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introduction to financial accounting

Questions and Answers of Introduction To Financial Accounting

Isybisy Limited has identified an impairment loss of €60 million in one of its cash-generating units (CGU). The CGU showed a carrying amount of €160 million and a recoverable amount of €100
You are the financial controller of Vertigo Limited (“Vertigo”), an Irish company that prepares its financial statements to 31 December each year. The following issue needs to be resolved before
Mumford Limited (“Mumford”) prepares its financial statements to 31 December each year.The company has been experiencing trading difficulties in recent years as a consequence of the economic
Given the current economic climate, and in order to retain staff, Fleetfox Limited (“Fleetfox”)offered a two-year interest-free loan of €10,000 to each of its employees on 1 January 2017.One
Kravitz Limited has identified an impairment loss of €100m in one of its cash-generating units (CGU). The CGU showed a carrying amount of €460m and a recoverable amount of€360m at 31 December
Finished goods of dissimilar items at 31 December 2017: Item Cost NRV 123456 1,000 1,400 800 700 2,500 2,800 4 1,800 1,700 5 200 300 6 300 250 6,600 7,150
Inventory should be recorded in the financial statements at 31 December 2017 at: Item 123456 1,000 700 2,500 1,700 200 250 6,350
Patches Limited values inventory at the lower of cost and net realisable value in accordance with IAS 2 Inventories, and at 31 December 2017 the company’s entire inventory is valued at cost in the
RED Limited purchases and re-sells a single product called a widget. Details of the purchases and sales of product widget during March 2018 are as followsRequirement Prepare a table showing the
You are the accounting consultant to a publicly traded company that has four trading subsidiaries:Screws Limited, Brackets Limited, Frames Limited and Concrete Blocks Limited.All the subsidiaries
Details of inventories of five separate products are as follows:Requirement Assuming that none of the above items has been sold at the year-end, value the inventory on the basis of IAS 2 ventories.
Ellen Limited entered into a fixed-price construction contract with no variable component on | January 2015. The contract price, which was determined at inception, is €10,000,000.The contract is
Greek Limited has the following three fixed-price construction contracts, none of which has a variable component. Each contract is considered to contain only one performance obligation which will be
Builders Limited entered into a construction contract with no variable component to build a shopping centre. The contract is considered to contain only one performance obligation which will be
You are the Financial Controller of Dry Limited, a construction company that has the following three incomplete construction contracts. Each contract is considered to contain only one performance
Expert Builders Limited is involved in three different fixed-price construction contracts, none of which has a variablé component, at 31 December 2017:Each contract is considered to contain only one
Zeppelin plc (“Zeppelin”) is an Irish company involved in the manufacture of aeroplanes for both private and commercial use. For internal reporting purposes, the company is divided into two
Cohen Limited has three fixed-price contracts in progress during the year and the following UO details are available for the year ended 31 December 2017.Additional Information:———-— 1.
Bull Limited is currently engaged in three construction contracts, details of which are set out below:The company includes all expenses directly incurred by specific contracts under direct costs.
During the course of examining the draft accounts of Brigade plc for the year ended 31 December 2017, you have noted the following matter.At 31 December 2017, the company was engaged in a fixed-price
. How should loss-making contracts be accounted for in accordance with IFRS 15?
. When should revenue be recognised in accordance with IFRS 15?
. If an observable selling price is not available, what methods does IFRS 15 suggest using to estimate it?
. What is a contract modification, and how is it accounted for, in accordance with TBR Sale:
. What is the transaction price in accordance with IFRS 15?
. What is a contract in accordance with IFRS 15?
Foundation Limited entered into Contract Z, a fixed-price construction contract with no variable component, on 1 September 2017. Contract Z is considered to contain only one performance obligation
Toffer Limited entered into Contact A, a fixed-price construction contract with no variable component, on | January 2016. The contract is considered to contain only one performance obligation which
Foundation Limited entered into Contract Y, a fixed-price construction contract with no variable component, on 1 November 2017. Contract Y is considered to contain only one performance obligation
Foundation Limited entered into Contract X, a fixed-price construction contract with no variable component, on 1 January 2017. Contract X is considered to contain only one performance obligation
Assuming the facts are the same as Example 12.3, except that the amount of variable consideration changes from an expected €11 million to an expected €13 million after contract inception due to
Casement Limited entered into a contract to build both a road and a bridge (assume these represent two separate performance obligations). Casement Limited determined at inception that the contract
Windsor Limited entered into a construction contract to build a football stadium, which is considered to be a single performance obligation (i.e. building the stadium). Windsor Limited has a history
Micro Limited processes and sells a single product. Purchases of raw materials during the year were made at a regular rate of 1,000 tonnes at the beginning of each week. The price was€200 per tonne
Techniques for the measurement of the cost of inventories, such as the ‘retail method’, may be used for convenience if the results approximate cost. The cost of the inventory is determined by
Outline the main differences between IAS 2 and FRS 102, Section 13 /nventories.
. How should inventory be measured in accordance with IAS 2?
A toy shop buys two batches of dolls during its accounting period:Batch 1 purchased in Month 1: 5 @ €10 each; and Batch 2 purchased in Month 2: 5 @ €12 each.During Month 3, three dolls were sold
The following information related to Unipoly plc, a manufacturer of can-openers, for the year ended 31 December 2017.€Direct materials cost of can-opener per unit 1 Direct labour cost of can-opener
DEF plc manufactures mechanical parrots, which trade under the name ‘Parker’. In the year ended 31 December 2017, 10,000 ‘Parkers’ are manufactured and the related costs were:€Materials
explain the principal accounting and disclosure differences between IAS 2 and Section 13 Inventories of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
Bush Limited (“Bush”) prepares its financial statements to 31 December each year. The company purchased a freehold property with an estimated useful economic life of 40 years at a cost of
Blues Limited (“Blues”) prepares its financial statements to 31; December each year. The company manufactures paint, and its operations are divided into two cash-generating units:domestic and
Keano Limited has identified an impairment loss of €60 million in one of its cash-generating units (CGUs). The CGU showed a carrying amount of €160 million-and a recoverable amount of €100
Outline the principal accounting and disclosure differences between IAS 36 and FRS 102, WB ON Section 27.
. Define the term ‘cash-generating unit’.
explain, and applyyhow the recoverable amount of an asset is determined
define the terms ‘cash generating unit’ and ‘impairment loss’;
Analyzing Financial Statements Using the Internet Go to www.gapinc.com to find Gap Inc.'s home page. Select Financials and Media and enter the site. Then, select Annual Reports, and click on the most
Analyzing Starbucks' Financial Statements Refer to the financial statements of Starbucks in the Appendix, especially footnote 1. Depreciation and amortization expense was $237,807,000 for the year
Financial Statement Research Select two distinct industries and identify two companies in each industry. 1. Identify the depreciation methods used by each company. 2. Calculate gross and net plant,
Accumulated Depreciation Form groups of at least four students (this exercise can be done as an entire class, if desired). Individual students, on their own, should select a company and find the
Depreciation Policies and Ethics Some companies have depreciation policies that differ substantially from the norm of their industry. For example, Cineplex Odeon depreciated its theater seats,
Basket Purchase and Intangibles A tax newsletter stated: "When a business is sold, part of the sales price may be allocated to tangible assets and part to a 'covenant not to compete.' How this
Software Development Costs Microsoft, Incorporated, is one of the largest producers of software for personal computers. Special rules apply to accounting for the costs of developing software for sale
Disposal of Equipment Airline Executive reported on an airline as follows: Lufthansa's highly successful policy of rolling over entire fleets in roughly ten years-before the aircrafts have outlived
Gain on Airplane Crash A few years ago, a chair is 727 crashed in Dallas. The crash resulted in a gain of $.11 per share for Delta. How could this happen? Consider the accounting for airplanes.
Disposal of Property and Equipment (Alternate is 8-71.) Rocawen is a leading provider of industrial automation power and controls. The company's annual report indicated that both accelerated and
Disposal of Equipment (Alternate is 8-72.) acquired a new Boeing 727-100 airplane for $26 million. Its expected residual value was $6 million. The company's annual report indicated that straight-line
Change in Service Life Prior to its acquisition by i niedilise, an annual report of contained the following footnote: Note 2, Change in accounting estimate. TWA extended the estimated useful lives of
Capital Expenditures Disputes sometimes arise between the taxpayer and the IRS concerning whether legal costs should be deductible as expenses in the year incurred or be considered as capital
Meaning of Book Value Chavez Company purchased an office building 20 years ago for $1.3 million, $500,000 of which was attributable to land. The mortgage has been fully paid. The current balance
Nature of Research Costs Katherine Mori, a distinguished scientist of international repute, had developed many successful drugs for a well-established pharmaceutical company. Having an
Rental Vehicles The AMERCO System is the holding company for U-Haal International and its subsidiaries. The 2003 annual report included the following footnote: Property, plant and equipment are
Depreciation, Income Taxes, and Cash Flow Mr. Brandt, president of the Bremen Shipping Company, read a newspaper story that stated: "The Frankfurt Steel Company had a cash flow last year of 1,500,000
Depreciation, Income Taxes, and Cash Flow (Alternates are 8-62 and 8-63.) The French auto company, eugen firen, sells the majority of its cars outside France. The company's annual report showed the
Depreciation, Income Taxes, and Cash Flow (Alternates are 8-62 and 8-64.) A recent annual report of Wal-Mart, a major retailing company, listed the following property and equipment including
Depreciation, Income Tax, and Cash Flow (Alternates are 8-63 and 8-64) Sanchez Metal Products Company had the following balances, among others, at the end of December 20X1: Cash, $300,000; Equipment,
Average Age of Assets SBC Communications, Inc. provides local phone services in 13 states, including California, Texas, and Illinois. It is the No. 2 local phone company in the United States after
Reconstruction of Plant Asset Transactions The Ford Motor Company's footnotes included (S in millions): Ford Motor Company Property December 31 2003 2002 Land, plant, and equipment $60,113 $52,981
Depreciation Asahi Kasel Corporation, has sales nearly the equivalent of $9 billion U.S. dollars. The company included the following in its balance sheet (yen in millions): Property, plant and
Depreciation Practices The annual report of General Mills, maker of Wheaties, Cheerios, and Betty Crocker baking products, for the year ended May 25, 2003 contained the following ($ in
Depletion A zinc mine contains an estimated 900,000 tons of zinc ore. The mine cost $14.4 million. The tonnage mined during 20X4, the first year of operations, was 120,000 tons. 1. What was the
Computation of Impairment on Long-Lived Assets Vincent Corporation acquired an office building that it rents to a variety of small businesses. The building had an original cost of $15 million, and at
Various Intangible Assets (Alternative is 8-53.) Consider the following: 1. On December 29, 2000, Sony Corporation purchased a patent on some broadcasting equipment for $800,000. The patent has 16
Various Intangible Assets and Impairment (Alternative is 8-54.) Consider the following: 1. On December 29, 20X1, a publisher acquires the paperback copyright for a book by Steven King for $3 million.
Gain or Loss on Disposal of Equipment-Cash Flow Implications Icarus Software Company sold five computers. It had purchased the computers 5 years ago for $120,000, and accumulated depreciation at the
Gain or Loss on Sale of Fixed Assets Luigi's Pizza Company purchased a delivery van in early 20XI for $45,000 and depreciated it on a straight-line basis over its useful life of 5 years. Estimated
Disposal of Equipment The Outpatient Clinic of Eastside Hospital acquired X-ray equipment for $29,000 with an expected useful life of 5 years and a $4,000 expected residual value. The hospital uses
Repairs and Improvements Yakima Wheat Company acquired harvesting equipment for $90,000 with an expected useful life of 5 years and a $10,000 expected residual value. Yakima Wheat used straight-line
Capital Expenditures Consider each of the following transactions. For each one, indicate whether it is a capital expenditure (C) or an expense in the current year (E).a. Paid a consultant to advise
Classic Case from the Business Press A news story concerning urga stated: Yet the $7.5 billion that John J. Riccardo, its money man, estimates the company will need to finance a recovery over the
Leasehold Improvements Pre has a 10-year lease on space in a suburban shopping center. Near the end of the sixth year of the lease, Pizza Hut exercised its rights under the lease, removing walls and
MACRS versus Straight-Line Depreciation Chicago Machinery bought special tooling equipment for $1.8 million. The useful life is 5 years, with no residual value. For tax purposes, assume MACRS
Depreciation, Income Taxes, and Cash Flow Fleck Company began business with cash and common stockholders' equity of $150,000. The same day, December 31, 20X1, the company acquired equipment for
Revision of Useful Life and Residual Value Estimates Nowling Company buys a machine for $75,000 on January 1, 2004. A residual value of $5,000 and a useful life of 10 years are estimated at the
Accumulated Depreciation Oregon Steel Mills reported the following items on its December 31, 2003 balance sheet ($ in thousands): Property, plant, and equipment, net $477,581 Accumulated depreciation
Balance Sheet Presentation of PPE Boeing had the following items listed under property, plant, and equipment as of December 31, 2003 (S in millions): Construction in progress Land $ 943 457 Net
Fundamental Depreciation Policies (Alternates are 8-36 through 8-38.) Suppose the printing department of Safeco Insurance acquired a new press for $280,000. The equipment's estimated useful life is 8
Comparison of Popular Depreciation Methods (Alternates are 8-36, 8-37, and 8-39.) Port Angeles Cedar Company acquired a saw for $32,000 with an expected useful life of 5 years and a $2,000 expected
Units-of-Production, Straight-Line, and DDB (Alternatives are 8-36, 8-38, and 8-39.) Yukon Mining Company buys special drills for $440,000 each. Each drill can extract about 150,000 tons of ore,
Fundamental Depreciation Approaches (Alternates are 8-37 through 8-39.) U-Haul acquired new trucks for $1.2 million. Their estimated useful life is 4 years, and estimated residual value is $200,000.
Unit Depreciation Method The Rockland Transport Company has many trucks that have an estimated useful life of 250,000 miles. The company computes depreciation on a mileage basis. Suppose Rockland
Simple Depreciation Computations A company acquired the following assets:a. Conveyor, 5-year useful life, $38,000 cost, straight-line method, $5,000 expected residual value.b. Truck, 3-year useful
Journal Entries for Depreciation (Alternates are 8-31 and 8-32.) The Coca-Cola Company's balance sheet of December 31, 2003 included the following (S in millions): Property, plant, and equipment Less
Journal Entries for Depreciation (Alternates are 8-31 and 8-33.) The Alaska Airlines balance sheet dated June 30, 2003 included the following ($ in millions): Property and equipment Flight equipment
Journal Entries for Depreciation (Alternates are 8-32 and 8-33.) On January 1, 20X1, the Dayton Auto Parts Company acquired nine identical assembly robots for a total of $594,000 cash. The robots had
Basket Purchase of Sports Franchise Paul Allen, co-founder of Microsoft, purchased the Seattle Seahawks, an NFL football team. Assume a total purchase price of $300 million. The largest assets are
Basket Purchase On February 21, 20X2, Speed-Tune, an auto service chain, acquired an existing building and land for $720,000 from a local gas station that had failed. The tax assessor had placed an
Government Equipment An office of the IRS acquired some used computer equipment. Installation costs were $8,000. Repair costs prior to use were $9,000. The purchasing manager, with a salary of

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