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ND
2 Annual Regional Convention 2008
QUIZ BEE PA1 & TOA
AVERAGE ROUND
2. The Hopkins Company is a manufacturing company. The cost per unit of an item
of inventory is shown on its card as follows:
PHP
Materials 30
Production labor costs 33
Production overheads 12
General administration costs 10
Marketing costs 5
According to IAS2 Inventories, what is the value of one completed item of
inventory in Hopkins's statement of financial position?
a. PHP63
b. PHP85
c. PHP75
d. PHP90
Question 11 - C
PHP75 is the correct answer.
IAS2 paras 10-12 define the cost of inventory. In this example the cost
includes materials, production labor and production overheads, but not
general administration or marketing costs.
3. On 1 January 20X8 The Ebro Company commenced trading to provide key skills
education facilities in a region identified for technology development. Also on 1
January 20X8, the company received two grants from its government for setting
up its operations in this location:
Grant (a) was paid to give financial assistance for start-up costs already
incurred.
Grant (b) was paid to subsidize the costs of purchasing computer software over
the five-year period. The company is almost certain to keep the facilities
operational for the next five years.
6. The Coral Company accounts for non-current assets using the cost model. On 20
July 20X7 Coral classified a non-current asset as held for sale in accordance with
IFRS5 Non-current assets held for sale and discontinued operations. At that date
the asset's carrying amount was PHP14,500, its fair value was estimated at
PHP21,500 and the costs to sell at PHP1,450. The asset was sold on 18 October
20X7 for PHP21,200. In accordance with IFRS5, at what amount should the asset
be stated in Coral's statement of financial position at 30 September 20X7?
A PHP20,050
B PHP21,500
C PHP21,200
D PHP14,500
Question 8 - D
IFRS5 para 15 requires that a non-current asset held for sale should be
stated at the lower of (i) the carrying amount and (ii) the fair value less costs
to sell.
9. The White Company set up a defined benefit post-employment plan with effect
from 1 January 20X7. In the first year the expected return on plan assets was
PHP5,000, the actual return on plan assets was PHP4,000, the current service cost
was PHP12,000 and White's contributions paid into the plan were PHP7,500.
What is the net expense to be recognized in profit or loss for the year ended 31
December 20X7, according to IAS19 Employee benefits?
A PHP8,000
B PHP3,500
C PHP7,000
D PHP2,500
Question 11 - C
The amounts to be recognized as an expense in profit or loss are the current
service cost less the expected return on plan assets. See IAS19 para 61.
Note that the difference between the expected and the actual return on plan
assets is an actuarial loss, while the employer contributions increase plan
assets.
10. The Pinder Company is completing the preparation of its draft financial
statements for the year ended 31 May 20X7. On 24 July 20X7, a dividend of
PHP175,000 was declared and a contractual profit share payment of PHP35,000
was made, both based on the profits for the year to 31 May 20X7. On 20 June
20X7, a customer went into liquidation having owed the company PHP34,000 for
the past 5 months. No allowance had been made against this debt in the draft
financial statements. On 17 July 20X7, a manufacturing plant was destroyed by
fire, resulting in a financial loss of PHP260,000.
According to IAS10 Events after the reporting period, which TWO amounts should
be recognized in Pinder's profit or loss for the year to 31 May 20X7 to reflect
adjusting events after the end of reporting period?
A PHP175,000 dividend
B PHP35,000 bonus
C PHP34,000 allowance for uncollectible trade receivables
D PHP260,000 loss on manufacturing plant
Question 7 - B & C
The correct answers are PHP35,000 bonus and PHP34,000 allowance.
See IAS10 paras 9, 12 and 22. Also, dividends are recognized in the
statement of changes in equity, not profit or loss