2

ND

RFJPIA-R12
Annual Regional Convention 2008 QUIZ BEE PA1 !"A

A#ERA$E R"UND 1. According to IAS29 Financial reporting in hyperinflationary economies , which TWO of the following are monetary items? a. Trade paya les . In!entories c. Administration costs paid in cash d. "oan repaya le at par !al#e
Que%tion & - A D $onetary items are to e recei!ed %or settled& in fi'ed monetary terms %per IAS29 para 12&. This incl#des trade paya les and loans to e repaid at par !al#e.

2. The (op)ins *ompany is a man#fact#ring company. The cost per #nit of an item of in!entory is shown on its card as follows+ P'P $aterials ,.rod#ction la or costs ,, .rod#ction o!erheads 12 /eneral administration costs 1$ar)eting costs 0 According to IAS2 Inventories, what is the !al#e of one completed item of in!entory in (op)ins1s statement of financial position? a. .(.2, . .(.30 c. .(.40 d. .(.9Que%tion 11 - C .(.40 is the correct answer. IAS2 paras 1-512 define the cost of in!entory. In this e'ample the cost incl#des materials, prod#ction la or and prod#ction o!erheads, #t not general administration or mar)eting costs.

,. On 1 6an#ary 2-73 The 8 ro *ompany commenced trading to pro!ide )ey s)ills ed#cation facilities in a region identified for technology de!elopment. Also on 1 6an#ary 2-73, the company recei!ed two grants from its go!ernment for setting #p its operations in this location+ /rant %a& 9 was paid to gi!e financial assistance for start5#p costs already inc#rred. /rant % & 9 was paid to s# sidi:e the costs of p#rchasing comp#ter software o!er the fi!e5year period. The company is almost certain to )eep the facilities operational for the ne't fi!e years. The company1s acco#nting year end is ,1 ;ecem er. Are the following statements concerning recognition of the income from the two go!ernment grants tr#e or false, according to IAS2- Government grants and government assistance? %1& Income from /rant %a& sho#ld e recogni:ed in f#ll on receipt in 2-73. %2& Income from /rant % & sho#ld e recogni:ed in f#ll at the end of 0 years. a ( Statement (1) <alse <alse Statement (2) <alse Tr#e

) *

Tr#e Tr#e

<alse Tr#e

Que%tion 2 - C IAS2- para 2- re=#ires grants for e'pendit#re already inc#rred to e recogni:ed immediately. .ara 12 re=#ires grants s#ch as that for the software to e matched against the related costs, so that grant wo#ld e recogni:ed o!er the fi!e5year period.

>. The Scandi#m *ompany is commencing a new constr#ction pro?ect, which is to e financed y orrowing. The )ey dates are as follows+ 10 $ay 2-73 "oan interest relating to the pro?ect starts to e inc#rred , 6#ne 2-73 Technical site planning commences 12 6#ne 2-73 8'pendit#res on the pro?ect start to e inc#rred 13 6#ly 2-73 *onstr#ction wor) commences According to IAS2, Borrowing costs, from what date can Scandi#m commence the capitali:ation of orrowing costs? a 10 $ay 2-73 ( , 6#ne 2-73 ) 12 6#ne 2-73 * 13 6#ly 2-73
Que%tion & - C All rele!ant conditions in IAS2, para 14 are f#lfilled y the date when e'pendit#res on the pro?ect start to e inc#rred.

0. The .alila *ompany p#rchased a !arnishing machine for .(.10-,--- on 1 6an#ary 2-74. The company recei!ed a go!ernment grant of .(.1,,0-- in respect of this asset. *ompany policy was to depreciate the asset o!er > years on a straight5 line asis and to treat the grant as deferred income. @nder IAS2Government grants and government assistance , what sho#ld e the carrying amo#nts of the machine and the deferred income %A;IA& alance at ,1 ;ecem er 2-73? Carrying amount I !alance a .(.40,--.(.2,40( .(.112,0-.(.1-,120 ) .(.31,40.(.2,40* .(.40,--.(.1,,0-Que%tion + - A *arrying amo#nt .(.40,---, ;eferred income .(.2,40- is the correct answer. See IAS2- para 22, where the grant is recogni:ed as income on a systematic and rational asis o!er the life of the asset. The deferred income in the statement of financial position is red#ced each year y the amo#nt credited to profit or loss. The asset is depreciated o!er its #sef#l life per IAS12.

2. The *oral *ompany acco#nts for non5c#rrent assets #sing the cost model. On 2- 6#ly 2-74 *oral classified a non5c#rrent asset as held for sale in accordance with I<BS0 "on#current assets held for sale and discontinued operations. At that date the asset1s carrying amo#nt was .(.1>,0--, its fair !al#e was estimated at .(.21,0-- and the costs to sell at .(.1,>0-. The asset was sold on 13 Octo er 2-74 for .(.21,2--. In accordance with I<BS0, at what amo#nt sho#ld the asset e stated in *oral1s statement of financial position at ,- Septem er 2-74? A .(.2-,-0B .(.21,0-C .(.21,2-D .(.1>,0-Que%tion 8 - D

I<BS0 para 10 re=#ires that a non5c#rrent asset held for sale sho#ld e stated at the lower of %i& the carrying amo#nt and %ii& the fair !al#e less costs to sell.

4. The $ar)a *ompany has ac=#ired a trademar) relating to the introd#ction of a new man#fact#ring process. The costs inc#rred were as follows+ *ost of trademar) .(. ,,0--,--8'pendit#re on promoting the new prod#ct .(. 0-,--8mployee enefits relating to the testing of the proper f#nctioning of the new process .(. 2--,--According to IAS,3 Intangi!le assets, what is the total cost that sho#ld e capitali:ed as an intangi le non5c#rrent asset in respect of the new process? A .(.,,40-,--B .(.,,4--,--C .(.,,0--,--D .(.,,00-,--Que%tion 11 - B IAS,3 paras 24529 specify the costs attri #ta le to a separately ac=#ired intangi le asset. This re=#ires the trademar) costs and costs of testing to e incl#ded.

3. The ;ipper *ompany operates chemical plants. Its p# lished policies incl#de a commitment to ma)ing good any damage ca#sed to the en!ironment y its operations. It has always honored this commitment. Which OC8 of the following scenarios relating to ;ipper wo#ld gi!e rise to an en!ironmental pro!ision as defined y IAS,4 $rovisions% contingent lia!ilities and contingent assets? a. On past e'perience it is li)ely that a chemical spill which wo#ld res#lt in ;ipper ha!ing to pay fines and penalties will occ#r in the ne't year . Becent research s#ggests there is a possi ility that the company1s actions may damage s#rro#nding wildlife c. The go!ernment has o#tlined plans for a new law re=#iring all en!ironmental damage to e rectified d. A chemical spill from one of the company1s plants has ca#sed harm to the s#rro#nding area and wildlife
Que%tion 11 - D The p# lished policy creates a constr#cti!e o ligation as defined y IAS,4 para 1-. The spill is a past e!ent which gi!es rise to a present o ligation and the need for a pro!ision #nder para 1>. The go!ernment plans and any chemical spill relate to f#t#re e!ents, while the Apossi leA damage to wildlife gi!es rise to a contingent lia ility which sho#ld e disclosed.

9. The White *ompany set #p a defined enefit post5employment plan with effect from 1 6an#ary 2-74. In the first year the e'pected ret#rn on plan assets was .(.0,---, the act#al ret#rn on plan assets was .(.>,---, the c#rrent ser!ice cost was .(.12,--- and White1s contri #tions paid into the plan were .(.4,0--. What is the net e'pense to e recogni:ed in profit or loss for the year ended ,1 ;ecem er 2-74, according to IAS19 &mployee !enefits? A .(.3,--B .(.,,0-C .(.4,--D .(.2,0-Que%tion 11 - C The amo#nts to e recogni:ed as an e'pense in profit or loss are the c#rrent ser!ice cost less the e'pected ret#rn on plan assets. See IAS19 para 21. Cote that the difference etween the e'pected and the act#al ret#rn on plan assets is an act#arial loss, while the employer contri #tions increase plan assets.

1-.The .inder *ompany is completing the preparation of its draft financial statements for the year ended ,1 $ay 2-74. On 2> 6#ly 2-74, a di!idend of .(.140,--- was declared and a contract#al profit share payment of .(.,0,--- was made, oth ased on the profits for the year to ,1 $ay 2-74. On 2- 6#ne 2-74, a c#stomer went into li=#idation ha!ing owed the company .(.,>,--- for the past 0 months. Co allowance had een made against this de t in the draft financial statements. On 14 6#ly 2-74, a man#fact#ring plant was destroyed y fire, res#lting in a financial loss of .(.22-,---. According to IAS1- &vents after the reporting period , which TWO amo#nts sho#ld e recogni:ed in .inder1s profit or loss for the year to ,1 $ay 2-74 to reflect ad?#sting e!ents after the end of reporting period? A .(.140,--- di!idend B .(.,0,--- on#s C .(.,>,--- allowance for #ncollecti le trade recei!a les D .(.22-,--- loss on man#fact#ring plant
Que%tion , - B C The correct answers are .(.,0,--- on#s and .(.,>,--- allowance. See IAS1- paras 9, 12 and 22. Also, di!idends are recogni:ed in the statement of changes in e=#ity, not profit or loss

1. The physical inventory of Pangasinan Company on December 31, 2009 showe merchan ise with a cost of P !,000,000 was on han at that ate. "o# also iscovere the following items were all e$cl# e from the co#nt% a. &erchan ise costing P1'0,000 , which was hel by Pangasinan on consignment. The consignor is a s#bsi iary. b. ( special machine, fabricate to or er for a c#stomer costing P !00,000 was finishe an specifically segregate in the bac) part of the shipping room on December 31, 2009. The c#stomer was bille on that ate an the machine e$cl# e from inventory altho#gh it was shippe on *an#ary !, 2010. c. &erchan ise costing P +0,000 which was shippe by Pangasinan f.o.b estination to a c#stomer on December 31, 2009. The c#stomer e$pects to receive the merchan ise on *an#ary 3, 2010. . &erchan ise costing P 120,000 which was shippe by Pangasinan f.o.b shipping point to a c#stomer on December 29, 2009 e. &erchan ise costing P ,0,000 shippe by a ven or -.../ shipping point on December 2+, 2009 an receive by Pangasinan on *an#ary 10, 2010. The correcte balance of Pangasinan0s inventory sho#l be a. P !,,30,000 b. P !,130,000 c. P !,!+0,000 . P !,'90,000

2. .n *an#ary 200!, 1ntity ( iss#e a 10 percent convertible ebent#re with a face val#e of P 1,000,000 mat#ring on 31 December 2013. The ebent#re is convertible into or inary shares of 1ntity ( at a conversion price of P2, per share. 2nterest is payable half yearly in cash. (t the ate of iss#e, 1ntity ( co#l have iss#e non convertible ebt with a ten year term bearing a co#pon interest rate of 11 percent. .n *an#ary 1 2009, to in #ce the hol er to convert the convertible ebent#re promptly, 1ntity ( re #ces the conversion price to P20 if the ebent#re is converte before 1 &arch 2009 3ie within '0 ays4. The mar)et price of 1ntity (0s or inary shares on the ate the terms are amen e is P !0 per share. Comp#te the amo#nt to be recogni5e in profit or loss as a res#lt of the amen ment of the terms a. P !00,000 b. P 200,000 c. P ,0,000 .P0

3. Coo)ie Company is negotiating a loan with 1$cel /an). Coo)ie nee s P 3,'00,000. as part of the loan agreement 1$cel /an) will re6#ire Coo)ie to maintain a compensating balance of 1,7 of the loan amo#nt on eposit in a chec)ing acco#nt at the ban). Coo)ie c#rrently maintains a balance of 200,000 in the chec)ing acco#nt. The interest rate Coo)ie is re6#ire to pay on the loan is 127. 1$cel ban) pays 17 interest on chec)ing acco#nts. the amo#nt of the loan is a. P !,000,000 b. P 3,+00,000 c. P 3,'00,000 . P 3,!00,000

!. .n *an#ary 1, 2009, the len ing company ma e a P 200,000 +7 loan. The interest is receivable at the en of each year, with the principal amo#nt to be receive at the en of , years. (s of December 31, 2009, the interest for the c#rrent year has not been receive nor recor e beca#se the borrower is e$periencing financial iffic#lties. The len ing company negotiate a restr#ct#ring of the loan. The payment of all of the interest base on the original will be elaye #ntil the en the , year loan term. 2n a ition, the amo#nt of principal repayment will be roppe from P 200,000 to P 100,000. The prevailing interest rate for similar type of the loan as of December 31, 2009 is 107. The loan impairment loss to be recogni5e in 2009 profit or loss is a. P '8,800 c. P 88,!92 b. P 83,,0' .P0 ,. 9in om Corp. on *an#ary 1, 2008 grante share options for 100,000 share of its P10 par val#e or inary shares to its )ey employees. The mar)et price of the or inary share on that ate was P 23 per share an the option price was P 20. The /lac) :choles option pricing mo el etermines total compensation e$pense to be P '00,000. The options are e$ercisable beginning *an#ary 1, 2010 provi e those )ey employees are still in 9in om0s employ at the time the options are e$ercise . The options e$pire on *an#ary 1, 2011. .n *an#ary 1, 2010 when the mar)et price of the share was P29 per share, all 100,000 options were e$ercise . The amo#nt of compensation e$pense 9in om sho#l recor for 2009 is. a. P 100,000 b. P 200,000 c. P 1,0,000 . P 800,000

'. (n entity prepares 6#arterly interim financial reports in accor ance with P(: 3!. The entity sells electrical goo s, an normally ,7 of c#stomer claims on their warranty. The provision in the first 6#arter was calc#late as ,7 of sales to ate, which was P20,000,000. ;owever, in the secon 6#arter, a esign fa#lt was fo#n an warranty claims were e$pecte to be 107 for the whole year. :ales in the secon 6#arter were P30,000,000 . 9hat wo#l be the provision charge in the secon 6#arters income statement< a. P 3,000,000 b. P !,000,000 c. P 2,2,0,000 . P ,,000,000

8. (n entity has grante share option to its employees. The total e$pense to the vesting ate of December 31, 2010, has been calc#late as P + million. The entity has eci e to settle the awar early, on December 31, 2009. The e$pense charge in the income statement since the grant ate of *an#ary 1, 2008, ha been year to December 31, 2008, 2 million, an year to December 31, 200+, 2.1 million. The e$pense that wo#l have been charge in the year to December 31, 2009 was P 2.2 million. 9hat wo#l be the e$pense charge in the income statement for the year December 31, 2009< a. P 2.2 million b. P +.0 million c. P 3.9 million . P 2.0 million

+. (n entity has spent P '00,000 in eveloping a new pro #ct. These cost meet the efinition of an intangible asset #n er P(: 3+ an have been recogni5e in the balance sheet. These costs have been recogni5e as an e$pense for ta$ p#rposes. (t the year en the intangible asset is eeme to be impaire by P ,0,000. The ta$ base of intangible asset at year en is a. P '00,000 b. P ,,0,000 c. P ,0,000 .P0

9. ;o#se P#blishers offere a contest in which the winner wo#l receive P 1 million payable over 20 years. .n December 31, 2009, ;o#se anno#nce the winner of the contest an signe a note payable to the winner for P 1 million, payable in P ,0,000 installments every *an#ary 2. (lso on December 31, 2009 ;o#se p#rchase an ann#ity for P !1+,000 to provi e the P 9,0,000 pri5e monies remaining after the first P ,0,000 installment which was pai on *an#ary 2, 2010. 2n its 2009 income statements, what sho#l ;o#se report as contest pri5e e$pense< a. P 0 b. P !1+, 2,0 c. P !'+, 2,0 . P 1,000,000

10. (t)ins bo#ght five i entical plots of evelopment lan for P 2 million in 2008. .n *an#ary 2009 (t)ins sol three of the plots of lan to an investment company, =an ban), for a total of 2.! million. This price

was base on 8,7 of the fair mar)et val#e of 3.2 million as etermine by an in epen ent s#rveyor at the ate of sale. The terms of the sale containe 2 cla#ses% . (t)ins can re p#rchase the plots of lan for the f#ll fair val#e of 3.2 million 3the val#e etermine the ate of sale4 any time #ntil 31 December 2011 an > .n 1 *an#ary 2012, =an ban) has the option to re6#ire (t)ins to re?p#rchase the properties for 3.2 million. "o# may ass#me that =an ban) see)s a ret#rn o its investment of 107 per ann#m.

2f (t)ins recor e the legal form of the transaction instea of its s#bstance, the profit for 2009 will be overstate by a. P 1,!!0,000 c. P '!0, 000 b. P 1,200,000 . P !00, 000 11. @#itino, 2nc. an its s#bsi iaries have provi e yo#, their P-A: specialist, with a list of the properties they own% =an hel by @#irino, 2nc. for #n etermine f#t#re #se, P ,,000,000. ( vacant b#il ing owne by @#irino, 2nc. an to be lease o#t #n er an operating lease, P 20, 000, 000. Property hel by a s#bsi iary of @#irino, 2nc., a real estate firm, in the or inary co#rse of its b#siness, P 30, 000, 000. Property hel by @#irino, 2nc. for #se in pro #ction, P 1, 000, 000. ( hotel owne by :#go 2nc, a s#bsi iary of @#irino, 2nc., an for which :#go, 2nc. provi es sec#rity services for its g#ests belongings P ,0,000,000. ( b#il ing owne by @#irino, 2nc being lease o#t to :tat#s 2nc, a s#bsi iary of @#irino 2nc., P 20,000,000. ;ow m#ch will be reporte as investment properties in @#irino, 2nc. an its s#bsi iaries consoli ate financial statements< a. P 8,,000,000 b. P 2,,000,000 c. P 9,,000,000 . P !,,000,000

12. Ao$y Company ha the following information relating to its acco#nt receivble% (cco#nts receivable at 12B31B200+ Cre it sales for 2009 Collection from c#stomers for 2009, e$cl# ing recovery (cco#nts written off 9B30B2009 Collection of acco#nts written off in prior year 3 c#stomer cre it was not re establishe 4 1stimate #ncollectible receivables per aging of receivables at 12B31B2009 P 1,300,000 ,,!00,000 !,8,0,000 12,,000 2,,000 1',,000

.n December 31, 2009 the amorti5e cost of acco#nts receivables is a. P 1,+2,,000 c. P 1,'3,,000 b. P 1,+00,000 . P 1,'00,000

:#ggeste (nswers% 1. b 2. a 3. a !. a ,. b '. b 8. c +. 9c 10. a 11. a 12.

1. (aron Company sells s#bscription to a speciali5e irectory that is p#blishe semi ann#ally an shippe to s#bscribers on (pril 1, an .ctober 1,. :#bscriptions receive after &arch 31 an :eptember 30 c#toff ates are hel for the ne$t p#blication. Cash from s#bscriber is receive evenly #ring the year an is cre ite to eferre reven#es from s#bscriptions. Data relating to 2009 are as follows% Deferre reven#es from s#bscriptions, balance 12B31B0+ Cash receipts from s#bscribers P 1,,00,000 P 8,200,000

2n its December 31 2009 balance sheet, (aron sho#l report eferre reven#es from s#bscription of a. P 1,+00,000 b. P 3,300,000 c. P 3,'00,000 . P ,,!00,000

2. (t *an#ary 1, a sole proprietorship0s asset totale P210,000, an its liabilities amo#nte to P 120,000. D#ring the year, owner investments amo#nte to P 82,000, (n owners with rawal totale P8,,000. (t year en , assets totale P 280,000 an liabilities amo#nte to P 181,000. The amo#nt of net income for the year was a. P 0 b. P',000 3. The following pertains to /#ll Company0s biological assets% Price of the asset in the mar)et 1stimate commission to bro)ers an ealers 1stimate transport cost an other cost necessary to get asset to the mar)et :elling price in a bin ing contract to sell The entity0s biological assets sho#l be val#e at a. P !,800 b.!,!00 c. !,,00 P ,,000 ,00 300 P ,,200 . !,200 c. 9,000 . 12,000

!. /#yer Co. reg#larly b#ys shirts from Cen or Company an is allowe tra e isco#nts of 207 an 107 from the last price. /#yer p#rchase shirts from Cen or on &ay 28, 2009 an receive an invoice with a list price of P 100,000 an payment terms 2B10, nB30. 2f b#yer #ses the net metho of recor ing p#rchases, the Do#rnal entry to recor the payment of *#ne +, 2009 will incl# e a. ( ebit to (cco#nts payable P 82,000 b. ( ebit on p#rchase isco#nt lost of P 1,!00 c. ( cre it to p#rchase isco#nt of P 1,!00 . ( cre it to Cash of P 80,,'0 ,. 9hite (irlines sol a #se Det aircraft to brown company for P +00,000 accepting a five year '7 note for the entire amo#nt. /rowns incremental borrowing rate was 1!7. The ann#al payment of principal an interest on note was to be P1+9,930. The aircraft co#l have been sol at an establishe cash price of P ',1,!'0. The present val#e of an or inary ann#ity of P1 at +7 for five perio s is 3.99. The aircraft sho#l be capitali5e on /rowns boo) at a. P 9!9,',0 b. P +00,000 c. P 8,8,+20 . P ',1,!'0

'. .n .ctober 1, 2009 9(E ac6#ire "(EF, a small company that speciali5es in pharmace#tical r#g research an evelopment. The p#rchase consi eration was by way a share e$change an val#e at P 3, million. The fair val#e of "ang0s net asset was P1, million 3e$cl# ing any item referre to below4 "ang owns a patent for an establishe s#ccessf#l r#g that has a remaining life of + years. ( firms of specialist a visors, Tantsahan, has estimate the c#rrent val#e of this patent to be P 10 million> however, the company is awaiting for o#tcome of clinical trials where the r#g has been teste to treat a ifferent illness. 2f trials were s#ccessf#l, the val#e of the r#g is then estimate to be 1, million. (lso incl# e in the company0s balance sheet is P 2 million for me ical research that has been con #cte on behalf of a client. Comp#te the amo#nt of goo will for this ac6#isition. a. P +,000,000 c. P 3,000,000

b. P ,,000,000

. P 20,000,000

8. ( factory e6#ipment with an estimate #sef#l life of 10 years was p#rchase by Carranglan Co. on December 30, 200,. The e6#ipment was e$pecte to have a resi #al val#e of P ,,000 at the en of its service life. The s#m of the years0 igit metho was #se in comp#ting epreciation. -or the year en e December 31, 2009 the epreciation applicable to this e6#ipment was P !2,000. The cost of the factory e6#ipment p#rchase on December 30, 200, was a. P 32,,000 b. P 293,8,0 c. P 33,,000 . P 330,000

+. .n December 2+, 2009, ;ornets Company commits itself to p#rchase a financial asset to be classifie as hel to mat#rity for P 1,000,000 its fair val#e on commitment 3tra e4 ate. This sec#rity has a fair val#e of P 1,002,000 an P 1,00,,000 on December 31, 2009 3;ornets0 -inancial "ear 1n 4, an *an#ary ,, 2010 3settlement ate4, respectively. 2f ;ornets applies the settlement ate acco#nting metho to acco#nt for reg#lar way p#rchases of its sec#rities, the financial asset sho#l be recogni5e on *an#ary ,, 2010 at a. P 1,000,000 b. P 1,00,,000 c. P 1,002,000 .P0

9. .n *#ly 2009, *enny =t leases a machine with a fair val#e of P 109,!!, to Aose =t for five years at ann#al rental 3in a vance4 of P 2,,000 an Aose =t g#arantees in f#ll estimate resi #al val#e of P 1,,000 on ret#rn of the asset. 9hat wo#l be the intestest rate implicit in the lease< a. 1!7 b. 127 c. 107 . 97

10. D Company ha the following eferre ta$ balances at reporting ate G Deferre ta$ assets, P 1,200,000> Deferre ta$ liabilities, P 3,000,000. 1ffective from the first ay of financial perio , the company rate of income ta$ was re #ce from !07 to 307. The a D#stment to income ta$ e$pense to recogni5e the impact of the ta$ rate change is% a. DA P '00,000 b. CA P '00,000 c. DA P !,0,000 . CA P !,0,000

11. .n December 31, 2009, 1ntity H ac6#ire an investment for P100,000 pl#s a p#rchase commission of P 2,000. The investment is classifie as available for sale. .n December 31, 2009, 6#ote mar)et price of the investment is P 100,000. 2f the investment were sol , a commission of P 3,000 wo#l be pai . .n December 31, 2009, the entity sho#l recogni5e #nreali5e loss irectly in e6#ity of a. P 2,000 b. P 3,000 c. P ,,000 .P0

12. (s of *#ne 30, 2009, the ban) statement of (ng Po Tra ing ha an en ing balance of P 383,'12. The following ata were assemble in the co#rse of reconciling the ban) balance% The ban) erroneo#sly cre ite (ng Po Tra ing for P 2,1,0 on *#ne 22. D#ring the month, the ban) charge bac) E:- chec)s amo#nting to P 2,3!0 of which P +00 ha been re eposite by the 2,th of *#ne. Collection for *#ne 30 totaling P 10, 330 was eposite the following month. Chec)s o#tstan ing as of *#ne 30 were P 30,20, Eotes collecte by the ban) for (ng Po Tra ing were P +,1,0 an the correspon ing ban) charges were P ,0. c. P 3,3 928 . P 3,9 '+8

The a D#ste ban) balance on *#ne 30, 2009 is a. P 3,1, ,+8 b. P 3,+, 1!8 :#ggeste (nswers% 1. a

2. 3. !. b ,. '. a 8. c +. a 9. b 10. 11. a 12. a

DIFFICU-! R"UND 1. ;#ring the year ended ,1 ;ecem er 2-73 the following e!ents occ#rred at The /osling *ompany+ %1& It was decided to write off .(.3-,--- from in!entory which was o!er two years old as it was o solete. %2& Sales of .(.2-,--- had een omitted from the financial statements for the year to ,1 ;ecem er 2-74. According to IAS3 'ccounting policies% changes in accounting estimates and errors% how m#ch sho#ld e shown as a prior period ad?#stment in /osling1s financial statements for the year to ,1 ;ecem er 2-73? A .(.2-,--B .(.1>-,--C .(.3-,--D .(.2-,--Que%tion , - A The correct answer is .(.2-,---. IAS3 para ,21s list of e'amples of changes in acco#nting estimates incl#des in!entory o solescence.

2. One of the conditions that m#st e satisfied in order to recogni:e re!en#e in a transaction in!ol!ing the rendering of ser!ices is that the stage of completion of the transaction at the end of the reporting period can e meas#red relia ly. Which TWO of the following methods for determining the stage of completion of a contract in!ol!ing the rendering of ser!ices are specifically referred to in IAS13 (evenue, as eing accepta le? A *osts inc#rred to date as a percentage of the estimated total costs of the transaction B Ad!ances recei!ed to date as a percentage of the total amo#nt recei!a le C S#r!eys of wor) performed D Be!en#e to date di!ided y total contract re!en#e
Que%tion 1 - A C IAS13 para 2> permits s#r!eys of wor) performed and costs inc#rred to date as methods of apportioning re!en#e on ser!ice contracts.

,. (ow sho#ld trade disco#nts e dealt with when !al#ing in!entories at the lower of cost and net reali:a le !al#e %CBD& according to IAS2 Inventories? (select one answer) A Added to cost B Ignored C ;ed#cted in arri!ing at CBD D ;ed#cted from cost
Que%tion , - D Trade disco#nts sho#ld e ded#cted from cost. See IAS2 para 11.

>. The .olyphony *ompany had 1--,--- e=#ity shares in iss#e on 1 6an#ary 2-74. On 1 6#ly 2-74 it iss#ed 2-,--- new shares y way of a 1 for 0 on#s. On 1 Octo er 2-74 it iss#ed 23,--- new shares for cash at f#ll mar)et price. When calc#lating asic earnings per share, how many shares sho#ld e di!ided into the profit after ta', according to IAS,, &arnings per share? A 1--,---

B 114,--C 1>3,--D 124,--Que%tion . - D The n#m er of shares to e #sed is the weighted a!erage in iss#e thro#gh the period. Eon#s shares pro!ide no additional consideration to the iss#er, so they are related ac) to the eginning of the earliest period presented. Shares iss#ed for cash pro!ide additional consideration, so they are time apportioned from the date the cash was recei!a le. See IAS,, paras 19 and 22. The weighted a!erage is 1--,--- F 2-,--- F %23,--- G ,H12& I 124,---.

0. On 1 6#ly 2-74 The Ota)amiro *ompany handed o!er to a client a new comp#ter system. The contract price for the s#pply of the system and aftersales s#pport for 12 months was .(.3--,---. Ota)amiro estimates the cost of the after5sales s#pport at .(.12-,--- and it normally mar)s #p s#ch costs y 0-J when tendering for s#pport contracts. @nder IAS13 (evenue, the re!en#e Ota)amiro sho#ld recogni:e in its financial year ended ,1 ;ecem er 2-74 is A .(.22-,--B .(.3--,--C .(.41-,--D Cil
Que%tion 10 - C @nder IAS13 Appendi' A para 11 a selling price which incl#des an amo#nt for after5sales s#pport sho#ld e split into two components+ the s#pport component % eing the cost of s#ch s#pport pl#s a reasona le profit margin& and the sale of goods component %meas#red as the alance&. The s#pport component sho#ld e recogni:ed as re!en#e o!er the ser!ice period. The s#pport component is .(.13-,--- %.(.12-,--- pl#s 0-J&, of which half %.(.9-,---& sho#ld e recogni:ed in the year ended ,1 ;ecem er 2-74, along with the .(.22-,--- %.(.3--,--- 9 .(.13-,---& sale of goods component.

2. The Tanager *ompany p#rchased a oring machine on 1 6an#ary 2-71 for .(.31,---. The #sef#l life of the machine is estimated at , years with a resid#al !al#e at the end of this period of .(.2,---. ;#ring its #sef#l life, the e'pected #nits of prod#ction from the machine are+ 2-71 12,--- #nits 2-72 4,--- #nits 2-7, 0,--- #nits What sho#ld e the depreciation e'pense for the year ended ,1 ;ecem er 2-72, #sing the most appropriate depreciation method permitted y IAS12 $roperty% plant and e)uipment? A .(.24,--B .(.21,340 C .(.2,,220 D .(.20,--Que%tion 1, - B The correct answer is .(.21,340. See IAS12 para 02, which indicates that assets are cons#med principally thro#gh their #se. In this e'ample the answer is calc#lated as %the original cost less the resid#al !al#e& di!ided y total #nits prod#ced in , years m#ltiplied y total #nits prod#ced in 2-72.

4. On 1 6an#ary 2-74 The (amer)op *ompany orrowed .(.2 million at an ann#al interest rate of 1-J to finance the costs of #ilding an electricity

generating plant. *onstr#ction commenced on 1 6an#ary 2-74 and cost .(.2 million. Cot all the cash orrowed was #sed immediately, so interest income of .(.3-,--- was generated y temporarily in!esting some of the orrowed f#nds prior to #se. The pro?ect was completed on ,- Co!em er 2-74. What is the carrying amo#nt of the plant at ,- Co!em er 2-74? A .(.2,---,--B .(.2,>4-,--C .(.2,02-,--D .(.2,00-,--Que%tion / - B See IAS2, para 12. The asset1s carrying amo#nt in this e'ample is the .(.2 million constr#ction cost pl#s the interest charged on the loan for the 11 months of constr#ction %.(.2 million ' 1-J ' 11H12 I .(.00-,---, less the .(.3-,--- interest earned prior to #sing the loan to finance constr#ction.

3. The Eentham *ompany p#rchased an in!estment property on 1 6an#ary 2-70 for a cost of .(.22-,---. The property had a #sef#l life of >- years and at ,1 ;ecem er 2-74 had a fair !al#e of .(.,--,---. On 1 6an#ary 2-73 the property was sold for net proceeds of .(.29-,---. Eentham #ses the cost model to acco#nt for in!estment properties. What is the gain or loss to e recogni:ed in profit or loss for the year ended ,1 ;ecem er 2-73 regarding the disposal of the property, according to IAS>- Investment property? A .(.32,0-- gain B .(.31,--- gain C .(.1-,--- loss D .(.4-,--- gain
Que%tion / - A The correct answer is the .(.29-,--- net disposal proceeds less the .(.2-,,0-- %.(.22-,--- less ,H>-ths thereof& carrying amo#nt. See IAS>- para 29.

9. The $inor *ompany leased a freehold #ilding for 2- years, the #sef#l life of the #ilding, with effect from 1 6an#ary 2-74. At that date the fair !al#e of the leasehold interest was .(.4.0 million of which .(.2.- million was attri #ta le to the #ilding. Ann#al rentals of .(.3--,--- are paya le in ad!ance on 1 6an#ary. (ow m#ch sho#ld $inor recogni:ed as an operating lease e'pense in the year ended ,1 ;ecem er 2-74, according to IAS14 *eases? A Cil B .(.2>-,--C .(.12-,--D .(.3--,--Que%tion + - C A land and #ildings lease sho#ld e separated into its two components+ the land component which will #s#ally e classified as an operating leaseK and the #ildings component which in this case e'tends to the end of the #ilding1s estimated #sef#l life and sho#ld e classified as a finance lease. The ann#al rental is split etween the two leases in proportion to the relati!e fair !al#es of the two leasehold interests. 2-J %%.(.4.0 million 9 .(.2.- million& as a J of .(.4.0 million& of the rental is attri #ta le to the land, so .(.12-,---. See IAS14 paras 1>512.

1-.The Battigan *ompany p#rchases .(.2-,--- of onds. The asset has een designated as one at fair !al#e thro#gh profit and loss. One year later, 1-J of the onds are sold for .(.>,---. Total c#m#lati!e gains pre!io#sly recogni:ed in Battigan1s financial statements in respect of the asset are .(.1,---. In accordance with IAS,9 Financial instruments+ recognition and measurement, what is the amo#nt of the gain on disposal to e recogni:ed in profit or loss? A .(.1,9-B .(.9--

C .(.2,--D .(.1,--Que%tion 2, - A .(.1,9-- %.(.>,--- 9 %1-J G %.(.2-,--- F .(.1,---&&& is the correct answer. IAS,9 para 24 states that on derecognition of part of a financial instr#ment+ %a& there shall e an allocation of the carrying amo#nt etween the part derecogni:ed and the part retained % & the difference etween the consideration recei!ed and the carrying amo#nt allocated to the part derecogni:ed shall e recogni:ed in profit or loss. The pre!io#s gains had already een recogni:ed in profit or loss and so are not incl#ded in the calc#lation. See IAS,9 para >2 and A/24.

EA01 R"UND

11.Which OC8 of the following statements est descri es the term 1lia ility1? A An e'cess of e=#ity o!er c#rrent assets B Beso#rces to meet financial commitments as they fall d#e C The resid#al interest in the assets of the entity after ded#cting all its lia ilities D A present o ligation of the entity arising from past e!ents
Que%tion 1 - D The correct answer is AA present o ligation of the entity arising from past e!entsA, as defined in para >9% & of the Framewor,.

12.Are the following statements tr#e or false, according to IAS1 $resentation offinancial statements? %1& ;i!idends paid sho#ld e recognised in the statement of comprehensi!e income. %2& A loss on disposal of assets sho#ld e recognised in the statement of changes in e=#ity. Statement (1) Statement (2) A <alse <alse B <alse Tr#e C Tr#e <alse D Tr#e Tr#e
Que%tion 2 - A A loss on disposal of assets is recognised in the statement of comprehensi!e income eca#se IAS12 $roperty% plant and e)uipment does not permit otherwise %IAS1 para 33&. ;i!idends paid are recognised in the statement of changes in e=#ity %IAS1 para 1-2&.

1,.The Oa)es *ompany has a loan d#e for repayment in si' months1 time, #t Oa)es has the option to refinance for repayment two years later. Oa)es plans to refinance this loan. In which section of its statement of financial position sho#ld this loan e presented, according to IAS1 $resentation of financial statements? (select one answer) A *#rrent lia ilities B *#rrent assets C Con5c#rrent lia ilities D Con5c#rrent assets
Que%tion 12 - C Eeca#se Oa)es oth has the right to roll o!er the loan eyond 12 months for the end of the reporting period and intends to roll it o!er, it sho#ld e presented as a non5c#rrent lia ility per para 4, of IAS1.

1>.Which TWO of the following sho#ld e ta)en into acco#nt when determining the cost of in!entories per IAS2 Inventories? A Storage costs of part5finished goods B Trade disco#nts C Beco!era le p#rchase ta'es D Administrati!e costs

Que%tion 1 - A B The correct answers are trade disco#nts %ded#ct these from p#rchase costs& and storage costs for part5finished % #t not finished& goods. See IAS2 paras 11 and 12.

10.Which OC8 of the following statements est descri es the carrying amo#nt of an asset? A The cost %or an amo#nt s# stit#ted for cost& of the asset less its resid#al !al#e B The amo#nt at which the asset is recogni:ed in the statement of financial position after ded#cting any acc#m#lated depreciation and acc#m#lated impairment losses C The higher of the asset1s net selling price and its !al#e in #se D The fair !al#e of the asset at the date of a re!al#ation less any s# se=#ent acc#m#lated impairment losses
Que%tion 2 - B The correct answer is AThe amo#nt L in the statement of financial position L after acc#m#lated depreciation and L impairment lossesA. IAS12 para 2 defines the carrying amo#nt.

12.Which OC8 of the following statements est descri es the term 1depreciation1? A The systematic allocation of an asset1s cost less resid#al !al#e o!er its #sef#l life B The remo!al of an asset from an entity1s statement of financial position C The amo#nt y which the reco!era le amo#nt of an asset e'ceeds its carrying amo#nt D The amo#nt y which the carrying amo#nt of an asset e'ceeds its reco!era le amo#nt
Que%tion + - A AThe systematic allocation of an asset1s costLA is the correct answer. See IAS12 para 2 for definitions.

14.The $irror *ompany classified a non5c#rrent asset acco#nted for #nder the cost model as held for sale on ,1 ;ecem er 2-72. Eeca#se no offers were recei!ed at an accepta le price, $irror decided on 1 6#ly 2-74 not to sell the asset, #t to contin#e to #se it. In accordance with I<BS0 "on#current assets held for sale and discontinued operations , the asset sho#ld e meas#red on 1 6#ly 2-74 at (select one answer) A the lower of its carrying amo#nt and its reco!era le amo#nt B the higher of its carrying amo#nt and its reco!era le amo#nt C the lower of its carrying amo#nt on the asis that it had ne!er een classified as held for sale and its reco!era le amo#nt D the higher of its carrying amo#nt on the asis that it had ne!er een classified as held for sale and its reco!era le amo#nt
Que%tion 2 - C I<BS0 para 24 in effect re=#ires an entity ceasing to classify an asset as held for sale to remeas#re it as if it had ne!er een held for sale, s# ?ect to an impairment test %the reco!era le amo#nt test& at that date.

13.A rand name that was ac=#ired separately sho#ld initially according to IAS,3 Intangi!le assets, at (select one answer) A reco!era le amo#nt B either cost or fair !al#e at the choice of the ac=#irer C fair !al#e D cost

e recogni:ed ,

Que%tion + - D IAS,3 para 2> states that an intangi le asset sho#ld e recognised initially at cost.

19.The Caylor *ompany has determined that it needs to recognise an impairment loss on each of two non5c#rrent assetsK plant and land. The rele!ant amo#nts are as follows+ Plant -an* Original cost *@4--,--- *@1,>--,--.re!io#s re!al#ations Cil *@>0-,--8'isting carrying amo#nt *@4--,--- *@1,30-,--Impairment loss to e recognised in year *@2--,--*@,--,--According to IAS,2 Impairment of assets, how sho#ld each of the impairment losses e recognised? $lant *and A In profit or loss In profit or loss B In profit or loss In other comprehensi!e income C In other comprehensi!e income In profit or loss D In other comprehensi!e income In other comprehensi!e income
Que%tion . - B IAS,2 paras 2-521 state that impairment losses on assets that ha!e not een re!al#ed are recognised in profit or loss. Impairment losses on re!al#ed assets are treated as a re!al#ation decrease.

2-.The Snowfinch *ompany is closing one of its operating di!isions, and the conditions for ma)ing restr#ct#ring pro!isions in IAS,4 $rovisions% contingent lia!ilities and contingent assets ha!e een met. The clos#re will happen in the first =#arter of the ne't financial year. At the c#rrent year end, the company has anno#nced the formal plan p# licly and is calc#lating the restr#ct#ring pro!ision. Which OC8 of the following costs sho#ld e incl#ded in the restr#ct#ring pro!ision? A Betraining staff contin#ing to e employed B Belocation costs relating to staff mo!ing to other di!isions C *ontract#ally re=#ired costs of retraining staff eing made red#ndant from the di!ision eing closed D <#t#re operating losses of the di!ision eing closed #p to the date of clos#re
Que%tion + - C IAS,4 paras 3-532 re=#ire pro!isions to e made for costs necessarily inc#rred y the restr#ct#ring, #t not those relating to the f#t#re cond#ct of the #siness.