Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Part A IAS 8 examines and prescribes the treatment of changes in accounting policies, changes in accounting estimates and the correction of prior period errors.
Part A IAS 8 examines and prescribes the treatment of changes in accounting policies, changes in accounting estimates and the correction of prior period errors. Define the following and in each case state the impact, if any, on the prior and current year financial statements. i. Change in accounting policies. (4 Marks) ii. Change in accounting estimates. Part B Define the following in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets: i. Contingent liability. ii. Provision (4 Marks) Part C The directors of Barry's Motor plc are unsure about the correct accounting treatment of the following items in the financial statements for the year ended 31 October 2021. (1) Damaged finished goods for resale have been included in the inventory (stock) valuation at an original cost of 52000. These goods will be sold at the original cost plus 20%. However, before sale, the stock will need to be repaired at an additional cost of 12500. (2) 60,000 of Barrys own personal health care membership has been included in the companies administration costs (3) A credit customer who owed 35000 at the year ended 31 October 2021 was declared bankrupt on 9 November 2021, before the financial statements had been approved by the Board of Directors. i. Identify the accounting standard to be applied to each of the items (1) to (3). (3 marks) ii. Explain, with reference to the relevant accounting standard, how each of the items (1) to (3) should be treated in the financial statements. ( 9 marks) (Total marks: 20 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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