0.91 End of year End of year 2 End of year 3 0.75 b) Telescope owned a 100% subsidiary, Tillia that is treated as a cash generating unit. On 31 March 2019, there was an industrial accident (a gas explosion) that caused damage to some of Tillia's plant. The assets of Tillia immediately before the accident were: 5000 Goodwill 1 800 Patent 1 200 4 000 Factory building Plant 3 500 Receivables and cash 1500 12 000 As a result of the accident, the recoverable amount of Tillia is $6,7m The explosion destroyed to the point of no further use) an item of plant that had a carrying amount of $500 000. Tillia has an open offer from a competitor of Sim for its patent. The receivable and cash are already stated at their fair value less costs to sell (net realizable value). Required: a) Calculate the carrying amounts of the assets in a) and b) above at 31 March 2019 after applying any impairment losses. (11) b) Explain what is meant by an impairment review. Your answer should include assets that that may form a cash generating unit. (4) QUESTION 3 (IAS 16) (15) Fire Ltd commenced in 2019 with the manufacturing of wood products at a new plant. The plant was purchased on 1 January 2019 for $700 000. During January 2019, some equipment was installed and other equipment was modified. Installation and modification costs incurred Page 12 of 16 ASSIGNMENT QUESTION I (LAS 2) Parta According to IAS 2 Inventories the general rule for valuation of inventories is that inventories are valued at the lower of cost or net realisable value. The following information relates to an auto parts dealer in Gweru who hold inventory types A, B, C, and D Details BC Selling price of inventory per unit 58,000 $15,000 $10,000 $25,000 Purchase price of inventory per unit $5,000 $7,000 58,000 $15,000 Value Added Tax $1,000 $2,000 $1,000 $4,000 Agent's commission per unit 550 530 525 570 Transportation cost per unit 550 550 550 550 Import duties per unit $500 $1,000 $1,500 $2,000 Number of inventory units held as closing 15,000 2,000 5.500 100 stock Required: Determine the value to be reflected in the financial statements for the following types of inventory A, B, C and D (16) Part b IAS 2 inventories has a valuation rule for inventories, with the following information from Daisy's Petals who produces a single homogenous product calculate the value to be recognised in the financial statements if cost of manufacture was $2,900,000 Additional information: Required: Costs of completion are expected to cost $500,000 Selling expenses are expected to cost $100,000 Determine the valuation for Daisy's Petals inventory to be recognised. Consider the following scenarios which are independent from each other in determining the value of inventories. Page 10 of 16 a) The sales value of the inventory is 9,700,000. (3) b) The sales value is $4,000,000 ) Parte TMZ manufactures ays. The following information relates towary 2018 Raw materials of S100 000were used in the manufacturing process during January Factory wages for January paid in cash $200 000 Electricity for January paid in cash 580 000 (only 80% relates to the factory) Depreciation on factory machines $40 000-70% of the time this machinery was used in producing inventory whereas 30% of the time it was standing idle. Depreciation on office equipment S10 000 -25% of the office equipment is used by factory administration staff and 75% is used by the head office administration staff Required: Journalise the above information. (6) QUESTION 2 (IAS 36) (15) a) Telescope acquired an item of plant at a cost of $800 000 on 1 April 2017 that is used to produce and package pharmaceutical pills. The plant had an estimated residual value of $50 000 and an estimated life of 5 years, neither of which has changed. Telescope uses straight line depreciation. On 31 March 2019, Telescope was informed by a major customer (who buys products produced by the plant) that it would not be placing orders with Telescope. Even before this information was known, Telescope had been having difficulty finding work for this plant. It now estimates that the net cash inflows earned from the plant for the next 3 years will be: $ 000 Year ended: 220 31 March 2020 31 March 2021 180 31 March 2022 170 On 31 March 2022, the plant is still expected to be sold for its estimated realizable value. Telescope has confirmed that there is no market, in which to sell the plant at 31 March 2022 Telescope's cost of capital is 10% and the following values should be used: Value of $1 at: Page 11 of 16 End of year 1 End of year 2 End of year 3 b) Telescope owned a 100% subsidiary, Tillia that is treated as a cash generating unit. On 31 March 2019, there was an industrial accident ( explosion) that caused damage to some of Tilia's plant. The assets of Tintin immediately before the accident were: 5000 Goodwill 1 800 Patent 1 200 Factory building Plant 4 000 3 500 1 500 12 000 Receivables and cash As a result of the accident, the recoverable amount of Tillia is $6,7m to the point of no further use) an item of plant that had a carrying The explosion destroyed amount of $500 000 Tillia has an open offer from a competitor of Sim for its patent. The receivable and cash are already stated at their fair value less costs to sell (net realizable value). Required: a) Calculate the carrying amounts of the assets in a) and b) above at 31 March 2019 after applying any impairment losses. (11) b) Explain what is meant by an impairment review. Your answer should include assets that that may form a cash generating unit. (4) QUESTION 3 (IAS 16) (15) Fire Ltd commenced in 2019 with the manufacturing of wood products at a new plant. The plant was purchased on 1 January 2019 for $700 000. During January 2019, some equipment was installed and other equipment was modified. Installation and modification costs incurred Page 12 of 16 Amounted to $130 000. For security reasons was erected at the plant at a cost of 520 000 he plant was ready for use on 1 Feb 19 An o s held in the plan February 2019 at a cost of $50 000 in order to entertain customers and to introduce the new products to be manufactured at this plant. Production only commenced on March 2019. The plant has a useful life of 10 years and the residual value was estimated at $200 000 Expected scrapping costs amount to $140 000 (discounted present value of scrapping costs equals S100 000). Assume that the provision for scrapping costs will be raised in accordance with IAS 37 At the end of August 2019 heavy rain caused severe damage to the houses of the employees in the region. Management granted special leave to all the employees of the plant to attend to the repair of their houses. The plant stood idle during September 2019. The company's year-end is 31 December Required: a) Calculate the cost of the plant. (5) b) Calculate the depreciable amount of plant. (3) c) Calculate depreciation for the year ended 31 December 2019. (5) d) Calculate the carrying amount of the plant on 31 December 2019.(2) 0.91 End of year End of year 2 End of year 3 0.75 b) Telescope owned a 100% subsidiary, Tillia that is treated as a cash generating unit. On 31 March 2019, there was an industrial accident (a gas explosion) that caused damage to some of Tillia's plant. The assets of Tillia immediately before the accident were: 5000 Goodwill 1 800 Patent 1 200 4 000 Factory building Plant 3 500 Receivables and cash 1500 12 000 As a result of the accident, the recoverable amount of Tillia is $6,7m The explosion destroyed to the point of no further use) an item of plant that had a carrying amount of $500 000. Tillia has an open offer from a competitor of Sim for its patent. The receivable and cash are already stated at their fair value less costs to sell (net realizable value). Required: a) Calculate the carrying amounts of the assets in a) and b) above at 31 March 2019 after applying any impairment losses. (11) b) Explain what is meant by an impairment review. Your answer should include assets that that may form a cash generating unit. (4) QUESTION 3 (IAS 16) (15) Fire Ltd commenced in 2019 with the manufacturing of wood products at a new plant. The plant was purchased on 1 January 2019 for $700 000. During January 2019, some equipment was installed and other equipment was modified. Installation and modification costs incurred Page 12 of 16 ASSIGNMENT QUESTION I (LAS 2) Parta According to IAS 2 Inventories the general rule for valuation of inventories is that inventories are valued at the lower of cost or net realisable value. The following information relates to an auto parts dealer in Gweru who hold inventory types A, B, C, and D Details BC Selling price of inventory per unit 58,000 $15,000 $10,000 $25,000 Purchase price of inventory per unit $5,000 $7,000 58,000 $15,000 Value Added Tax $1,000 $2,000 $1,000 $4,000 Agent's commission per unit 550 530 525 570 Transportation cost per unit 550 550 550 550 Import duties per unit $500 $1,000 $1,500 $2,000 Number of inventory units held as closing 15,000 2,000 5.500 100 stock Required: Determine the value to be reflected in the financial statements for the following types of inventory A, B, C and D (16) Part b IAS 2 inventories has a valuation rule for inventories, with the following information from Daisy's Petals who produces a single homogenous product calculate the value to be recognised in the financial statements if cost of manufacture was $2,900,000 Additional information: Required: Costs of completion are expected to cost $500,000 Selling expenses are expected to cost $100,000 Determine the valuation for Daisy's Petals inventory to be recognised. Consider the following scenarios which are independent from each other in determining the value of inventories. Page 10 of 16 a) The sales value of the inventory is 9,700,000. (3) b) The sales value is $4,000,000 ) Parte TMZ manufactures ays. The following information relates towary 2018 Raw materials of S100 000were used in the manufacturing process during January Factory wages for January paid in cash $200 000 Electricity for January paid in cash 580 000 (only 80% relates to the factory) Depreciation on factory machines $40 000-70% of the time this machinery was used in producing inventory whereas 30% of the time it was standing idle. Depreciation on office equipment S10 000 -25% of the office equipment is used by factory administration staff and 75% is used by the head office administration staff Required: Journalise the above information. (6) QUESTION 2 (IAS 36) (15) a) Telescope acquired an item of plant at a cost of $800 000 on 1 April 2017 that is used to produce and package pharmaceutical pills. The plant had an estimated residual value of $50 000 and an estimated life of 5 years, neither of which has changed. Telescope uses straight line depreciation. On 31 March 2019, Telescope was informed by a major customer (who buys products produced by the plant) that it would not be placing orders with Telescope. Even before this information was known, Telescope had been having difficulty finding work for this plant. It now estimates that the net cash inflows earned from the plant for the next 3 years will be: $ 000 Year ended: 220 31 March 2020 31 March 2021 180 31 March 2022 170 On 31 March 2022, the plant is still expected to be sold for its estimated realizable value. Telescope has confirmed that there is no market, in which to sell the plant at 31 March 2022 Telescope's cost of capital is 10% and the following values should be used: Value of $1 at: Page 11 of 16 End of year 1 End of year 2 End of year 3 b) Telescope owned a 100% subsidiary, Tillia that is treated as a cash generating unit. On 31 March 2019, there was an industrial accident ( explosion) that caused damage to some of Tilia's plant. The assets of Tintin immediately before the accident were: 5000 Goodwill 1 800 Patent 1 200 Factory building Plant 4 000 3 500 1 500 12 000 Receivables and cash As a result of the accident, the recoverable amount of Tillia is $6,7m to the point of no further use) an item of plant that had a carrying The explosion destroyed amount of $500 000 Tillia has an open offer from a competitor of Sim for its patent. The receivable and cash are already stated at their fair value less costs to sell (net realizable value). Required: a) Calculate the carrying amounts of the assets in a) and b) above at 31 March 2019 after applying any impairment losses. (11) b) Explain what is meant by an impairment review. Your answer should include assets that that may form a cash generating unit. (4) QUESTION 3 (IAS 16) (15) Fire Ltd commenced in 2019 with the manufacturing of wood products at a new plant. The plant was purchased on 1 January 2019 for $700 000. During January 2019, some equipment was installed and other equipment was modified. Installation and modification costs incurred Page 12 of 16 Amounted to $130 000. For security reasons was erected at the plant at a cost of 520 000 he plant was ready for use on 1 Feb 19 An o s held in the plan February 2019 at a cost of $50 000 in order to entertain customers and to introduce the new products to be manufactured at this plant. Production only commenced on March 2019. The plant has a useful life of 10 years and the residual value was estimated at $200 000 Expected scrapping costs amount to $140 000 (discounted present value of scrapping costs equals S100 000). Assume that the provision for scrapping costs will be raised in accordance with IAS 37 At the end of August 2019 heavy rain caused severe damage to the houses of the employees in the region. Management granted special leave to all the employees of the plant to attend to the repair of their houses. The plant stood idle during September 2019. The company's year-end is 31 December Required: a) Calculate the cost of the plant. (5) b) Calculate the depreciable amount of plant. (3) c) Calculate depreciation for the year ended 31 December 2019. (5) d) Calculate the carrying amount of the plant on 31 December 2019.(2)