Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Explain the most appropriate IFRS financial reporting treatments for each of the following issues. Each business is unrelated and is preparing its financial statements
Explain the most appropriate IFRS financial reporting treatments for each of the following issues. Each business is unrelated and is preparing its financial statements for the year ended 30 June 2021. For each issue, explain and justify the required accounting requirements, with supporting calculations where required. (i) A building was purchased on 1 January 2021 with the intention of using it as Fife Ltd's head office. The building had a remaining useful life of 25 years and cost 5 million on 1 January 2021. A 1 million government grant towards the cost of the building was received on the same day. Buildings held as non-current assets are depreciated on a 'straight-line' basis. Land is not depreciated. Fife Ltd's directors require an explanation on how to account for the government grant including any choices available and an understanding of the effect of the choices on profit. (ii) (7 marks) During the year, Wilton Ltd sold a large item of plant to Langton Ltd, an unconnected company. Proceeds of the sale are to be received in instalments from Langton Ltd as follows: Deposit - received 1 July 2020 Balance - due 1 July 2023 1,800,000 16,200,000 18,000,000 The sale took place on 1 July 2020 at which point the 1.8 million deposit was received by Wilton Ltd and immediately accounted for within revenue. The directors of Wilton Ltd have done nothing with the remaining balance due as they are unsure of the appropriate accounting treatment. The time value of money is considered material, requiring appropriate adjustment in accordance with the relevant accounting standard. Prevailing interest rates are 3% per annum. (6 marks) (!!!) Dumfries plc had the following loan finance in place during the year: 2 million of 7% loan finance 3 million of 9% loan finance During the year it constructed a new overseas facility, funded from existing borrowings. This cost 2 million and took nine months to complete. All borrowing costs have been charged to profit or loss. (iv) (6 marks) Crowie Ltd made a sale of inventory on 6 June 2021 to a customer in Portugal and the invoice was raised in the sum of 100,000 euros. The invoice was settled by the customer on 1 August 2021. Exchange rates were as follows: 6 June 2021 30 June 2021 1 August 2021 1 = 1.20 euros 1 = 1.10 euros 1 - 1.15 euros
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started