Fall until wanted. Ludwick is paying 8%

 Fall 2016BA 294-Financial Reporting 1Final ExaminationTime Allowed 2 HoursTotal Marks: 40Instructor: Dr. Thejo Jose  STUDENT’S NAME: _______________________________________STUDENT’S ID: ___________________________________________PART 1Multiple choice questions. Each question carries 2 marks each.1. What will be the next step undertaken by the IASB after receipt and review of comments on a Discussion Paper?A Consultation with the Advisory CommitteeB Issue of a final IFRSC Publication of an Exposure DraftD Establishment of an Advisory Committee2. Which one of the following would not be an advantage of adoption of IFRS?A Accountants and auditors would have more defence in case of litigation.B Multinational companies could more easily transfer accounting staff across national borders.C It would be easier for investors to compare the financial statements of companies with those of foreign competitors.D Cross-border listing would be facilitated.3. Ludwick has borrowed $4.8 million to finance the building of a factory. Construction is expected to take two years. The loan started being utilized on 1 January 2009 and work began on 1 March 2009. $2 million of the loan was not utilized until 1 July 2009 so Ludwick was able to invest it until wanted. Ludwick is paying 8% on the loan and can invest surplus funds at 6%.Calculate the borrowing costs to be capitalized for the year ended 31 December 2009 in respect of this project.A $260,000B $384,000C $200,000D $324,0004. Which one of the following can be recognised as an investment property under IAS 40 in the consolidated financial statements of B co?A A property held by B co under a finance lease and leased out under an operating leaseB A property owned by B co and leased out to a subsidiaryC A property planned for sale in the ordinary course of businessD A property being constructed for a customer5. A company had $10 million of capitalized development expenditure at cost brought forward at 1 October 2007 in respect of products currently in production and a new project began on the same date.The research stage of the new project continued until 31 December 2007 and incurred $700,000 of costs. From that date, the project incurred development costs of $400,000 per month. On 1 April 2008 the directors are confident that the project would be successful and make a profit well in excess of costs. The project was still in development at 30 September 2008. Capitalized development expenditure is amortized at 20% per annum using the straight-line method.What amount will be charged to profit or loss for the year ended 30 September 2008 in respect of research and development costs?A $3,900,000B $1,900,000C $4,140,000D $3,440,0006. An equipment has a carrying amount of $170,000 at the year end of 31 March 2009. Its market value is $156,000 and costs of disposal are estimated at $5000. A new equipment would cost $300,000. The company which owns the equipment expects it to produce net cash flows of $60,000 per annum for the next three years. The company has a cost of capital of 8%.What is the impairment loss to be recognized in the financial statements at 31 March 2009?A $3,333B $4,400C $16,374D $19,0007. D Co’s statement of financial position as at 31 March 2009 shows financial assets at fair value through profit or loss with a carrying amount of $25 million as at 1 April 2008.These financial assets are held in a fund whose value changes directly in proportion to a specified market index. At 1 April 2008, the relevant index was 1,200 and at 31 March 2009 it was 1,296.What amount of gain or loss should be recognized at 31 March 2009 in respect of these assets?$………………………………………………………..8. On 1 October 2004, Fred Co. acquired an item of plant under a five-year finance lease agreement. The plant had a cash price of $50 million. The agreement had an implicit finance cost of 10% per annum and required an immediate deposit of $4 million and annual rentals of $12 million paid on 30 September each year for five years.What would be the current liability for the leased plant in Fred Co’s statement of financial position as at 30 September 2005?A $38,600,000B $8,140,000C $10,000,000D $4,700,0009. How does IFRS 9 require investments in equity instruments to be measured and accounted for in the absence of any selection at initial recognition?A Amortized cost with changes going through profit or lossB Amortized cost with changes going through other comprehensive incomeC Fair value with changes going through profit or lossD Fair value with changes going through other comprehensive income10. A company purchased an item of plant under a finance lease on 1 April 2008. The PV of the minimum lease payments was $30.2 million and the rentals are $12 million per annum paid in arrears for three years on 31 March each year. The interest rate implicit in the lease is 8% per annum.What amount will appear under current liabilities in respect of this lease in the statement of financial position at 31 March 2009?A $10,264,000B $11,432,000C $12,000,000D $9,504,00011. Ed Co gives the following financial information.Statements of financial position as at 30 September:2003 2002$m $mOrdinary shares of $1 each 1500 1000Share premium 700 200On 1 October 2002, a bonus issue of one new share for every 10 held was made, financed from the share premium account. This was followed by a further issue for cash.What amount will appear under ‘cash flows from financing activities’ in the statement of cash flows of Ed Co for the year ended 30 September 2003 in respect of share issues?A $1000 millionB $900 millionC $1100 millionD $500 million12. The statement of financial position of P Co as at 31 March 2008 showed PPE with a carrying amount of $1,860,000. At 31 March 2009, it had increased to $2,880,000.During the year to 31 March 2009 plant with a carrying amount of $240,000 was sold at a loss of $90,000, depreciation of $280,000 was charged and $100,000 was added to the revaluation surplus in respect of property, plant and equipment.What amount should appear under ‘investing activities’ in the statement of cash flows of P Co for the year ended 31 March 2009 as cash paid to acquire property, plant and equipment?A $1,260,000B $1,350,000C $1,640,000D $1,440,00013. Which among the following is NOT a purpose of the IASB’s Conceptual Framework?A To help in determining the treatment of items not covered by an existing IFRSB To be authoritative where a specific IFRS conflicts with the Conceptual FrameworkC To support the IASB in the preparation and review of IFRSD To support auditors in forming an judgement on whether financial statements comply with IFRSPART 2TonicoThe following information has been extracted from the books of Tonico, a limited liability company, as at 31 October 2007.Dr Cr$’000 $’000Cash 15Insurance 75Inventory at 1 November 2006 350General expenses 60Energy expenses 66Marketing expenses 50Wages and salaries 675Discounts received 50Share premium account 200Retained earnings at 1 November 2006 315Allowance for receivables at 1 November 2006 40Sales revenue 5,780Telephone expenses 80Property expenses 100Bank 94Returns inward 95Trade payables 290Loan note interest 33Trade receivables 900Purchases 3,5707% loan notes 470Irrecoverable debts 150$1 ordinary shares 1,800Accumulated depreciation at 1 November 2006Buildings 360Motor Vehicles 80Furniture and equipment 420Land at cost 740Buildings at cost 1,500Motor vehicles at cost 240Furniture and equipment at cost 1,2009,899 9,899You have also been provided with the following information:(a) Inventory at 31 October 2008 was valued at $275,000 based on its original cost. However, $45,000 of this inventory has been in the warehouse for over two years and the directors have agreed to sell it in November 2007 for a cash price of $20,000.(b) The marketing expenses include $5,000 which relates to November 2007.(c) The allowance for receivables is to be increased to the equivalent of 5% of trade receivables.(d) There are wages and salaries outstanding of $40,000 for the year ended 31 October 2007.(e) Buildings are depreciated at 5% of cost. At 31 October 2007 the buildings were professionally valued at $1,800,000 and the directors wish this valuation to be incorporated into the financial statements.(f) Depreciation is to be charged as follows:(i) Motor vehicles at 20% of carrying amount(ii) Furniture and equipment at 20% of cost(g) No dividends have been paid or declared.(h) Tax of $150,000 is to be provided for the year.(i) During October 2007, a bonus issue of one for ten shares was made to ordinary shareholders. This has not entered the books. The share premium account was used for this purpose.RequiredPrepare the following statements:(a) The statement of profit or loss for the year ended 31 October 2007 (7 marks)(b) The statement of financial position as at 31 October 2007 (7 marks)                                      (14 marks)