Q1. Cuddly plc's closing inventory consists of 1,000 teddy bears purchased for 10,000. Ninety of these teddy bears were damaged due to a leakage in the warehouse ceiling. If repaired at a cost of 2 each, these teddy bear could be sold for 8 each.

What amount of closing inventory should be reported in the financial statements of Cuddly plc?

9,720

10,000

9,640

720

Q2. As at 31st March 2020 a manufacturer reported at 284,000 machinery which originally cost 480,000. 90,000 had been paid for a new machine on 1st July 2020 and on 1st October a machine which cost 80,000 on 1st January 2017 was sold for 36,000. Annual depreciation is at 10% of cost using the straight-line method. What is the carrying value of machinery as at 31st March 2021 and the gain or loss on the disposal of machinery?

Carrying value: 490,000; Gain/Loss: 14,000 gain

Carrying value: 265,250; Gain/Loss: 18,000 loss

Carrying value: 273,250; Gain/Loss: 14,000 loss

Carrying value: 265,250; Gain/Loss: 18,000 gain

Q3. Rachel manufactures surgical gloves. Upon receiving an order from a hospital for supplying them with their requirements for three years ending on 31st December 2024, she raised an invoice for 15,000 and has accounted for it by crediting Sales account and debiting Receivables account. For preparing the financial statements in respect of the year ended 31st December 2022 the adjusting entries required are:

Debit Sales Account and credit Receivables account with 10,000

Debit Sales account and credit Deferred income account with 10,000

Debit Sales account and credit Cash account with 10,000

Debit Receivables account and credit Deferred Income account with 10,000

Q4. The Up To Heaven Co. provides service contracts to customers for maintenance of their elevator systems. On 1 October 2020 it agrees a four year contract with a major customer for 169,000. Costs over the period of the contract are reliably estimated at 56,333.

Under IAS 18 - 'Revenue', how much revenue should the company recognise in the income statement in the year ended 31 December 2020?

3,521

42,250

10,562

14,083

Q5. Jonathan and Shabila Trevelyan run a bus company with a 30 June accounting year end. On 1 March 2006 they signed a one year contract worth 72,000 to promote a local football team by repainting its buses each quarter to advertise different aspects of the team's activities. The buses were first painted on 1 May 2006 and the second repainting was made on 1 August 2006.

What revenue in relation to this contract should be recognised by Jonathan and Shabila for the year ended 30 June 2006?

24,000

12,000

18,000

72,000

Q6. Qalam Ltd has entered into a four year fixed price construction contract to build a factory. The total contract value is 60m and the estimated costs are 48m.

At the end of the first year, Qalam Ltd can estimate the outcome of the contract reliably. It has received cash payments for 26.7m and incurred costs for 18m.

The revenues related to this contract recognised in the first year are:

18m

8m

22.5m

12m

Q7. During the year ended 31 December 2020, Kalam Ltd. carried out the following transactions:

(a) purchased PPE for 26m

(b) paid dividends for 10m in cash

(c) purchased own shares totalling 90m

(d) spent 50m on operating expenses, of which 20m was paid in cash.

Which one of the following entries would be incorrect on the statement of cashflows?

Operating activities +20m

Financiaing activities +90m

Investing activities -26m

Operating activities -10m

Q8. S, a parent company, acquired T, an unincorporated company, for 2.8m. A fair value exercise performed on Ts net assets at the date of purchase showed:

m

Intangible Identifiable Asset 500

Inventory 300

Trade Receivables less payables 200

PPE 3,000

4,000

How should the purchase of S be reflected in the CSOFP of S?

Record the net assets at their values shown above and credit profit and loss with 1.2m

Record the net assets at their values shown above and consolidated goodwill with 1.2m

Write of the intangible asset, record the remaining assets at the values shown above, and credit profit and loss with 700,000

Record the purchase as a financial asset investment at 2.8m