Explain the required IFRS accounting treatment of Issues (i) to (iii) above in the financial statements of the respective companies at year-end. Prepare all relevant calculations and set out the required adjustments.

i. On 1 May 2020 Moreton Ltd purchased a consignment of goods for resale from Italy. The cost of the order was €250,000. €100,000 was paid on 1 June 2020 and the balance is due on 1 August 2020. The £/€ exchange rate has fluctuated as follows:

€1:£1

1 May 2020 0.85

1 June 2020 0.81 

30 June 2020 0.87

The payment in June cost £81,000, which has been debited to payables. No accounting has been done for exchange differences. The financial year ends on 30 June 2020.

ii. A patent was acquired on 1 July 2018 and is being amortised over its estimated useful life of 10 years. Amortisation charges on this patent are presented in the cost of sales. The current balance of 32,000 includes amortisation up to 30 June 2020. On 1 January 2021, the directors decided to sell this patent to a competitor, as the company wishes to move out of that particular market sector.

The patent was expected to sell for £22,000 with selling costs of £1,000. A buyer was found on 1 June 2021 at that price, although the sale was not

completed until after the year-end. No adjustments to the financial statements have been made in respect of this patent. On 1 January 2021, the patent met the 'held for sale' criteria of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, and continued to do so as at the year-end.

iii. On 1 April 2019 Zeal plc sold equipment to Flatford Ltd for £360,000. The contract included after-sales support to be provided by Zeal plc for two years from the date of sale. These are to be considered as separate performance obligations. The support will cost Zeal plc £16,000 pa to deliver and it would normally expect to make a 20% gross profit margin on the provision of such services. Flatford Ltd undertook to pay the amount due in three equal instalments on 1 April, 1 July and 1 October 2019. The first two instalments have been received and the cost of after-sales support has been included in the cost of sales. Zeal plc has credited £360,000 to revenue in respect of this sale.