight years at 1.4.20X1. Fresco does not makes an annual transfer to
retained profits to reflect the realization of the revaluation surplus.
Plant and equipment is depreciated at 15% per annum using the reducing balance method.
Page 56 of 76
No depreciation/amortisation has yet been charged on any non-current asset for the year ended 31 March
20X2. Depreciation and amortisation are charged to administration expense.
(ii) The investment property has fair value at 31.3.20X2 was $8m.
(iii) The above figures do not include the estimated provision for income tax on the profit for the year $1.5m.
(iv) At year end, a part of inventory obsoleted, this inventory has cost of $3m and net realizable value of
$2.8m. The entity currently recoded closing inventory at cost.
(v) During the year, entity perform a research and development project, the project commence at 1.9.20X2
with cost of $40,000 per month. At 1.1.20X3, director was confident that project commercial success and the
project still continue development at year end. However, the entity has recoded all research and development
cost in cost of sale for the year.
(vi) At 31.3.20X2, the entity disposal a part of investment property with consideration of $1.5m (this
investment property has carrying amount $1.4m– which just after recorded at fair value at year end). The entity
has not received cash from this transaction, hence the accountant has not record this transaction.
(vi) The accountant determine closing inventory at 5/4/20X2 and use this amount to determine closing
inventory and cost of sale. However, there are some transactions incurred between 31.3.20X2 and 5/4/20X2:
- Purchase inventory with cost of $10,000
- Sale inventory for $18,000 and margin of 20%
- Customer returned goods which has sale to customer for $30,000 and mark up 20%
Required: Determine following items in financial statement of the entity for the year ended 31
March 20X2:
a. Revenue
b. Cost of sale
c. Administration expense
d. Distribution expense
e. Finance cost
f. Non-current asset
g. Inventory
h. Trade receivable
i. Equity
Page 57 of 76
Question 3:
Lotus: Trial balance as at 31 March 20X4 $'000 $'000
Share premium 5,000
Accumulated depreciation of property at 1 April 20X3 16,000
Bank 1,400
Revenue 539,500
Bank interest 300
667,800 667,800
The following notes are relevant:
(i) Revenue includes an amount of $20 million for cash sales made through Xtol's retail outlets during the year
on behalf of Francais. Xtol, acting as agent, is entitled to a commission of 10% of the selling price of these
goods.
By 31 March 20X4, Xtol had remitted to Francais $15 million (of the $20 million sales) and recorded this
amount in cost of sales.
(ii) At 31 March 20X4, an equipment has a carrying amount of $65,000 at the year end of 31 March 20X9. Its
market value is $78,000 and costs of disposal are estimated at $2,500. A new machine would cost $150,000.
Page 58 of 76
The company which owns the machine expects it to produce net cash flows of $30,000 per annum for the next
three years. The company has a cost of capital of 8%.
(ii) Plant and equipment is depreciated at 12½% per annum on the reducing balance basis. All amortisation
and depreciation of non-current assets is charged to cost of sales.
(iii) A provision of $28 million is required for current tax for the year ended 31 March 20X4.
(iv) At 3 Apr 20X4, a customer of business declare bankrupt, this client own the entity $15,000.
Required: with appropriate working determine following items:
a. Revenue (5 marks)
b. Cost of sale (5 marks)
c. Plant and equipment (2 marks)
d. Tax expense for the year (2 marks)
e. Receivable (2 marks)
f. Administration expense (5 marks)
g. Equipment (5 marks)
Page 59 of 76
Question 4:
Bagio: Trial balance as at 31 March 20X3 $'000 $'000
long-term contract 4,000
Land and buildings – at cost (land $10 million) 60,000
Accumulated depreciation at 1 April 20X2 buildings 20,000
Accumulated depreciation at 1 April 20X2 plant and equipment 24,500

Bank 8,800
Revenue 694,400
Dividends paid 20,000
Bank interest 300
864,000 864,000
The following notes are relevant.
(i) The balance on the long-term contract is made up of the following items.
Cost incurred to date $14 million
Value of invoices issued (work certified) $10 million
Page 60 of 76
The contract commenced on 1 October 20X2 and is for a fixed price of $25 million. Performance obligations
are satisfied over time. The costs to complete the contract at 31 March 20X3 are estimated at $6 million.
Moby's policy is to recognise satisfaction of performance obligations (and therefore accrue profits) on such
contracts based on a stage of completion given by the work certified as a percentage of the contract price.
On 1 April 20X2, the directors of Atlas decided that the financial statements would show an improved position
if the land and buildings were revalued to market value. At that date, an independent valuer valued the land at
$12 million and the buildings at $35 million and these valuations were accepted by the directors. The
remaining life of the buildings at that date was 14 years. Atlas does not make a transfer to retained earnings for
excess depreciation. Ignore deferred tax on the revaluation surplus.
Plant and equipment is depreciated at 20% per annum using the reducing balance method and time
apportioned as appropriate. All depreciation is charged to cost of sales, but none has yet been charged on any
non-current asset for the year ended 31 March 20X3.
(iii) Atlas estimates that an income tax provision of $27.2 million is required for the year ended 31 March
20X3.
Required
(a) Prepare the statement of profit or loss and other comprehensive income for Atlas for the year ended
31 March 20X3. (5 marks)
(b) Prepare the statement of financial position of Atlas as at 31 March 20X3. (5 marks)
Page 61 of 76
Question 5:
Using trial balance in question 1 and determine relevant items in financial statement based on following
information:
(i) The balance on the long-term contract is made up of the following items.
Cost incurred to date $14 million
Value of invoices issued (work certified) $10 million
The contract commenced on 1 October 20X2 and is for a fixed price of $25 million. Performance obligations
are satisfied over time. The costs to complete the contract at 31 March 20X3 are estimated at $6 million.
Moby's policy is to recognise satisfaction of performance obligations (and therefore accrue profits) on such
contracts based on a stage of completion given by the work certified as a percentage of the contract price.
On 1 April 20X2, the directors of Atlas decided that the financial statements would show an improved position
remaining life of the buildings at that date was 14 years. Atlas does not make a transfer to retained earnings for
excess depreciation. Ignore deferred tax on the revaluation surplus.
Plant and equipment is depreciated at 20% per annum using the reducing balance method and time
apportioned as appropriate. All depreciation is charged to cost of sales, but none has yet been charged on any
non-current asset for the year ended 31 March 20X3.
(iii) Atlas estimates that an income tax provision of $27.2 million is required for the year ended 31 March
20X3.
Page 62 of 76
Question 6:
information:
1, Revenue includes an amount of $20 million for cash sales made through the entity's retail outlets
during the year on behalf of its customer. The entity, acting as agent, is entitled to a commission of
15% of the selling price of these goods. By 31 March 20X4, the entity had paid to the customer $15
million (of the $25 million sales) and recorded this amount in cost of sales.
2, On 31.3.20X3, the directors of Atlas decided that the financial statements would show an improved position
remaining life of the buildings at 1.4.20X2 was 20 years. Atlas transfer to retained earnings for excess
depreciation. Ignore deferred tax on the revaluation surplus.
3, Plant and equipment is depreciated at 25% per annum using the reducing balance method and time
apportioned as appropriate.
4, All depreciation is charged to distribution expense, but none has yet been charged on any non-current asset
for the year ended 31 March 20X3.
5, At 31.3.20X3, the entity perform impairment review with a plant (with cost of $40,000 and accumulated
depreciation of $15,000 at 1.4.20X2. A study at the year end concluded that the present value of the
future estimated net cash flows from the plant at 31 March 20X3 is $20,000; however,
Downing Co also has a confirmed offer of $28,000 to sell the plant immediately at that date.
Page 63 of 76
Question 7:
information:
1, Revenue includes an amount of $16 million for a sale made on 1.12.20X2. The sale relates to a
single product and includes ongoing servicing from Downing Co for four years. The normal selling
price of the product and the servicing would be $20 million and $500,000 per annum ($2 million in
total) respectively.
2, The balance on long term contract is comprised of contract costs incurred at 31 March 20X3 of
$15 million less a payment of $11 million from the customer. The agreed transaction price for the
total contract is $30 million and the total expected costs are $24 million. Downing Co uses an input
method based on costs incurred to date relative to the total expected costs to determine the progress
towards completion of its contracts.
2, The remaining life of the buildings at 1.4.20X2 was 20 years.
3, Plant and equipment is depreciated at 20% per annum using the reducing balance method and time
apportioned as appropriate.
4, All depreciation is charged to administration expense, but none has yet been charged on any non-current
asset for the year ended 31 March 20X3.
5, At 31.3.20X3, the entity perform impairment review with a plant (with cost of $40,000 and accumulated
depreciation of $15,000 at 1.4.20X2), the plant have recoverable amount of $18,000 at 31.12.20X3.
6, At 1.5.20X4, the entity has sold 500 items A of inventory with net realisable value of $50, these inventory
has cost of $80 per unit (which is reflected on financial statement at 31.12.20X3)
7, The entity commenced a research and development project on 1.4.20X2. It spent $1 million per
month on research until 31.7.20X2, at which date the project passed into the development stage.
From this date it spent $1·6 million per month until the year end (31.3.20X3), at which date
development was completed. However, it was not until 1 May 2015 that the directors of Moston
were confident that the new product would be a commercial success. The accountant has recorded
these expense as cost of sale in the period.
8, At 31.3.20X3, the entity decided to convert a building with cost of $5m and accumulated
depreciation of $2m to investment property. At this date, fair value of the investment property was
$6m.
Page 64 of 76
CHAPTER 9: IAS 07 STATEMENT OF CASH FLOW
LEARNING OBJECTIVE
a) Differentiate between profit and cash flow.

b) Understand the need for management to control cash flow.
c) Recognize the benefits and drawbacks to users of the financial statements of a statement of cash
flows.
d) Classify the effect of transactions on cash flows.
e) Calculate the figures needed for the statement of cash flows including:
i) Cash flows from operating activities
ii) Cash flows from investing activities
iii) Cash flows from financing activities
f) Calculate the cash flow from operating activities using the indirect and direct method.
g) Prepare statements of cash flows and extracts from statements of cash flows from given information.
h) Identify the treatment of given transactions in a company’s statement of cash flows.
I, Explain meaning of statement of cash flow
Page 65 of 76
Question 1:
Set out below are the financial statements of Emma, a limited liability company. You have been asked to
prepare the company's statement of cash flows, implementing IAS 7 Statement of cash flows.
EMMA statement of profit or loss for the year ended 31 December 20X2
Sales revenue 2,553
Cost of sales 1,814
Gross profit 739
Distribution costs 125
Administrative expenses 264
Operating profit 350
Interest income 25
Interest expense 75
Profit before tax 300
Income tax expense 240
Profit for the year 60
EMMA - statements of financial position as at 31 December

20X2 20X1
$'000 $'000
Non-current assets
Tangible assets 380 305
Intangible assets 250 200
Investments – 25
630 530
Current assets
Inventories 150 102
Receivables 390 315
Short-term investments 50 –
Cash in hand 2 1
592 418
1,222 948
Equity and liabilities
Share capital ($1 ordinary shares) 200 150
Share premium account 160 150
Revaluation surplus 100 91
Retained earnings 160 100
620 491
Page 66 of 76
Non-current liabilities
Long-term loan 100 –
Current liabilities
Trade payables 127 119
Bank overdraft 85 98
Taxation 290 240
502 457
1,222 948
The following information is available.
(a) The proceeds of the sale of non-current asset investments amounted to $30,000.
(b) Fixtures and fittings, with an original cost of $85,000 and a carrying amount of $45,000, were sold for
$32,000 during the year.
(c) The current asset investments fall within the definition of cash equivalents under IAS 7. (short term
investment in current asset
(d) The following information relates to property, plant and equipment.
31.12.20X2 31.12.20X1
$'000 $'000
Cost 720 595
Accumulated depreciation 340 290
Carrying amount 380 305
Required
Prepare a statement of cash flows for the year to 31 December 20X2 (15 marks)
Page 67 of 76
Question 2:
The following information is available for Sioux, a limited liability company:
Statements of financial position 31 December
20X4 20X3
$'000 $'000 $'000 $'000
Non-current assets
Cost or valuation 11,000 8,000
Accumulated depreciation
(5,600) (4,800)
Carrying amount
5,400 3,200
Current assets
Inventories 3,400 3,800
Receivables 3,800 2,900
Cash at bank 400 100
7,600 6,800
13,000 10,000
Capital and reserves
Ordinary share capital 1,000 1,000
Revaluation surplus 1,500 1,000
Retained earnings 3,110 2,200
5,610 4,200
10% Loan notes

3,000 2,000
Current liabilities
Trade payables 3,700 3,200
Interest payable -
10
Income tax 700 600
4,400 3,800
13,000 10,000
Summarised statement of profit or loss for the year ended 31 December 20X4
Page 68 of 76
$'000
Profit from operations 2,650
Finance cost (loan note interest) (310)
2,340
Income tax expense (700)
Net profit for the year 1,640
Notes
1 During the year non-current assets which had cost $800,000, with a carrying amount of $350,000, were sold
for $500,000.
2 The revaluation surplus arose from the revaluation of some land that was not being depreciated.
3 The 20X3 income tax liability was settled at the amount provided for at 31 December 20X3.
4 The additional loan notes were issued on 1 January 20X4. Interest was paid on 30 June 20X4 and 31
December 20X4.
5 Dividends paid during the year amounted to $750,000.
Required:
a. Prepare extract cash flow from operating activity 31 December 20X4 (show your working) (10
marks)
b. Prepare cash flow from investing 31 December 20X4 (show your working) (5 marks)
c. Prepare cash flow from financing activity 31 December 20X4 (show your working) (5 marks)
Page 69 of 76
Question 3:
The following information has been extracted from the draft financial statements of Snowdrop, a limited
liability company.
SNOWDROP - statements of financial position as at 31 May
20X5 20X4
$'000 $'000 $'000 $'000
Non-current assets 4,598 2,700
Current assets
Inventory 580 500
Trade receivables 360 230
Bank 0 170
940 900
Total assets 5,538 3,600
Equity
Share premium 300 150
Retained earnings 1,050 470
4,850 2,990
10% Loan note (redeemable 31 May 20X5) 0 100
Current liabilities
Trade payables 450 365
Taxation 180 145
Bank overdraft 58 0
688 510
5,538 3,600
Additional information
(a) The statement of profit or loss for the year ended 31 May 20X5 shows the following.
$'000
Operating profit 1,040
Interest payable (10)
Profit before taxation 1,030
Taxation (180)
Profit for financial year 850
Page 70 of 76
(b) During the year dividends paid were $270,000.
(c) Profit before taxation had been arrived at after charging $700,000 for depreciation on non-current assets.
(d) During the year non-current assets with a net book value of $200,000 were sold for $180,000.
(e) During the year, an asset with carrying amount of $25,000 has impaired by $2,000.
Required:
marks)
Page 71 of 76
Question 4:
Geofost is preparing its statement of cash flows for the year ended 31 October 20X7. You have been presented
with the following information.
GEOFOST - statement of profit or loss for the year ended 31 October 20x7
$'000
Profit from operations 15,730
Finance cost (730)
Profit before tax 15,000
Taxation (4,350)
Profit for the year 10,650
Statements of financial position as at 31 October
20X7 20X6
$'000 $'000 $'000 $'000 $'000
Non-current assets 44,282 26,574
Current assets
Inventory 3,560 9,635
Trade receivables 6,405 4,542
Cash 559 1,063
10,524 15,240
Total assets 54,806 41,814
Equity
Share premium account 3,365 2,496
Retained earnings 15,629 6,465
34,994 23,961
9% loan notes 8,000 10,300
Current liabilities
Bank overdraft 1,230 429
Trade payables 7,442 4,264
Interest payable 120 100
Taxation 3,020 2,760
11,812 7,553
Total equity and liabilities 54,806 41,814
Additional information
(a) During the year dividends paid were $1,486,000.
Page 72 of 76
(b) Summary schedule of changes to non-current assets during 20X7.
Carrying
Cost Accumulated depreciation
value
$'000 $'000 $'000

Balance b/f 33,218 6,644 26,574
Additions 24,340 24,340
Disposals (2,964) (990) (1,974)
Depreciation 4,658 (4,658)
Balance c/f 54,594 10,312 44,282
(c) The total proceeds from the disposal of non-current assets were $2,694,000.
Required:
marks)
Page 73 of 76
CHAPTER 10: CONCEPTUAL FRAMEWORK
LEARNING OBJECTIVE
1. The need for a conceptual framework and the characteristics of useful information
a) A conceptual framework for financial reporting.
b) Relevance and faithful representation and describe the qualities that enhance these characteristics.
c) Understandability and verifiability in relation to the provision of financial information.
d) The importance of comparability and timeliness to users of financial statements.
e) The principle of comparability in accounting for changes in accounting policies.
2. Recognition and measurement
a) Define what is meant by ‘recognition’ in financial statements and discuss the recognition criteria.
b) Apply the recognition criteria to:
i) assets and liabilities.
ii) income and expenses.
c) Explain and compute amounts using the following measures :
i) historical cost
ii) current cost
iii) value in use
iv) fair value
d) Discuss the advantages and disadvantages of historical cost accounting.
e) Discuss whether the use of current value accounting overcomes the problems of historical cost
accounting.
3. Regulatory framework
a) Explain why a regulatory framework is needed including the advantages and disadvantages of IFRS
over a national regulatory framework.
b) Explain why accounting standards on their own are not a complete regulatory framework.
c) Explain the relationship of national standard setters to the IASB in respect of the standard setting
process.
Page 74 of 76
Question 1:
Define asset in accordance to the Conceptual Framework? (2 marks)
Question 2:
List criterias for recognition of asset in accordance to the Conceptual Framework (4 marks)
Question 3:
Define liability in accordance to the Conceptual Framework? (2 marks)
Question 4:
Define income in accordance to the Conceptual Framework? (2 marks)
Question 5:
Define expense in accordance to the Conceptual Framework? (2 marks)
Question 6:
Explain “going concern” assumption in preparing financial statements in accordance to the
Conceptual Framework? (2 marks)
Question 7:
Describe what is meant by a conceptual framework for financial reporting.
Question 8:
Discuss what is meant by relevance and faithful representation and describe the qualities that
enhance these characteristics.
Question 9:
Discuss what is meant by understandability and verifiability in relation to the provision of financial
information.
Question 10:
Discuss the importance of comparability and timeliness to users of financial statements.
Question 11:
Explain meaning and illustrate how these concept applied in relevant accounting standards:
Page 75 of 76
• i, historical cost
• ii) current cost
• iii) value in use
• iv) fair value
Question 12:
Discuss the advantages and disadvantages of historical cost accounting.
Question 13:
Explain why a regulatory framework is needed including the advantages and disadvantages of IFRS
over a national regulatory framework.
-------------------------- THE END ____________________
Page 76 of 76

3, Fa1 Question Book 2021 (Gen 5) - G I Cho Sinh Viên

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3, Fa1 Question Book 2021 (Gen 5) - G I Cho Sinh Viên

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2021 - 2022

Ngo Nhu Vinh PhD, FCCA, CPA, SIRM

Question 1: What is inventory in accordance to IAS 02? (2 marks)

Question 2: List and explain 5 types inventory of an:

Question 3: List and explain method of valuation closing inventory?

Question 4: Explain how to determine net realizable value?

Question 7: Explain why LIFO is not permitted in accordance to IAS 02?

Depreciation of factory plant

Finished goods storage costs

Factory supervisors' wages

1 January 20X1 Opening inventory: nil

1 February 20X1 Buys 10 units at $300 per unit

11 February 20X1 Buys 12 units at $250 per unit

1 April 20X1 Sells 8 units at $400 per unit

1 August 20X1 Buys 6 units at $200 per unit

1 December 20X1 Sells 12 units at $400 per unit

Basic Super Luxury

$ per unit $ per unit $ per unit

Estimated selling price 9 12 15

Selling and distribution 1 4 5

units units units

Units of inventory 200 250 150

Product Quantity Cost Selling price Selling cost

A 1,000 $40 $55 $8

B 2,500 $15 $25 $4

C 800 $21 $23 $5

b) Recognise the difference between current and non-current assets.

Question 1: Give definition of PPE in accordance to IAS 16?

Question 2: List recognition criteria of PPE in accordance to IAS 16?

Question 3: List and explain following depreciation method:

Question 4: Explain following term:

Question 5: Explain circumstances of derecognition of PPE in accordance to IAS 16?

PLANT AND MACHINERY – COST

1 Jul Balance 240,000 30 Sep Transfer disposal account 60,000

1 Jan Cash – purchase of plant 160,000 30 Jun Balance 340,000

Manufacturer's base price 1,050,000

Trade discount (applying to base price only) 20%

Freight charges 30,000

Electrical installation cost 28,000

Staff training in use of machine 40,000

Pre-production testing 22,000

Purchase of a three-year maintenance contract 60,000

o Recognise the difference between tangible and intangible non-current assets.

Question 1: Give definition of intangible asset in accordance to IAS 38?

Question 10: Control criteria

Research expenditure 103

Development costs on Project 910 which continues to satisfy the

1, Definition and recognition of investment property

Question 1: Give definition of investment property in accordance to IAS 40?

Question 5: How to record below items in financial statement?

a) Define, calculate and account for an impairment loss.

Question 2: Explain how to determine the recoverable amount of an asset?

Question 5: List 3 internal indicators that indicate impairment of asset (6 marks)

Question 6: Why do we need to test impairment of cash generating unit? (2 marks)

Carrying amount 850,000

Value in use 760,000

Fair value 850,000

Costs of disposal 30,000

Plant and equipment 300

Other current assets 130

Plant and equipment 200

Property, plant and equipment 200,000

Allocated goodwill 50,000