Mock Exam - Fr

8/19/2019 Mock Exam - Fr

1/31

MOCK EXAM – FINANCIAL REPORTING

Time: 3 Hours

Reading Time: ! Minu"es

Par" A #To"a$ %or &! mar's(

1) Marcus Ltd enters into a lease with Lee of an aircraft which had a fair

value of $300,000 at the inception of the lease. The terms of

the lease require Marcus to pay annual rentals of $0,000 in

arrears. !esidual "alue at the end of the contract is $#0,000. The

interest rate implicit in the lease is 10. The terms of the lease

indicate that Marcus has su%stantially all of the ris&s and rewards of

ownership.'n accordance with '( 1* Leases, what amount would %e added to

Marcus+s noncurrent assets in respect of the leased aircraft- The cumulative annuity factor for years at 10 3.*0/ The discount factor of the th year at 10 0.#0( $nil $300,0002 $1/,04 $#01,/

#) (lco Ltd enters into a 5nance lease with a term of ten years. The

details are as follows6 10 annual payments of $130,000 !esidual value of $#0,000 7uaranteed %y the lessee Maintenance costs to %e paid %y the lessee as they are incurred

8estimated to %e $,000 per annum)

The asset has a fair value of $1,/0,000 at the inception of the

lease.

9hat are the minimum payments as de5ned %y '( 1* Leases-

() $ 1,300,000) $ 1,00,0002) $1,30,0004) $1,/0,000

3) (le: Ltd entered into a $#0 million 5:ed price contract on 3 ;e%ruary

#0


2/31

Total contract costs in year 3 #

1.>stimated costs to completion 3 3

#.

9hat 57ure for attri%uta%le pro5t should %e reco7nised in the

5nancial statements for the year ended 31 4ecem%er #0


3/31

miles in e:chan7e for free travel. The fair value of each air mile is

estimated at $10.

4urin7 the year ended 31 4ecem%er #0


4/31

which of the followin7 Aournal entries would %e required to account for the

chan7e in the decommissionin7 lia%ility-

( 4r !evaluation surplus $1,000

2r 4ecommissionin7 lia%ility $1,000


2r 2ost of asset $1,000

2 4r Bro5t or loss $1,000


4 4r 2ost of asset $1,000


/) (n entity has a nuclear power plant and a related decommissionin7

lia%ility. The plant is reco7nised under the revaluation model. (t the end of

the reportin7 period the entity estimates that the net present value of the

decommissionin7 lia%ility has increased %y $#0,000 due to technolo7ical

chan7es. The 5nancial statements include a revaluation surplus of

$0,000 resultin7 from the revaluation of the plant in previous accountin7

periods. 'n accordance with ';!'2 1 Changes in Existing Decommissioning,

Restoration and Similar Liabilities which of the followin7 Aournal entrieswould %e required to account for the chan7e in the decommissionin7

lia%ility-

( 4r Bro5t or loss $0,000


4r 4ecommissionin7 lia%ility $#0,000

2r !evaluation surplus $#0,000

2 4r !evaluation surplus $#0,000

2r 4ecommissionin7 lia%ility $#0,000

4 4r 2ost of plant $1#,000

2r 4ecommissionin7 lia%ility $1#,000

) "elona has received claim of $1#0,000 from one of its customers for

defective cotton, which was sold in the year. The customer+s claim is valid

and "elona+s lawyers have advised that it is pro%a%le that the claim will %esuccessful.


5/31

"elona has insured itself a7ainst such ris& and the insurance company has

a7reed to reim%urse "elona $0,000 of the cost. Fow should these

transactions %e represented in the statement of 5nancial position and

pro5t and loss-

Statement of nancial position Prot or loss

( Get provision of $0,000 Get e:pense of $30,000

Get provision of $1#0,000 'ncome of $0,000

e:pense of $1#0,000

2 (sset of $0,000 provision of $1#0,000 Get e:pense of $30,000

4 (sset of $/0,000 provision of $100,000 'ncome of $/0,000

e:pense of $100,000

10)


6/31

'n accordance with the requirements of '( 3* Proisions, Contingent

Liabilities and Contingent !ssets, what is the total value of the

restructurin7 provision required to %e reco7nised %y 4 Ltd at the end

of the current reportin7 period-

( $00,000

$/0,000

2 $1,00,000

4 $1,10,000

1#) (2 Ltd has reco7nised a provision for the estimated cost of

decommissionin7 a nuclear power station. The power station has a totalestimated useful life of #0 years and started operatin7 5fteen years a7o.

The ori7inal cost of the power station was $#.0 million which included

decommissionin7 costs of $*0,000. The power station is measured at

cost.

(t the end of the current reportin7 period, mana7ement estimates that

the net present value of the decommissionin7 lia%ility has decreased %y

$0,000 due to improvements in the relevant technolo7y.

9hich one of the followin7 Aournal entries is required to account for thechan7e in decommissionin7 lia%ility for this 5nancial year in accordance

with the requirements of ';!'2 1 Changes in Existing Decommissioning,

Restoration and Similar Liabilities"

4e%it 2redit

$ $

( 4ecommissionin7 lia%ility 0,000

2ost of asset

0,000

4ecommissionin7 lia%ility *0,000

2ost of asset

*0,000

2 4ecommissionin7 lia%ility 1,000,000

!elease of decommissionin7 provision1,000,000


7/31

4 4ecommissionin7 lia%ility 0,000

2ost of asset

00,000

Bro5t and Loss0,000

13) LMG Ltd %e7an operatin7 on 1 @anuary #0


8/31


9/31

( 4! Bro5t or loss 0,000

2! ;inancial lia%ility

0,000

4! 'nventory 0,000


0,000

2 4! 'nventory 0,000


0,000

2! Bro5t or loss #0,000

4 4! ;inancial lia%ility 0,000

4! Bro5t or loss #0,000

2! 'nventory

0,000

1*) ?n 1 @anuary #0


10/31

4! 4eferred ta: lia%ility #,00

2! 'ncome ta: e:pense #,00

2 4! 4epreciation e:pense #,000

2! (ccumulated depreciation #,000

4! 4eferred ta: lia%ility *,00

2! usiness com%ination reserve

*,00

4 4! 4epreciation e:pense #,000

2! (ccumulated depreciation #,000

4! 4eferred ta: lia%ility *,00

2! 'ncome ta: e:pense *,00

1/) ?n 1 eptem%er #0


11/31

2 4! ales /0,000

4! 4eferred ta: asset 1,/00

2! 2ost of sales *,000

2! 'ncome ta: e:pense 1,/00

2! 'nventory

,000

4 4! 2ost of sales /0,000

4! 'ncome ta: e:pense 1,/00

2! ales

*,000

2! 4eferred ta: lia%ility 1,/00

2! 'nventory

,000

1) @ustin Ltd holds a 0 investment in an associate, Mar& Ltd. (t 1

(pril #0


12/31

'n accordance with '( #/ #nestments in !ssociates and $oint %entures

what amount would appear in the consolidated statement of pro5t or loss

as Cshare of pro5t or loss of associate+-

( $111,00

$1#0,000

2 $1#/,0

4 $*,000

#1) rad Ltd has a su%sidiary and also owns 0 of the equity shares in

9endy Ltd. 4urin7 the year ended 31 4ecem%er #0


13/31

##) ( %uildin7 owned %y (nna Ltd has %een reviewed for impairment. The

followin7 information is relevant6

• The carryin7 amount of the %uildin7 is $00,000J• The estimated fair value less disposal costs is $*0,000J

• The value in use is $/00,000J

• The %uildin7 has previously %een revalued upwards and the related

revaluation surplus is $*,000.

'n accordance with '( 1 Property, Plant and E&uipment and '( 3

#mpairment of !ssets, which one of the followin7 Aournal entries would %e

appropriate to reco7nise the impairment loss-

4e%it 2redit

$ $

( 'mpairment loss 10,000

(ccumulated depreciation and

(ccumulated impairment losses

10,000

'mpairment loss #00,000



#00,000

2 'mpairment loss #,000

!evaluation surplus *,000



100,000

4 'mpairment loss 100,000

!evaluation surplus 100,000



14/31


#00,000

#3) hireen Ltd has a #0 investment in an associate, Malini Ltd. 4urin7

the period ended 30 @une #0


15/31

2! 'nvestment in associate

,000

2 4! hare of pro5t or loss of associate #,000

4! 4eferred ta: 00

2! 'nvestment in associate

#,000

2! 'ncome ta: e:pense 00

4 4! 2ost of sales #,000

4! 4eferred ta: 00

2! 'nventory#,000

2! 'ncome ta: e:pense

00

I#

4onna Ltd prepares consolidated 5nancial statements. 4urin7 the 5nancial year

ended 30 @une #0


16/31

d. ?ther comprehensive income for the translation of the forei7n operation

would %e an e:chan7e diEerence net of ta: 7ain of $300.

I#)

!o%erto Ltd has completed its #0


17/31

%. $0 000.

c. $* 000.

d. $3 000.

I#/)

The followin7 information relates to the activities of Gaseem Ltd. 'ncome ta: may

%e i7nored.

2ash Dows from operatin7 activities $#0 000'ncrease in trade paya%les $33 000

4ecrease in inventory $1# 004ecrease in trade receiva%les $# 002ash proceeds from sale of plant 8%oo& value of $1# 000) $1 000'ncrease in allowance for dou%tful de%ts $# 000

9hat is the pro5t for the period-

a. $00.

%. $/ 100.

c. $100.

d. $1300.

I#)

2ampion Minin7 Ltd has a minin7 site with a related decommissionin7 lia%ility.

The minin7 site started its operations ten years a7o. The minin7 site has a useful

life of #0 years. The minin7 site was esta%lished at a cost of $30 million which

included decommissionin7 costs of $1000 000.

(s at the end of this 5nancial year, 2ampion Minin7 Ltd estimates that the net

present value of the decommissionin7 lia%ility relatin7 to esta%lishin7 the mine

has increased to $1.#million due to additional technolo7ical and le7al

requirements. This amount is in addition to the depreciation char7es incurred for

the minin7 site.

(ssumin7 that 2ampion Ltd values the cost of esta%lishin7 the mine usin7

the cost model, which one of the followin7 Aournal entries is required to account

for the additional decommissionin7 lia%ility for this 5nancial year-

a. 4r 2ost of asset $#00,000

2r decommissionin7 lia%ility $#00,000


18/31

%. 4r 'mpairment e:pense $#00 000

2r 4ecommissionin7 lia%ility $#00 000

c. 4r 4ecommissionin7 lia%ility $#00 000

2r 2ost of assets $#00 000

4 4r !evaluation surplus $100 000

2r 4ecommissionin7 lia%ility $100 000

I30)

Mustafa Minin7 Ltd has a minin7 site with a related decommissionin7 lia%ility. The

minin7 site started its operations 5fteen years a7o. The minin7 site has a useful

life of #0 years. The minin7 site was esta%lished at a cost of $#0 million which

included decommissionin7 costs of $# 000 000.

(s at the end of this 5nancial year, Mustafa Minin7 Ltd estimates that the net

present value of the decommissionin7 lia%ility relatin7 to esta%lishin7 the mine

has decreased to $1.#million due to additional technolo7ical and le7al

requirements. This amount is in addition to the depreciation char7es incurred for

the minin7 site.

(ssumin7 that Mustafa Ltd values the cost of esta%lishin7 the mine usin7

the cost model, which one of the followin7 Aournal entries is required to account

for the additional decommissionin7 lia%ility for this 5nancial year-

a. 4r 4ecommissionin7 lia%ility $/00,0002r 2ost of assets $00,0002r Bro5t and loss $300,000

%. 4r 2ost of (ssets $00,0002r Bro5t and loss $300,0002r 4ecommissionin7 lia%ility $/00,000

c. 4r 'mpairment loss $/00,0002r 2ost of assets $00,0002r Bro5t and loss $300,000

d. 4r Brovision for decom lia%ility $00,0002r Bro5t and loss $300,000

2r 4ecommissionin7 lia%ility $/00,000


19/31

I31. ;or the year ended 31 4ecem%er #0=0, ylvia Ltd reported rent income of

$#0 000 in its statement of pro5t or loss and other comprehensive income.

!entals are ta:a%le on a cash %asis. !ents received, reported as ta:a%le pro5t in

the year received, amounted to $00 000 for #0=0. (lso in #0=0, ylvia Ltd

incurred an unrealised 7ain of $0 000 from a forei7n currency transaction. The

7ain was not ta:a%le for ta: purposes in #0=0, %ut will %e ta:a%le when realisedin the future. ylvia Ltd+s eEective income ta: rate was 30 per cent. (ssumin7

that the reco7nition criteria are satis5ed, %y what amount would the %alance of

the deferred ta: asset increase for #0=0-

a. $,000

%. $1,000

c. $30,000

d. $* 00

I3#. ;or the year ended 30 @une #0


20/31

9hich of the followin7 Aournal entries should %e processed to record this

transaction-

a. 4r Ta: e:pense $13004r 4T( $100

2r Ta: paya%le $1300

%. 4r 2urrent ta: e:pense $13002r Ta: paya%le $1300

c. 4r Ta: >:pense $10002r 4TL $1002r Ta: paya%le $1300

d. 4r 4T( $1004r 4T' $13002r Ta: paya%le $1000

I3. ?n 31 4ecem%er #0


21/31

T)e %o$$o*ing +ase no"e re$a"es "o ")e ne," "*o -ues"ions #-ues"ions 3!

"o 3.( indhu Ltd acquired *0 per cent interest in (runee Ltd on 1 @uly #0


22/31

%.)

4r !etained >arnin7s 8?N) 13#0

4r 4T( #0

4r 'T> #0

2r 'nv /00

2r. 2?P /00

c.)

4r !etained >arnin7s 8?N) 000

4r 4T( *#0

4r 'T> *#0

2r 'nv #00

2r. 2?P #00

d.)

4r !etained >arnin7s 8?N) 1300

4r 4T( 1

4r 'T> 1

2r 'nv 0

2r. 2?P 0

T)e %o$$o*ing +ase no"e re$a"es "o ")e ne," "*o -ues"ions #-ues"ions 3/"o 30( Kamal Ltd acquired 100 per cent interest in Manuel Ltd on 1 @uly #0


23/31

2r Blant $0,000

2r 'T> $1/,000

4r ?ther 'ncome $0,000

4r 4epreciation $,000

4r 4T( $1/,000

2r Blant $0,000

2r (cc.4epreciation $,000

2r 'T> $1/,000

2 4r ?ther 'ncome $0,000


4r 4T( $1/,000

2r Blant $0,000


2r 'T> $1/,000

4 4r ?ther 'ncome $0,000


4r 'T> $1/,000

2r Blant $0,000


2r 4T( $1/,000

(ssume a ta: rate of 30 per cent. 9hich of the followin7 proforma Aournal

entries would %e processed in the consolidation wor&sheet for the year ended 30

@une #0arnin7s8?penin7 alance) $3*,/00

4r 4T( $1,00

4r (cc.4epreciation $1#,000

4r 'T> $1,/00

2r Blant $0,000



24/31

4r ?ther 'ncome $3*,/00

4r 4T( $1,00


4r 'T> $1,/00

2r Blant $0,000


2 4r Blant $3*,/00

4r 4T( $1,00


4r 'T> $1,/00

2r !etained >arnin7s8?penin7 alance) $0,000


4 4r Blant $3*,/00

4r 'T> $1,00


4r 4T( $1,/00

2r !etained >arnin7s8?penin7 alance) $0,000


T)e %o$$o*ing +ase no"e re$a"es "o ")e ne," "*o -ues"ions #-ues"ions 31

"o &2( Lily Ltd acquired 100 per cent interest in >mine Ltd on 1 @uly #0mine Ltd was $10,000. oth companies depreciate theplant on a strai7ht line %asis over a period of years.

(ssume a ta: rate of 30 per cent. 9hich of the followin7 proforma Aournal

entries would %e processed in the consolidation wor&sheet for the year ended 30

@une #0


25/31

2r 4TL $10,00



4r 'ncome Ta: >:pense $10,00


2r Blant $0,000

2r 4TL $10,00


2 4r Blant $0,000

4r 'ncome Ta: >:pense $10,00



2r 4TL $10,00


4 4r Blant $0,000

4r 4TL $10,00



2r 'ncome Ta: e:pense $10,00


(ssume a ta: rate of 30 per cent. 9hich of the followin7 proforma Aournalentries would %e processed in the consolidation wor&sheet for the year ended 30

@une #0arnin7s 8?penin7 alance) $0,000

4r 4epreciation $10,000

2r Blant $#,00

2r 4TL $*,00

Q 2r 'ncome Ta: >:pense $3,000


26/31

2r (cc.4epreciation $1,000

4r Blant $0,000


2r !etained >arnin7s 8?penin7 alance) $#,00

2r 4TL $*,00



2 4r Blant $0,000



2r 'ncome Ta: e:pense $*,00

Q 2r 4TL $3,000


4 4r Blant $0,000



2r 4TL $*,00



&

9hich of the followin7 is true in relation to the %alance sheet lia%ility method of

accountin7 for 'ncome Ta:es6

a) The focus of attention is on the ta: consequences of temporary diEerencesJ%) The principle issue is how to account for the current and future ta:

consequences of the future recovery or settlement of the carryin7 amount ofassets or lia%ilitiesJ

c) The ta: consequences of transactions of the current period reco7nised inpro5t and loss is also an important issueJ


27/31

d) (ll of the a%ove.

&4

9hich of the followin7 is not true6

a) 9here the carryin7 amount of an asset e:ceeds the ta: %ase of an asset, a4TL is disclosed in the tatement of ;inancial BositionJ

%) 9here the carryin7 amount of a lia%ility is less than the ta: %ase for a lia%ilitya 4T( is disclosed in the tatement of ;inancial BositionJ

c) 9here the carryin7 amount of an asset is less than the ta: %ase of an asset a4T( is disclosed in the tatement of ;inancial BositionJ

d) 9here the carryin7 amount is the same amount as the ta: %ase for an assetor lia%ility, no 4T( or 4TL is disclosed in the tatement of ;inancial Bosition.

&3

The ta: %ase of a deprecia%le asset is the amount that will %e deducti%le for ta:

purposes a7ainst any ta:a%le %ene5ts received when the entity recovers the

carryin7 amount of an asset. 9hich of the followin7 statements is false6

a) !ecovery of the carryin7 amount can %e via use or sale which may havediEerent recovera%le amountsJ

%) The ta: %ase for an asset may diEer where the recovery methods deployedhave diEerent ta: treatmentsJ

c) (ny ta: depreciation recouped on sale of the asset is not ta:a%leJd) 'f the asset is recovered in use, there is no question of a capital 7ain arisin7.

&&

9hen reversin7 impairment loss, which of the followin7 is false6

a) 9ith the e:ception of impairment of 7oodwill, '(3 does not re7ardimpairment losses as permanent writedownsJ

%) (n indication of an impairment loss has reversed is occurs when the mar&etvalue for the assets has increased si7ni5cantly durin7 the periodJ

c) (ny asset can only %e written up to the lower of its recovera%le amount asestimated now and the carryin7 amount if the ori7inal impairment was notreco7nisedJ

d) The revaluation Aournal will %e to pro5t and loss if the impairment was topro5t and loss and as a revaluation amount for an asset previously valued ata revalued amount li&e fair value.

&!

"alue in use is de5ned at the present value of future cash Dows e:pected to %e

derived from an asset or 2P. 9hich of the followin7 is incorrect6


28/31

a) 'n calculatin7 value in use, you need to estimate the cash inDows andoutDows from the asset or 2P+s use, includin7 its ultimate disposalJ

%) ;uture cash Dows are discounted to present value %y usin7 an appropriatediscount rate that reDects the ris&iness of the cash DowsJ

c) >ach parameter and factor utilised in calculatin7 value in use may chan7eover time and %e inDuenced %y the economic environmentJ

d) 9hen the ris&s and uncertainties associated with cash Dows is factored into

the cash Dows and not the discount rate, this is &nown as the traditional

approach in '(3 (ppendi: (

Par" 5 #To"a$ o% 42 mar's(

#2 Mar's(

Par" A 6 4 Mar's

4iane Ltd purchased an asset on 1N1N#0


29/31

the revaluation surplus to retained earnin7s on the disposal of property, plant

and equipment.

c )Brepare the ta: Aournal entry to account for the sale of the asset. '7nore

the eEect of depreciation for the period.

Par" C # !Mar's(

Kathleen Ltd has the followin7 accountin7 pro5t 8loss) %efore ta:6• 31 4ecem%er #0


30/31

Pre8are +onso$ida"ion *or's)ee" en"ries #in+$uding "a, ee+"

en"ries( %or ")e ;nan+ia$ 9ears ending 32 s 8oin" o% ?ie*@

4#Par" 5( – 4 Mar's

2hristina Ltd issues 1000 converti%le notes on 1 @an #0


31/31

3 +(

sin7 the same facts as for I3, e:cept now assume that on 31 4ecem%er #0=0,

Mu7u Limited revalues the asset to $1# 000.Pro?ide ")e ourna$ en"r9#ies( "o +om8$9 *i") ")e re-uiremen"s o% IFRIC

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