TABLE OF CONTENT

CHAPTER 1 CONCEPTUAL FRAMEWORK ......................................................................................... 2

CHAPTER 2: IAS 02 INVENTORY ........................................................................................................ 2
CHAPTER 3: IAS 16 PROPERTY PLAN AND EQUIPMENT ............................................................... 8
CHAPTER 4: IAS 38 INTANGIBLE ASSET ......................................................................................... 15
CHAPER 5: IAS 40 INVESTMENT PROPERTIES ................................................................................ 17
CHAPTER 6: IAS 36 IMPAIRMENT OF ASSET .................................................................................. 19
CHAPTER 7: IFRS 15 REVENUE ........................................................................................................ 23
CHAPTER 8: IAS 10 EVENT AFTER REPORTING PERIOD ................................................................ 26
CHAPTER 9: PRESENTATION FINANCIAL STATEMENT .................................................................. 28
CHAPTER 10: IAS 07 STATEMENT OF CASH FLOW ........................................................................ 31

Page 1 of 32
CHAPTER 1 CONCEPTUAL FRAMEWORK
1. Define asset in accordance to the Conceptual Framework? (2 marks)
2. List criterias for recognition of asset in accordance to the Conceptual Framework (5
marks)
3. Define liabilty in accordance to the Conceptual Framework? (2 marks)
4. Define income in accordance to the Conceptual Framework? (2 marks)
5. Define expense in accordance to the Conceptual Framework? (3 marks)
6. Explain “going concern” assumption in preparing financial statements in accordance to
the Conceptual Framework? (2 marks)
7. List four fundamental qualitative characteristics of financial information in accordance
to the Conceptual Framework. (5 marks)
8. List four enhancing qualitative characteristics of financial information in accordance to
the Conceptual Framework. (4 marks)

CHAPTER 2: IAS 02 INVENTORY

Question 1
Mobistart restores and sell vintage motorcycles. At 30.11.2006, the entity has 3 motyrcycles in
inventory:
MODEL DETAILS
triumph this item cost $5,800, and at 30 novermber 2006 tony had also spent
$700 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 $450 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:
For each of the three motorcycle, calculate following values at 30 November 2006:
- Cost (3 marks)
- Net realizable value (3 marks)
- Inventory value (2 marks)

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Question 3
A company values its inventory using the weighted average (period) 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:
1 July 20X2 Purchased 500 engines at $220 each
1 November 20X2 Sold 400 engines for $160,000
1 February 20X3 Purchased 300 engines at $230 each
15 April 20X3 Sold 250 engines for $125,000
At year end, the inventory of the entity has impaired. All closing inventory has expected selling
price of $120 with expected cost to sell $20.
Required:
a. Determine value of the company's closing inventory of engines at 30 April 20X3? (4
marks)
b. Determine cost of sale and gross profit of the entity for the year ended 30.4.20X3 (4
marks)
c. Prepare extract financial statement of the entity related to items above. (2 marks)

Question 3:
The information below relates to inventory item Z.
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:
Under AVCO (periodic), Determine value of inventory held for item Z at the end of March
31? (2 marks)

Question 4:
A company values its inventory using the weighted average period method.
A firm has the following transactions with its product R.
1 January 20X1 Opening inventory: nil

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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:
a. Determine value of the company's closing inventory of engines at 30 April 20X3? (2
marks)
b. Determine cost of sale and gross profit of the entity for the year ended 30.4.20X3 (4
marks)
c. Prepare extract financial statement of the entity related to items above. (4 marks)

Question 5:
The inventory value for the financial statements of Global Co for the year ended 30 June 20X3
was based on a inventory count on 7 July 20X3, which gave a total inventory value of
$950,000.
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 Global Co to supplier 1,500
Required: Determine value of inventories in financial statement at 30 June 20X3, show your
working. (6 marks)

Question 6:
A company with an accounting date of 31 October carried out a physical check of inventory on
4 November 20X3, leading to an inventory value at cost at this date of $483,700.
Between 1 November 20X3 and 4 November 20X3 the following transactions took place:
1 Goods costing $38,400 were received from suppliers.
2 Goods were sold for $20,000 with mark up 20%

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3 A customer returned, in good condition, some goods which had been sold to him in
October for $600 with margin 25%
4 The company returned goods that had cost $1,800 in October to the supplier, and received
a credit note for them.
5 Sale of goods (mark up on cost at 15%) $14,950
6 Good returned to supplier $1,800
Required:
Determine value of inventories in financial statement at 31 October 20X3, show your
working. (10 marks)

Question 7:
The financial year of Mitex Co ended on 31 December 20X1. An inventory count on January 4
20X2 gave a total inventory value of $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 inventories in financial statement at 31 December 20X1, show your
working. (6 marks)

Question 8: Explain how to determine net realized value? ( 2 marks)

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 10% of the proceeds.

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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:
a. Determine the inventory value be according to IAS 2 Inventories after considering
the above items for the financial statement ended 31.1.20X3? (8 marks)
b. If the entity recorded closing inventory at cost, what is the effect on financial
statement? What is the adjustment entry for that misstatement? (5 marks)

Question 10:
The closing inventory of X amounted to $116,400 excluding the following two inventory lines:
400 items which had cost $4.5 each. All were sold after the reporting period for $5 each, with
selling expenses of 20% of sale price.
250 different items which had cost $35 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 $12 per unit, after which they were sold for 80% normall selling price of $45 per
unit each, with selling expenses totalling $300.
Required:
a. Determine the inventory value be according to IAS 2 Inventories after considering
the above items for the financial statement? (5 marks)
b. If the entity recorded closing inventory at cost, what is the effect on financial
statement? What is the adjustment entry for that misstatement? (5 marks)

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:
a. Determine the inventory value be according to IAS 2 Inventories after considering
the above items for the financial statement? (5 marks)
b. If the entity recorded closing inventory at cost, what is the effect on financial
statement? What is the adjustment entry for that misstatement? (5 marks)

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Question 14:
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 (5 marks)

Question 15:
200 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:
At what amount should total inventory be stated in the statement of financial position? (4
marks)

Question 16:
201 In which of the following situations is the net realisable value of an item of inventory
likely to be lower than cost? Explain reason
A The production cost of the item has been falling.
B The selling price of the item has been rising.
C The item is becoming obsolete.
D Demand for the item is increasing.

Question 18:
207 In preparing financial statements for the year ended 31 March 20X6, the inventory count
was carried out on 4 April 20X6. The value of inventory counted was $36 million. Between 31
March and 4 April goods with a cost of $2.7 million were received into inventory and sales of
$7.8 million were made at a mark-up on cost of 35%.

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Required: At what amount should inventory be stated in the statement of financial position
as at 31 March 20X6 (show working)? (5 marks)
Question 19:
208 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 10% commission on the sales price of the product.
At what amount should inventory of product W32 be recognised in the financial statements
of Tentacle as at 31 March 20X7 (show working)? (5 marks)

CHAPTER 3: IAS 16 PROPERTY PLAN AND EQUIPMENT

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

30 Sep Transfer disposal

1 Jul Balance 240,000 account 60,000

20X4 20X4

Cash – purchase of
1 Jan 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 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)

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Question 2:
Evans Co purchased a machine with an estimated useful life of 10 years for $76,000 on 1 May
20X5. The machine had a residual value of $10,000.
Required:
a. Determine depreciation charged for the year ended 30 September 20X8? (3 marks)
b. What are the ledger entries to record the depreciation charge for the machine in the
year ended 30 September 20X8? (2 marks)

Question 3:
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 $8,000. On 1 October 20X8, Senakuta
revised the scrap value to $4,000 due to the decreased value of scrap metal.
Required:
a. Determine depreciation charged for the year ended 30 September 20X8? (2 marks)
b. Determine depreciation charged for the year ended 30 September 20X9? (4 marks)
c. Determine carrying amount of the machine at 30.9.20X9? (2 marks)
Question 4:
B acquired a lorry on 1 May 20X0 at a cost of $45,000. 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.
Required:
a. Determine depreciation charged for the year ended 30 September 20X0? (2 marks)
b. Determine carrying amount of the machine at 30 September 20X0? (2 marks)
Question 5:
Gamma purchases a motor vehicle on 1 December 20X0 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.
Required:
What are the ledger entries to record the purchase of the vehicle at 30 September 20X1
and what is the depreciation charge for the year ended 30 November 20X1? (4 marks)

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Question 6;
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 1.1.20X3 it was decided to
change the method to straight line.
Required:
a. Determine depreciation charged for the year ended 31.12.20X1? (2 marks)
b. Determine depreciation charged for the year ended 31.12.20X3? (4 marks)
c. Determine carrying amount of the machine at 31.12.20X3? (2 marks)
Question 7:
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.X3 Baxter Co revised the
remaining estimated useful life to 8 years.
Required:
a. Determine depreciation charged for the year ended 31.12.20X1? (2 marks)
b. Determine depreciation charged for the year ended 31.12.20X3? (3 marks)
c. Determine carrying amount of the machine at 31.12.20X3? (2 marks)
Question 8:
Senakuta Co purchased a machine with an estimated useful life of 5 years for $84,000 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 $4,000 due to the decreased value of scrap metal.
Required:
a. Determine depreciation charged for the year ended 30 September 20X8? (2 marks)
b. Determine depreciation charged for the year ended 30 September 20X9? (4 marks)
c. Determine carrying amount of the machine at 30 September 20X9? (2 marks)
Question 11:
Alpha sells machine B for cash on 30 April 20X4 and has loss on disposal of the machine was
$10,000. Machine B cost $130,000 when it was purchased and has a carrying amount of
$65,000 at the date of disposal.
Required: What are the journal entries to record the disposal of machine B? (5 marks)
Question 12:
A non-current asset (cost $15,000, depreciation $10,000) is given in part exchange for a new
asset costing $20,500. The agreed trade-in value was $5,500.

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Required: What are the journal entries to record the transaction? (5 marks)
Question 13:
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 $6,000. The depreciation charge for the year was $25,000.
Required:
a. Determine the carrying amount of non-current assets at 31 July 20X1? (5 marks)
b. What are the journal entry to record above transactions? (2 marks)
c. Prepare extract financial statement for the year ended 31.7.20X1? (3 marks)
Question 14:
The purchase of computer stationary of 25,000 was debited to the computer equipment at
cost account. The computer equipment of the entity has depreciation 25% per annum on
straight line method and full year depreciation on the year of purchase and disposal.
Required:
What is the impact on this error in financial statement of the entity (asset and profit)? (5
marks)
Question 15:
A business purchased a motor car on 1 July 20X3 for $25,000. It is to be depreciated at 25 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 $25,000 cost was correctly entered in the cash book but posted to the debit of the motor
vehicles repairs account.
Required:
a. What is the impact on this error in financial statement of the entity for the year
ended 30.6.20X4? (8 marks)
b. What are the journal entry to correct misstatement for the financial statement
ended 30.6.20X4? (2 marks)
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.

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Required:
c. What is the impact on this error in financial statement of the entity for financial
statement ended 31.12.20X2 and 31.12.20X3? (8 marks)
d. What are the journal entries to correct misstatement for the financial statement
ended 31.12.20X3? (2 marks)
Question 17:
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.
Required:
a. What is the impact on this error in financial statement of the entity? (4 marks)
b. What are the journal entries to correct misstatement for the financial statement
ended 31 March 20X0? (4 marks)
Question 18:
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.
Required:
Explain with journal entry how to account for transaction above in accordance to IAS 16 for
the year ended 31.12.20X0? (10 marks)
Question 19:
At 31 December 20X3 Q, a limited liability company, owned a building that had cost $800,000
on 1 January 20W4.
It was being depreciated at 2% per year.
On 1 January 20X4 a revaluation to $1,000,000 was recognised. At this date the building had a
remaining useful life of 40 years.
Required:
Explain with journal entry how to account for transaction above in accordance to IAS 16
for the year ended 31 December 20X4 (10 marks)

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Question 20:
Gusna Co purchased a building on 31 December 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 20X6, 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.
Required:
a. What is the depreciation charge on the building for the year ended 31 December
20X7? (4 marks)
b. What is the journal entry to record the transfer of excess depreciation from the
revaluation surplus to retained earnings? (5 marks)
c. Prepare extract financial statement for the year ended 31.12.20X5 and 31.12.20X6
and 31.12.20X7 (5 marks)
Question 21:
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.
Required:
Explain with journal entry how to recored the building for the year ended 30 June 20Y9
in accordance to IAS 16? (10 marks)
Question 22
17 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

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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)

Question 23:
23 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.
Required:
Explain for the accounting recorded for the year ended 31 March 20X8 and prepare
extracted financial statement for the year ended 31 March 20X8? (8 marks)
Question 25:
32–36. (a) 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) 25%
Freight charges 35,000
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 20X7 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
Required:
a. Determine cost of the machine at 1.10.20X5? (5 marks)
b. Determine amount will be charged to profit or loss for the year ended 30.9.20X5? (5
marks)

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CHAPTER 4: IAS 38 INTANGIBLE ASSET
Question 2: What is the required accounting treatment for expenditure on research? (2
marks)
Question 3:
At 1.1.20X1 XY Co has development expenditure of $500,000. Its policy is to amortise
development expenditure at 4% per annum. Accumulated amortisation at 1.1.20X1 is
$20,000.
Required:
Explain with journal entry how to account the development cost above in accordance to
IAS 38 for the year ended 31.12.20X1? (5 marks)
Question 4
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)
d) If certain conditions are met, an entity may decide to capitalise development
expenditure. (2 marks)
e) Research expenditure, other than capital expenditure on research facilities, must
be written off as incurred. (2 marks)
f) Capitalised development expenditure must be amortised over a period not exceeding
5 years. (2 marks)
g) Capitalised development expenditure must be disclosed in the statement of
financial position under intangible non-current assets. (2 marks)
Question 7:
Theta Co purchased a patent on 31 December 20X3 for $250,000. Theta Co expects to use
the patent for ten years, after which it will be valueless.
Required:

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Explain with journal entry how to account the development cost above in accordance to
IAS 38 for the year ended 31 December 20X4? (5 marks)
Question 12
PF purchased a quota for carbon dioxide emissions for $18,000 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 4 years.
Required: Explain with journal entry how to account the development cost above in
accordance to IAS 38 for the year ended 30 April 20X9? (5 marks)
Question 13:
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 25% per annum using the straight
line method.
Required:
Required:
Explain with journal entry how to account the development cost above in accordance to
IAS 38 for the year ended 30 September 20X8 (15 marks)
Question 5
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 $45,000 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.
Required:
Explain, with journal entry, how to account for research and development costs for the
year ended 30 September 20X4 in accordance to IAS 38: Intangible asset? (10 marks)

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CHAPER 5: IAS 40 INVESTMENT PROPERTIES
Question 1: Additional question for investment property
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
Required:
Explain with journal entry how to account for transaction above for the year ended
31.12.20X3 (15 marks)
Question 3
26 Carter vacated an office building and let it out to a third party on 30 June 20X8. The
building had an original cost of $900,000 on 1 January 20X0 and was being depreciated over
50 years. It was judged to have a fair value on 30 June 20X8 of $950,000. At the year end date
of 31 December 20X8 the fair value of the building was estimated at $1.2 million.
Carter uses the fair value model for investment property.
Required:
a. Explain, with journal, how to treatment with the property for the financial
statement ended 31 December 20X8? (10 marks)
b. Prepare extract financial statement of the entity for the year ended 31 December
20X8? (5 marks)

Question 4:
The draft financial statements of Plethora plc for the year to 31 December 20X9 are being
prepared and the accountant has requested your advice on dealing with the following issues.
(i) Plethora plc has an administration building which it no longer needs. On 1 July 20X9
Plethora plc entered into an agreement to lease the building out to another company. The
building cost $600,000 on 1 January 20X0 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.
(ii) Plethora plc owns another building which has been leased out for a number of years. It
had a fair value of $550,000 at 31 December 20X8 and $740,000 at 31 December 20X9.
Required:

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a. Explain, with journal, how to treatment with the property for the financial
statement ended 31 December 20X9? (10 marks)
b. Prepare extract financial statement of the entity for the year ended 31 December
20X9? (statement of profit or loss and statement of financial position) (15 mark)

Question 3
Speculate owns the following properties at 1 April 2012:
Property A: An office building used by Speculate for administrative purposes with a
depreciated historical cost of $2 million. At 1 April 2012 it had a remaining life of 20 years.
After a reorganisation on 1 October 2012, the property was let 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 sub-let to a subsidiary of Speculate. 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:
Advise, with journal entry, how the above transactions should be correctly dealt with in
its financial statements with reference to relevant International Financial Reporting
Standards for the year ended 31.3.2013. (15 marks)
Question 4:
Zippy holds properties for investment purposes. At 1 July 2015, Zippy held a 10-floor office
block at a fair value of $90 million with a remaining useful life of 15 years. The first floor was
occupied by Zippy’s staff and the second floor was let to Boo free of charge. The other eight
floors were all let to unconnected third parties at a normal commercial rent. It was estimated
that the fair value of the office block was $96 million at 30 June 2016. Zippy has a policy of
restating all land and buildings to fair value at each reporting date. The only accounting
entries for the year ended 30 June 2016 in relation to this office block have been to correctly
include the rental income in profit or loss. It can be assumed that each floor is of equal size
and value. Depreciation is charged to administrative costs.
Required:
a. Advise how the above transactions should be correctly dealt with in its financial
statements with reference to relevant International Financial Reporting Standards.
(15 marks)
b. Prepare extract financial statement for the year ended 30 June 2016. (5 marks)

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CHAPTER 6: IAS 36 IMPAIRMENT OF ASSET
Question 1
If an impairment review is carried out, how to measure a potentially impaired asset? (5
marks)
Question 2
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 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
Plant and equipment 300
Inventory 70
Other current assets 130
Goodwill 40
An impairment review has been carried out as at 31 December 20X9 and the recoverable
amount of the cash generating unit is estimated at $1.3m.
Required:
a. Explain, with journal entry, how to account for above transations for the year ended
31 December 20X9 in accordance to IAS 36: Impairment of asset? (10 marks)
b. Prepare extract financial statement for the year ended 30 September 20X4? (5
marks) (5 marks)
Question 4:
36 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

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Required:
a. Explain, with journal entry, how to account for above transations for the year ended
ended 30 September 20X7 in accordance to IAS 36: Impairment of asset? (10 marks)
b. Prepare extract financial statement for the year ended 30 September 20X4? (4
marks) (5 marks)
Question 6
62 A cash-generating unit comprises the following assets:
$'000
Building 700
Plant and equipment 200
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:
a. Explain, with journal entry, how to account for above transactions in accordance
to IAS 36: Impairment of asset? (10 marks) (10 marks)
b. Prepare extract financial statement for the year ended 30 September 20X4? (4
marks) (5 marks)
Question 7
Explain how to determine the recoverable amount of an asset?
Question 8
64 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:
c. Explain, with journal entry, how to account for above transations for the year ended
ended 31 March 20X9 in accordance to IAS 36: Impairment of asset? (10 marks) (10
marks)
d. Prepare extract financial statement for the year ended 30 September 20X4? (4
marks)
Question 10

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66 The following information relates to an item of plant.
(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 transations in accordance to IAS 36:
Impairment of asset? (10 marks)

Question 11
67 A business which comprises a single cash-generating unit has the following assets.
$'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 transactions in accordance to IAS 36:
Impairment of asset? (10 marks)
Question 11
Riley acquired a non-current asset on 1 October 20W9 (ie ten years before 20X9) at a cost of
$100,000 which had a useful life of ten years and a nil residual value. The asset had been
correctly depreciated up to 30 September 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.

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Required:
a. Explain, with journal entry, how to account for above transations for the year ended
ended 30 September 20X4 in accordance to IAS 36: Impairment of asset? (10 marks)
(10 marks)
b. Prepare extract financial statement for the year ended 30 September 20X4? (4
marks) (5 marks)
Question 12
The net assets of Fyngle, a cash generating unit (CGU) 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:
a. Explain, with journal entry, how to account for above transations in accordance to
IAS 36: Impairment of asset? (10 marks) (10 marks)
b. If the value in use of the product patent is $19,500. Explain, with journal entry, how
to account for above transations in accordance to IAS 36: Impairment of asset? (5
marks)

Question 14:
Systria is preparing its financial statements for the year ended 31 December 20X7 and has a
number of issues to deal with regarding non-current assets.
(i) Systria has suffered an impairment loss of $90,000 to one of its cash generating units. The
carrying amounts of the assets in the cash-generating unit prior to adjusting for impairment
are:
$'000
Goodwill 50
Patent 10
Land and buildings 100
Plant and machinery 50

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Net current assets 10
The patent is now estimated to have no value.
During the year to 31 December 20X7 Systria acquired Dominica for $10 million, its tangible
assets being valued at $7 million and goodwill on acquisition being $3 million. Assets with a
carrying amount of $2.5 million were subsequently destroyed. Systria has carried out an
impairment review and has established that Dominica could be sold for $6 million, while its
value in use is $5.5 million.
Required:
a) Explain, with journal entry, how to account for above transations in accordance to
IAS 36: Impairment of asset? (10 marks)
b) Prepare extract financial statement of the entity for the year ended 31 December
20X7

Question 14:
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:
Explain, with journal entry, how to account for above transations for the financial statement
ended 30.9.20X9 in accordance to IAS 36: Impairment of asset? (10 marks)

CHAPTER 7: IFRS 15 REVENUE

Question 2:
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.
Required: Explain, with journal entry, how to record the transaction above in accordance
to IFRS 15: Revenue from contract with customer for the first year (15 marks)
Question 2:
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.

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Required:
a. Explain, with journal entry, how to record the transaction above in accordance to
IFRS 15: Revenue from contract with customer for the first year (15 marks)
b. Prepare financial statement of the entity related the contract for 2 years. (5 marks)

Question 5:
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 only received $600,000.
Required: Explain, with journal entry, how to record transaction above in accordance with
IFRS 15 the year ended 31 December 20X5? (15 marks)
Question 4
79 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 148,000
Amounts invoiced 50,400
The contract is agreed to be 45% complete at 31 December 20X5.
Required:
Required: Explain, with journal entry, how to record transaction above in accordance with
IFRS 15 the year ended 31 December 20X5? (15 marks)

Question 6
81 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

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Estimated costs to complete 6
Amounts invoiced 4
Certified complete 40%
Required: Required: Explain, with journal entry, how to record transaction above in
accordance with IFRS 15 the year ended 31 December 20X5? (15 marks)
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 $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.
Required: Required: Explain, with journal entry, how to record transaction above in
accordance with IFRS 15 the year ended 30 September 20X4? (10 marks)
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.
Required: Explain with journal entry how to account transactions above in accordance to
IFRS 15 for the year ended 31 December 20X9? (Ignore the time value of money.) (10 marks)
Question 12
Newmarket's revenue as shown in its draft statement of profit or loss for the year ended 31
December 20X9 is $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.

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Required: Explain with journal entry how to account transactions above in accordance to
IFRS 15 for the year ended 31 December 20X9? (Ignore the time value of money.) (5 marks)

CHAPTER 8: IAS 10 EVENT AFTER REPORTING PERIOD

Question 1
1. A 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 statements
4. The insolvency of a customer with a debt owing at the end of the reporting period
which is still outstanding
5. The bankruptcy of a major customer, with a substantial debt outstanding at the end
of the reporting period
1. A fire destroying some of the company's inventory (the company's going concern
status is not affected)
2. An issue of shares to finance expansion
3. Sale for less than cost of some inventory held at the end of the reporting period
1. A customer who owed $180,000 at the end of the reporting period went bankrupt in July
20X4.
2. (6) The sale in August 20X4 for $400,000 of some inventory items valued in the
statement of financial position at $500,000.
3. (7) 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.
4. (8) The company issued 1,000,000 ordinary shares in August 20X4.
1. (9) 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. (10) 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.

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 3. (11) 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:
Explain how these transactions should be accounted in financial statement? (2 marks
per items)

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CHAPTER 9: PRESENTATION FINANCIAL STATEMENT
Question 1:
Fresco : Trial balance as at 31 March 20X2
$'000 $'000
Equity shares of 50 cents each 45,000
Share premium 5,000
Retained earnings at 1 April 20X1 5,100
Building (20 years) – at cost 48,000
Plant and equipment – at cost 47,500
Investment property - fair value at 1 April 20X1 10,000
Accumulated depreciation of building 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 1,400
Trade payables 27,300
Revenue 350,000
Cost of sales 280,800
Distribution costs 16,100
Administrative expenses 26,900
Bank interest 300
483,300 483,300
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. 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) Revenue includes an amount of $20 million for cash sales made through the entity's retail
outlets during the year on behalf of one customer. The entity, acting as agent, is entitled to a
commission of 10% of the selling price of these goods.
By 31 March 20X2, Xtol had paid to Francais $15 million (of the $20 million sales) and
recorded this amount in cost of sales.

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(iii) During the year the entity perform a construction contract with following information
Cost incurred to date $14 million
Value of invoices issued and received in cash (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 30
September 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, however, the
accountant has recorded the amount invoice to customer in revenue and cost incurred to
date to cost of sale.
(iv) Non-current assets:
To reflect a marked increase in building prices, Fresco decided to revalue its property on 1
April 20X1. The directors accepted the report of an independent surveyor who valued the
leased property at $36 million on that date. Fresco has not yet recorded the revaluation. The
remaining life of the building is ten years at the date of the revaluation. Fresco makes an
annual transfer to retained profits to reflect the realization of the revaluation surplus.
Plant and equipment is depreciated at 20% per annum using the reducing balance method.
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.
(v) The investment property has fair value at 31.3.20X2 was $12m.
(vi) The above figures do not include the estimated provision for income tax on the profit for
the year $3m.
(vii) At 31 March 20X3, an equipment has a carrying amount of $65,000. 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%.
(vii) At 31 March 20X3, a customer of business declare bankrupt, this client own the entity
$15,000. Bad debt expense accounted for administration expense.
(viii) Included in cost of closing inventory, there is 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 10% of the
proceeds.

Required Determine following information (with appropriate working):

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a. Revenue (5 marks)
b. Cost of sale (5 marks)
c. Tax expense (2 marks)
d. Administration expense
e. Change in fair value of investment property (2 marks)
f. Tax expense for the year (2 marks)
g. Plant and equipment (2 marks)
h. Receivable (2 marks)
i. Building
j. Plant and equipment (5 marks)
k. Revaluation surplus on SOCI
l. Revaluation surplus on SOFP
m. Inventory
n. Contract asset/liability

Page 30 of 32
CHAPTER 10: IAS 07 STATEMENT OF CASH FLOW
$'000
Sales revenue 2,553
Cost of sales (1,834)
Gross profit 719
Distribution costs (125)
Administrative expenses (264)
Change in fair value of investment property 8
Operating profit 338
Interest received 25
Interest expense (85)
Profit before tax 278
Income tax expense (240)
Profit for the year 38

Statement of financial position 20X2 20X1

$'000 $'000
Non-current assets
Tangible assets 360 305
Intangible assets 250 200
Investment property 38 0
Investments 0 25
648 530
Current assets
Inventories 150 102
Receivables 390 315
Short-term investments 20 0
Cash in hand 2 1
562 418
1,210 948
Equity and liabilities
Share capital ($1 ordinary shares) 200 150
Share premium account 160 150
Revaluation surplus 100 91
Retained earnings 138 100
598 491
Non-current liabilities
Long-term loan 100 –
Current liabilities
Trade payables 127 119

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 Bank overdraft 85 98
Interest payable 10 0
Taxation 290 240
612 457
1,210 948

The following information is available.

1. The proceeds of the sale of non-current asset investments amounted to $30,000.
2. 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.
3. The current asset investments fall within the definition of cash equivalents under IAS 7.
4. Depreciation of the asset during the year $90,000.
5. During the year, an asset has impaired and impairment cost has recorded in financial
statement. The asset has carrying amount of 300,000 and recoverable amount of
$280,000.

Required:
Prepare extract cash flow statement for following activity:
a. Cash flow from operating activity
b. Cash flow from investing activity
c. Cash flow from financing activity

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