EXCERCISES

CONCEPTUAL FRAMEWORK
1. How does the Conceptual Framework define an asset?
A. A present economic resource, which is a right that has the potential to economic
benefits, owned by an entity as a result of past events produce
B. A present economic resource over which an entity has legal rights. An economic
resource is a right that has the potential to produce economic benefits
C. A present economic resource controlled by an entity as a result of past events. An
economic resource is a right that has the potential to produce economic benefits
D. A present economic resource to which an entity has a future commitment as a
result of past events. An economic resource is a right that has the potential to
produce economic benefits

2. Which of the following would meet the definition of a liability?

A. Dexter's business manufactures a product under licence. In 12 months' time the
licence expires and Dexter will have to pay $50,000 for it to be renewed =>
optional
B. Reckless purchased an investment 9 months ago for $120,000. The market for
these investments has now fallen and Reckless's investment is valued at
$90,000 => Impairment
C. Carter has estimated the tax charge on its profits for the year just ended as
$165,000 Dr Tax expense/ Cr tax payable
D. Expansion is planning to invest in new machinery and has been quoted a price
of $570,000 => optional

3. Which of the following would correctly describe the net realisable value of a
two year old asset?
A. The original cost of the asset less two years' depreciation => Carrying amount
B. The amount that could be obtained from selling the asset, less any costs of
disposal
C. The cost of an equivalent new asset less two years' depreciation => Current cost
D. The present value of the future cash flows obtainable from continuing to use the
asset => Value in use

4. The Conceptual Framework identifies which of the following as an underlying

assumption in preparing financial statements.
A. Going concern
B. Materiality
C. Substance over form
D. Accruals

5. The Conceptual Framework identifies four enhancing qualitative characteristics of

financial Information: timeliness, comparabilty, understandablity , relevance and
faithful
6. Which ONE of the following is NOT an enhancing qualitative characteristic?
A. Verifiability
B. Timeliness
C. Consistency
D. Understandability
7. In accordance with the Conceptual Framework which of the following is/are true
in relation to the enhancing characteristic of comparability?
(1) Permitting alternative accounting treatments for the same economic
phenomenon enhances comparability
(2) Comparability requires uniformity
A. Both 1 and 2
B. Neither 1 nor 2
C. 1 only
D. 2 only
 IAS 02 INVENTORY
Question 1
Caminas has the following products in inventory at the year end.
NRV
(selling price –
selling cost) so
Product Quantity Cost Selling price Selling cost
sánh với Cost,
cái nào thấp
hơn thì lấy
A 1,000 $40 $55 $8 $47

B 2,500 $15 $25 $4 $21

C 800 $20 $23 $5 $18

At what amount should total inventory be stated in the statement of

financial position? = 1000 x 40 + 2500 x 15 + 800 x 18

Question 2
Which of the following statements about IAS 2 Inventories are correct?
a/Production overheads should be included in cost on the basis of a
company's actual level of activity in the period.
b/In arriving at the net realisable value of inventories, settlement discounts
must be deducted from the expected selling price.
c/In arriving at the cost of inventories, FIFO and weighted average cost
formulas are acceptable.
d/It is permitted to value finished goods inventories at materials plus labour
cost only, without adding production overheads.

IAS 16: PROPERTY PLANT AND EQUIPMENT

Question 1:
Foster has built a new factory incurring the following costs: $'000

Land 1,200
Materials 2,400
Labor 3,000
Architect's fees 25
Surveyor's fees 15
Site overheads 300
Apportioned administrative overheads 150
Testing of fire alarms 10
Advertising campaign for first year 12
7,112 – 12 –
150
What will be the total amount capitalized in respect of the factory?

Question 2
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.
What amount will be charged to profit or loss for the year ended 31
March 20X8 in respect of depreciation on this machine?
Depreciation charged of the machine=(500000-20000)/(10x12) x 9months= 36,000
Depreciation for the safety guard= 25000/ (5x12) x 3months = 1.250
=> P/L= 3,600 + 1,250 = 37,250

Question 3
 Auckland purchased a machine for $60,000 on 1 January 20X7 and assigned
it a useful life of 15 years. On 31 March 20X9 it was revalued to $64,000 with
no change in useful life.
What will be depreciation charge in relation to this machine in the
financial statements of Auckland for the year ending 31 December 20X9?
Deperciation charge from (1 Jan X9 – 31 Mar X9) = (60,000/15x12) x
3months=1,000
Remaining useful life = 15 x 12 – (2x12+3) = 153 months
Depreciation charge from (1 April X9 – 31 Dec X9) = (64,000/153) x
9months= 3,765
Total depreciation charge in financial statement = 1,000 + 3,765= 4,765

Question 4-6
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%
Early settlement discount taken (on the payable amount of
5%
the base cost only)
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 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.

Question 4
 What amount should be recognised under non-current assets as the cost
of the machine? = (1,050,000 x 80%) + 30,000 + 28,000 + 22,000

Question 5
How should the $200,000 worth of new components be accounted for?
a/Added to the carrying amount of the machine
b/Charged to profit or loss
c/Capitalised as a separate asset
d/Debited to accumulated depreciation
( 1 tài sản được hình thành bởi các bộ phận riêng lẻ nếu một bộ phận có chức
năng riêng ví dụ như động cơ máy bay thì sẽ được ghi nhận là separate asset)
Question 6
Every five years the machine will need a major overhaul (sửa chữa lớn) in
order to keep running. How should this be accounted for?
a/Set up a provision at year 1 (
b/Build up the provision over years 1–5
c/Capitalise the cost when it arises and amortise over five years
d/Write the overhaul off to maintenance costs

Questions 7 to 8
Advent is a publicly listed company. Details of Advent's non-current assets at
1 October 20X8 were:

Land and building Plant Total

$m $m $m
Cost/valuation 280 150 430
Accumulated (40) (105) (145)
depreciation/amortisation
Carrying amount 240 45 285
 The following information is relevant:
The land and building were revalued on 1 October 20X3 with $80 million
attributable to the land and $200 million to the building. At that date the
estimated remaining life of the building was 25 years. A further revaluation was
not needed until 1 October 20X8 when the land and building were valued at $85
million and $180 million respectively. The remaining estimated life of the
building at this date was 20 years.
Plant is depreciated at 20% per annum on cost with time apportionment
where appropriate. On 1 April 20X9 new plant costing $45 million was
acquired. In addition, this plant cost $5 million to install and commission. No
plant is more than four years old.
There were no disposals of non-current assets during the year to 30
September 20X9. 10 Oct X5 -- 30 Sep X9

Question 7
What is the carrying amount of the land and buildings at 30 September
20X9?
10 Oct X8: Land: $85,000=> No depre
Building: $180,000
Useful life: 20 years
=> Revaluated 1/10/X8= 180,000 +85,000 =265,000
Depreciation of the building = 180,000/20 x1= 9,000
=> CV = 265,000 – 9,000= 256,000

Question 8
What is the depreciation charge on the plant for the year ended 30
September 20X9?
Depreciation for existing plant = 150,000 x 20% = 30,000
Depreciation for new plant =((45,000 + 5,000) x 20%)/12 x6=5,000
=> Total depreciation for plant= 30,000 + 5,000= 35,000
IAS 38: INTANGIBLE ASSET
Question 1
Geek is developing a new product and expects to be able to capitalise the
costs. Which one of the following would preclude capitalisation of the costs?
a/Development of the product is not yet complete.
b/No patent has yet been registered in respect of the product.
c/No sales contracts have yet been signed in relation to the product.
d/It has not been possible to reliably allocate costs to development of the
product.

Question 2
A company had $20 million of capitalised development expenditure at cost
brought forward at 1 October 20X7 in respect of products currently in
production 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.
What amount will be charged to profit or loss for the year ended 30
September 20X8 in respect of research and development costs?

Question 3
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.
What should be the carrying amount of the brand in the statement of
financial position of Sandown as at 30 September 20X9?
Depreciation charge = 30,000/10 =3,000
Accumulated depreciation up to 1st April 20X9 = 3,000 x 3,5years = 10,500
=> CV on 1st April 20X9 = 30,000 – 10,500 = 19,500
Revaluation asset= Higher (12,000; 15,000) = 15,000
=> CA on 30th Sep = 15,000 – (15,000/3x12) x6) = 12,500
RA=higher between value in use with net sales (FV-Cost to sell)
Question 4
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.
What amount will Dempsey charge to profit or loss for development
costs, including any amortisation, for the year ended 30 September 20X4?
Development cost recorded as expense to P/L (1/1-1/3) = 40.000*2 = 80.000
4 months capitalized -> amortised (1/3-30/6) = (40.000*4)/5*(3/12) = 8.000

Development in P/L = 40,000 x 2= 80,000

Captialized development cost = 40,000 x 4= 160,000
=>Amortisation cost = 160,000/5x12 x3= 8,000
Total expense in P/L= 80,000 +8,000 = 88,000
IAS 40 INVESTMENT PROPERTY
Question 1
Which one of the following would be recognised as an investment
property under IAS 40 in the consolidated financial statements of Buildco?
a.A property intended for sale in the ordinary course of business => Inventory
b.A property being constructed for a customer =>WIT
c.A property held by Buildco as a right-of-use asset and leased out under a six-
month lease
d. A property owned by Buildco and leased out to a subsidiary =>
Question 2
Which one of the following is NOT TRUE concerning the treatment of
investment properties under IAS 40?
a.Following initial recognition, investment property can be held at either cost or
fair value.
b.If an investment property is held at fair value, this must be applied to all of the
entity's investment property.
c.An investment property is initially measured at cost, including transaction
costs.
d.A gain or loss arising from a change in the fair value of an investment
property should be recognised in other comprehensive income. => P/L

Question 3
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.
What amount will be shown in revaluation surplus (P/L?) at 31
December 20X8 in respect of this building?
 AD (1.1.X0 - 30.6.X8)= 900,000/50 x 8,5years= 153,000
=> Carrying amount on 30 Jun X8= 900,000 – 153,000= 747,000
=> Revaluation surplus= 950,000 – 747,000 = 203,000
Dr IP 950,000
Cr PPE 747,000
Cr Revaluation surplus 203,000
Questions 5.
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 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.
How will the increase in value from $550,000 to $740,000 be accounted for?
a. Credited to profit or loss
b. Credited to the revaluation surplus
c. Credited to retained earnings
d. Credited to an investment property reserve
IAS 23: BORROWING COST
Question 1
Capita had the following bank loans outstanding during the whole of 20X8:
$m
9% loan repayable 20X9 15
11% loan repayable 20Y2 24
Capita began construction of a qualifying asset on 1 April 20X8 and
withdrew funds of $6 million on that date to fund construction. On 1 August
20X8 an additional $2 million was withdrawn for the same purpose.
Calculate the borrowing costs which can be capitalised in respect of this
project for the year ended 31 December 20X8.
WAI = (9% x 15 + 11% x 24)/ (15+24) = 10.3%
=>Capitalized borrowing cost = $6m x 9/12 x10.3% + $2m x 10/12 x 3%
x5= 549,333

Question 2
Leclerc has borrowed $2.4 million to finance the building of a factory.
Construction is expected to take two years. The loan was drawn down and
incurred on 1 January 20X9 and work began on 1 March 20X9. $1 million of the
loan was not utilised until 1 July 20X9 so Leclerc was able to invest it until
needed. Leclerc is paying 8% on the loan and can invest surplus funds at 6%.
Calculate the borrowing costs to be capitalised for the year ended 31
December 20X9 in respect of this project.
Capitalized borrowing cost = ($2,4m x 8%)/12 x 10months - $1m x 6%/12 x
4months= 160,000 -20,000= 140,000

Question 3
A company has the following loans in place throughout the year ended 31
December 20X8.
 $m
10% bank loan 140
8% bank loan 200
On 1 July 20X8 $50 million was drawn down for construction of a qualifying
asset which was completed during 20X9.
What amount should be capitalised as borrowing costs at 31 December
20X8 in respect of this asset?
IAS 36 IMPAIRMENT OF ASSET
Information relevant to questions 1–5.
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.
Question 1
When an impairment review is carried out, a potentially impaired asset
is measured at what amount?
a. Fair value
b. Value in use
c. Recoverable amount
d. Carrying amount
 Question 2
What will be the carrying amount of the inventory after the impairment
loss has been accounted for?
Impairment
Prior to review of I After review of I
allocation
Building 900 825 75
Plant and equipment 300 275 25
Inventory 70 70
Other current assets 130 130
Goodwill 40 0 40
Carrying amount of CGU 1440 1300
Recoverable amount 1300

Question 3
What will be the carrying amount of the building after the impairment
loss has been accounted for?
Impairment
Prior to review of I After review of I
allocation
Building 900 825 75
Plant and equipment 300 275 25
Inventory 70 70
Other current assets 130 130
Goodwill 40 0 40
Carrying amount of CGU 1440 1300
Recoverable amount 1300
Question 4
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.
What will be the carrying amount of the building when the impairment
loss has been recognised? (to the nearest $'000)
RA (CGU) = 750.000
CA = 1.010.000
Imparment loss = CA – RA = 260.000
Remaining impairment loss = 260.000-40.000-90.000 = 130.000
 Make allocation (Theo tỷ lệ)
Building: 700.000
PE: 160.000
Building PE
700.000 160.000
Impaired (106.000) (24.000)
CA 594.000 136.000

Question 5
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%.
What is the impairment loss on the machine to be recognised in the
financial statements at 31 March 20X9?
IAS 37 PROVISION
Question 1
Candel is being sued by a customer for $2 million for breach of contract over
a cancelled order. Candel has obtained legal opinion that there is a 20% chance
that Candel will lose the case. Accordingly Candel has provided $400,000 ($2
million × 20%) in respect of the claim. The unrecoverable legal costs of
defending the action are estimated at $100,000. These have not been provided
for as the case will not go to court until next year.
What is the amount of the provision that should be made by Candel in
accordance with IAS 37 Provisions, contingent liabilities and contingent
assets?
Question 2
During the year Peterlee acquired an iron ore mine at a cost of $6 million. In
addition, when all the ore has been extracted (estimated ten years' time) the
company will face estimated costs for landscaping the area affected by the
mining that have a present value of $2 million. These costs would still have to
be incurred even if no further ore was extracted.
How should this $2 million future cost be recognised in the financial
statements?
a. Provision $2 million and $2 million capitalised as part of cost of mine
b. Provision $2 million and $2 million charged to operating costs
c. Accrual $200,000 per annum for next ten years
d. Should not be recognised as no cost has yet arisen
Question 3
Which one of the following would NOT be valid grounds for a
provision?
a. A company has a policy has a policy of cleaning up any environmental
contamination caused by its operations, but is not legally obliged to do so.
b. A company is leasing an office building for which it has no further use.
However, it is tied into the lease for another year.
 c. A company is closing down a division. The Board has prepared detailed
closure plans which have been communicated to customers and employees.
d. A company has acquired a machine which requires a major overhaul every
three years. The cost of the first overhaul is reliably estimated at $120,000.

Question 5
Which of the following statements are correct in accordance with IAS 37
Provisions, contingent liabilities and contingent assets?
a/Provisions should be made for both constructive and legal obligations.
b/Discounting may be used when estimating the amount of a provision.
c/A restructuring provision must include the estimated costs of retraining or
relocating continuing staff.
d/A restructuring provision may only be made when a company has a detailed
plan for the restructuring and has communicated to interested parties a firm
intention to carry it out.

Question 6
Tynan's year end is 30 September 20X4 and the following potential liabilities
have been identified.
Which TWO of the above should Tynan recognise as liabilities as at 30
September 20X4?
a. The signing of a non-cancellable contract in September 20X4 to supply
goods in the following year on which, due to a pricing error, a loss will be made
b. The cost of a reorganisation which was approved by the board in August
20X4 but has not yet been implemented, communicated to interested parties or
announced publicly
c. An amount of deferred tax relating to the gain on the revaluation of a
property during the current year. Tynan has no intention of selling the property
in the foreseeable future.
 d. The balance on the warranty provision which related to products for which
there are no outstanding claims and whose warranties had expired by 30
September 20X4

Question 7
On 1 October 20X3 Xplorer commenced drilling for oil from an undersea
oilfield. The extraction of oil causes damage to the seabed which has a
restorative cost (ignore discounting) of $10,000 per million barrels of oil
extracted. Xplorer extracted 250 million barrels in the year ended 30 September
20X4.
Xplorer is also required to dismantle the drilling equipment at the end of its
five year licence. This has an estimated cost of $30 million on 30 September
20X8. Xplorer's cost of capital is 8% per annum and $1 has a present value of 68
cents in five years' time.
What is the total provision (extraction plus dismantling) which Xplorer would
report in its statement of financial position as at 30 September 20X4 in respect
of its oil operations?

Question 8
Hopewell sells a line of goods under a six-month warranty. Any defect
arising during that period is repaired free of charge. Hopewell has calculated
that if all the goods sold in the last six months of the year required repairs the
cost would be $2 million. If all of these goods had more serious faults and had to
be replaced the cost would be $6 million.
The normal pattern is that 80% of goods sold will be fault-free, 15% will
require repairs and 5% will have to be replaced.
What is the amount of the provision required?
IAS 12 TAXATION
Question 1
A company's trial balance shows a debit balance of $2.1 million brought
forward on current tax and a credit balance of $5.4 million on deferred tax. The
tax charge for the current year is estimated at $16.2 million and the carrying
amounts of net assets are $13 million in excess of their tax base.
The income tax rate is 30%
What amount will be shown as income tax in the statement of profit or loss
for the year?

Question 2
A company's trial balance at 31 December 20X9 shows a debit balance of
$700,000 on current tax and a credit balance of $8,400,000 on deferred tax. The
directors have estimated the provision for income tax for the year at $4.5 million
and the required deferred tax provision is $5.6 million, $1.2 million of which
relates to a property revaluation.
What is the profit or loss income tax liability for the year ended 31 December
20X9?

Question 3
The following information relates to an entity.
At 1 January 20X8 the carrying amount of non-current assets exceeded their
tax written down value (tax base) by $850,000.
For the year to 31 December 20X8 the entity claimed depreciation for tax
purposes of $500,000 and charged depreciation of $450,000 in the financial
statements.
During the year ended 31 December 20X8 the entity revalued a property. The
revaluation surplus was $250,000. There are no current plans to sell the
property.
The tax rate was 30% throughout the year.
 What is the provision for deferred tax required by IAS 12 Income Taxes at 31
December 20X8?
IFRS 15
Question 1:

A company sublets part of its office accommodation. In the year ended 30 June
20X9 cash received from tenants was $83,700.

Details of rent in arrears and in advance at the beginning and end of the year
were:

30 June 20X8 30 June 20X9

In arrears 3,800 4,700

In advance 2,400 3,000

All arrears of rent were subsequently received.

What figure for rental income should be included in the company’s statement of
profit or loss for the year ended 30 June 20X9?

Question 2:
ABC Ltd enters into a contract to build a factory for XYZ customer. The
contract price is £2m and the specified completion date is 31 December 20X8.
However, the contract provides that the company should receive an incentive
payment of a further £250,000 if the factory is completed by 30 November
20X8. Similarly, the price will be reduced by £250,000 if the factory is not
completed until after 31 January 20X9.
The company estimates that there is a 15% probability that the factory will be
completed by 30 November 20X8, an 80% probability that it will be completed
in December 20X8 or January 20X9 and a 5% probability that it will not be
completed until after January 20X9.
What is the expected value of the transaction price for this contract?
Question 3:
Company ABC entered into a contract to supply three distinct products to a
customer. The promise to supply each of these products was regarded as a
separate performance obligation. The stand-alone prices of the three products (if
sold singly) were:
Product X £12,500
Product Y £24,000
Product Z £27,500
The agreed contract price was £57,600. How should this price be allocated to
performance obligations?
Question 4:
An IT company provides two types of products: hardware and software, and IT
services to small business customers. The company has developed an “off-the-
shelves” accounting pakage and offers a supply and installation service for
$2,000 and a separate two-year technical support service for $500. It also offers
another choice of a combined goods and services contract which includes both
of these elements for $2,250. Payment for the combined contract is due one
month after the date of installation.
A contract was signed with customer ABC on 1 January 20X9. In accordance
with IFRS 15 Revenue from Contracts with Customers, how should the
company recognise revenue from the combined goods and services contract as at
the year ended 31 December 20X9?
IAS 27, IFRS3, IFRS10
Question 1
Cloud obtained a 60% holding in the 100,000 $1 shares of Mist on 1 January
20X8, when the retained earnings of Mist were $850,000. Consideration
comprised $250,000 cash, $400,000 payable on 1 January 20X9 and one share
in Cloud for each two shares acquired. Cloud has a cost of capital of 8% and the
market value of its shares on 1 January 20X8 was $2.30.
Cloud measures non-controlling interest at fair value. The fair value of the
non-controlling interest at 1 January 20X8 was estimated to be $400,000.
What was the goodwill arising on acquisition?
a. $139,370
b. $169,000
c. $119,370
d. $130,370
Question 2:
On 1 August 20X7 Patronic purchased 18 million of the 24 million $1 equity
shares of Sardonic. The acquisition was through a share exchange of two shares
in Patronic for every three shares in Sardonic. The market price of a share in
Patronic at 1 August 20X7 was $5.75. Patronic will also pay in cash on 31 July
20X9 (two years after acquisition) $2.42 per acquired share of Sardonic.
Patronic's cost of capital is 10% per annum.
What is the amount of the consideration attributable to Patronic for the
acquisition of Sardonic?
a. $105 million
b. $139.5 million
c. $108.2 million
d. $103.8 million

Question 3:
 Crash acquired 70% of Bang's 100,000 $1 ordinary shares for $800,000 when
the retained earnings of Bang were $570,000 and the balance in its revaluation
surplus was $150,000. Bang also has an internally-developed customer list
which has been independently valued at $90,000. The non-controlling interest in
Bang was judged to have a fair value of $220,000 at the date of acquisition.
What was the goodwill arising on acquisition?
A $200,000
B $163,000
C $226,000
D $110,000

Question 4:
Highveldt, a public listed company, acquired 75% of Samson's ordinary
shares on 1 April 20X4. Highveldt paid an immediate $3.50 per share in cash
and agreed to pay a further amount of $108 million on 1 April 20X5. Highveldt's
cost of capital is 8% per annum. Highveldt has only recorded the cash
consideration of $3.50 per shahe summarised statements of financial position of
the two companies at 31 March 20X5 are shown below:
Highveldt Samson
$m $m $m $m

Property, plant and equipment (note (i)) 420 320

Development costs nil 40
Investments 300 20
720 380
Current assets 133 91
Total assets 853 471

Equity and liabilities

Ordinary shares of $1 each 270 80
Reserves:
Share premium 80 40
Revaluation surplus 45 nil
Retained earnings – 1 April 20X4 160 134
– year to 31 March 20X5 190 76
350 210
745 330
Non-current liabilities
10% intragroup loan nil 60
Current liabilities 108 81
Total equity and liabilities 853 471

The following information is relevant:

 Highveldt has a policy of revaluing land and buildings to fair value. At

the date of acquisition Samson's land and buildings had a fair value $20 million
higher than their carrying amount and at 31 March 20X5 this had increased by a
further $4 million (ignore any additional depreciation).

 Samson had established a line of products under the brand name of

Titanware. Acting on behalf of Highveldt, a firm of specialists, had valued the
brand name at a value of $40 million with an estimated life of ten years as at 1
April 20X4. The brand is not included in Samson's statement of financial
position.

 It is the group policy to measure non-controlling interest fair value. The

fair value of the non-controlling interest in Samson at the acquisition date was
$83 million.

Required: Calculate Goodwill as it would appear in the consolidated statement

of financial position of Highveldt at Acquisition date.

Question 5:
 On 1 October 20X8 Pacemaker acquired 30 million of Vardine's 100 million
shares in exchange for 75 million of its own shares. The stock market value of
Pacemaker's shares at the date of this share exchange was $1.60 each.
Vardine's profit is subject to seasonal variation. Its profit for the year ended
31 March 20X9 was $100 million.
$20 million of this profit was made from 1 April 20X8 to 30 September
20X8. Pacemaker has one subsidiary and no other investments apart from
Vardine.
What amount will be shown as 'investment in associate' in the consolidated
statement of financial position of Pacemaker as at 31 March 20X9?
A $144 million
B $150 million
C $78 million
D $126 million
Question 6:
Ulysses owns 25% of Grant, which it purchased on 1 May 20X8 for $5
million. At that date Grant had retained earnings of $7.4 million. At the year end
date of 31 October 20X8 Grant had retained earnings of
$8.5 million after paying out a dividend of $1 million. On 30 September
20X8 Ulysses sold $600,000 of goods to Grant, on which it made 30% profit.
Grant had resold none of these goods by 31 October.
At what amount will Ulysses record its investment in Grant in its
consolidated statement of financial position at 31 October 20X8?

Question 7:
Ruby owns 30% of Emerald and exercises significant influence over it.
Emerald sold goods to Ruby for $160,000. Emerald applies a one third mark up
on cost. Ruby still had 25% of these goods in inventory at the year end.
What amount should be deducted from consolidated retained earnings in
respect of this transaction?
Question 8:
The following information relates to questions 1- 4.
On 1 October 20X6 Plateau acquired the following non-current investments:
3 million equity shares in Savannah by an exchange of one share in Plateau
for every two shares in Savannah plus $1.25 per acquired Savannah share in
cash. The market price of each Plateau share at the date of acquisition was $6
and the market price of each Savannah share at the date of acquisition was
$3.25.
30% of the equity shares of Axle at a cost of $7.50 per share in cash.
Only the cash consideration of the above investments has been recorded by
Plateau.

Extracts from the summarised draft statements of financial position of the

three companies at 30 September 20X7 are:
Plateau Savannah Axle
$'000 $'000 $'000
Equity shares of $1 each 10,000 4,000 4,000
Retained earnings
– at 30 September 20X6 16,000 6,000 11,000
– for year ended 30 September 20X7 9,250 2,900 5,000
The following information is relevant. 35,250 12,900 20,000

 It is the group policy to value non-controlling interest at acquisition at fair

value. For this purpose the share price of Savannah at the acquisition date should
be used.
1. What is the total of the consideration paid by Plateau for Savannah?
A $3,750,000
B $9,750,000
C $12,750,000
D $21,750,000
 2. What amount will be shown as non-controlling interest in the consolidated
statement of financial position at 30 September 20X7?
A $3,900,000
B $3,250,000
C $3,225,000
D $3,975,000
3. What amount will be shown in the consolidated statement of financial
position at 30 September 20X7 in respect of the investment in Axle?
A $9,000,000
B $10,500,000
C $14,000,000
D $30,000,000
4. Plateau is negotiating a contract to supply goods to Axle in the coming
year (ended 30 September 20X8) at 20% profit. How will the unrealised profit
on the sale of these goods be adjusted in the consolidated financial statements
for the year ended 30 September 20X8?
A DR Share of profit of associatesCR Group inventory
B DR Share of profit of associatesCR Investment in associate
C DR Group inventory CR Share of profit of associate
D DR Investment in associate CR Share of profit of associate

Question 9:
On 1 April 20X8, Pc acquired 60% of the equity share capital of Sin a share exchange of two shares in
P for three shares in S. At that date the retained earnings of S were $5 million. The issue of shares has
not yet been recorded by Pc. At the date of acquisition shares in P had a market value of $6 each.
Below are the summarised draft statements of financial position of both companies.
STATEMENTS OF FINANCIAL POSITION AS AT 30 SEPTEMBER 20X8

P S
Assets $'000 $'000
Non-current assets 40,600 12,600
Property, plant and equipment
Current assets 16,000 6,600
Total assets 56,600 19,200
Equity and liabilities
Equity shares of $1 each 10,000 4,000
Retained earnings 35,400 6,500
45,400 10,500
Non-current liabilities
10% loan notes 3,000 4,000
Current liabilities 8,200 4,700
Total equity and liabilities 56,600 19,200
The following information is relevant.
At the date of acquisition, the fair values of S's assets were equal to their carrying amounts with the
exception of an item of plant, which had a fair value of $2 million in excess of its carrying amount. It
had a remaining life of five years at that date (straight-line depreciation is used). S has not adjusted the
carrying amount of its plant as a result of the fair value exercise.
Sales from S to P in the post acquisition period were $8 million. S made a mark up on cost of 40% on
these sales. P had sold $5.2 million (at cost to P) of these goods by
30 September 20X8.
S's trade receivables at 30 September 20X8 include $600,000 due from P which did not agree with P's
corresponding trade payable. This was due to cash in transit of $200,000 from P to S. Both
companies have positive bank balances.
P has a policy of accounting for any non-controlling interest at full fair value. The fair value of the non-
controlling interest in Sat the date of acquisition was estimated to be $5.9 million. Consolidated
goodwill was not impaired at 30 September 20X8.
Required
Prepare the consolidated statement of financial position for P as at 30 September 20X8.
IAS 01: PRESENTATION OF FINANCIAL STATEMENT
Question 1: Which one of the following would not NECESSARILY lead to a
liability being classified as a current liability?
a/The liability is expected to be settled in the course of the entity's normal
operating cycle.
b/The liability has arisen during the current accounting period.
c/The liability is held primarily for the purpose of trading.
d/The liability is due to be settled within 12 months after the end of the
reporting period.

Question 2: Which one of the following would be shown in the 'other

comprehensive income' section of the statement of profit or loss and other
comprehensive income?
a/A revaluation gain on an investment property
b/Profit on sale of an investment
c/Receipt of a government grant
d/Gain on revaluation of a factory building

Question 3: Which of the following are NOT items required by IAS 1

Presentation of Financial Statements to be shown on the face of the
statement of financial position?
a/Inventories
b/Provisions
c/Government grants
d/Intangible assets

Question 4: How does IAS 1 define the 'operating cycle' of an entity?

a/The time between acquisition of assets for processing and delivery of
finished goods to customers
 b/The time between delivery of finished goods and receipt of cash from
customers
c/The time between acquisition of assets for processing and payment of cash
to suppliers
d/The time between acquisition of assets for processing and receipt of cash
from customers

Question 5: Where are equity dividends paid presented in the financial

statements?
a/As a deduction from retained earnings in the statement of changes in equity
b/As a liability in the statement of financial position
c/As an expense in profit or loss
d/As a loss in 'other comprehensive income'