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Page 2 MOCK EXAM BUS238 (2019) SECTION A Answer ONE question from the TWO in this section Question 1 Truck plc is a distributor of parts for trucks. The financial director of Truck plc is currently finalising the financial statements for the year ended 28 February 20X8. The trial balance at that date is as follows: TRUCK plc Trial Balance at 28 February 20X8 Debit Credit Ordinary share capital ($1 par value) 3,250 Share premium 150 Retained Earnings 1,424 Lease obligation 2,000 Accounts payable 975 Equipment: Cost 1,320 Leased vehicles: Cost 2,000 Investment property: Fair value 1,970 Accounts receivable 1,320 Inventory 1,250 Cash at bank 1, 140 Sales 10,230 Cost of sales 4,970 Rental income 100 Salaries and wages 1,300 Other costs 2,859 18, 129 18,129 The following relevant information needs to be taken into account: . The company classifies its expenses using the function method. The financial director has identified three functions, namely sales, administration and distribution.BUSZ38(2019) Page 3 0 Salaries and wages of 1 ,300,000 are allocated 800,000 to the administration function and 500,000 to the distribution function. The other costs of 2,859,000 are allocated 1,859,000 to the administration function and 1,000,000 to the distribution function. These costs include expenses for rent, advertising and repairs and are all individually immaterial. o The equipment is all used within the administrative function and the leased vehicles are all used within the distribution function. . All the equipment was purchased on 1 March 20X? at a cost of 1,320,000. The equipment is depreciated over its useful life of ve years on the straight line basis. The estimated residual value is zero. a On 28 February 20X8, the investment property was measured at its fair value of 2,100,000. The investment property was purchased on 1 September 20x5 and is held to earn rental income. The investment property is measured using the fair value model. 0 On 1 March 20x7 Truck plc entered into a lease agreement with LTC plc for the lease of three vehicles. The fair value of the vehicles at the inception of the lease is 2,000,000. The lease agreement requires Truck plc to pay ve instalments of 450,000 in arrears on 28 February each year. The implicit interest rate is 10% per annum. The estimated useful life of the vehicles is ve years and the estimated residual value is zero. The company has not accounted for the above lease agreement other than recognising the lease asset and lease obligation at the inception of the lease. a The tax expense for the year has not been recorded. The amount has been correctly calculated to be 220,000. - Dividends of eight pence per share were declared and approved at a shareholder meeting on 25 March 20X8. The nancial statements were authorised for issue on 30 March 20X8. Required: Prepare the following nancial statements for Truck plc for the year ended 28 February 20X8 in accordance with the requirements of relevant International Financial Reporting Standards: a) The Statement of Comprehensive Income. (Present your answer to the nearest 000) [20 marks] Page 4 MOCK EXAM BUS238 (2019) b) The Statement of Financial Position. (Present your answer to the nearest E000) [21 marks] c) Prepare the following notes to the financial statements in accordance with International Financial Reporting Standards. i. Dividends [3 marks] d) Define the term "investment property" and explain the two models permitted by international standard IAS40 for the measurement of the investment property after its initial recognition. [6 marks] [Total 50 marks]
