Question 1: (10 marks) A York operates in the oil industry and is regularly involved in the contamination of land, seas and rivers given the nature of the business. It does however have a publicised environmental policy on its website and in its annual report that states that it will clean up any environmental damage incurred. It is currently involved in three major projects where the costs of cleaning up the contamination and the local laws regarding environmental clean-up are given. Environmental clean-up costs $4 million $5 million $6 million Law enforces the clean-up of environmental damage No law exists for the clean-up of environmental damage Law to enforce clean-up of environmental damage will come into force in the next accounting period No law enforce clean- u nting period Explain how York should account for the above environmental clean-up costs in its financial statements. Answer B. The following two issues relate to Suliman Co's mining activities: Issue 1: Suliman Co began operating a new mine in January 2017 under a five-year government licence which required Suliman Co to landscape the area after mining ceased at an estimated cost of $100,000. Issue 2: During 2018, Suliman Co's mining activities caused environmental pollution on an adjoining piece of government land. There is no legislation which requires Suliman Co to rectify this damage, however, Suliman Co does have a published environmental policy which includes assurances that it will do so. The estimated cost of the rectification is $1,000,000. In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, Can Suliman Co recognize provision for the two issues in the financial statements for the year ended 31 December 20X4? Answer C. A company has a legal obligation to remove an asset after it has finished with it in 8 years time. How is this dealt with in the accounts? Solution D. At 31 May 2018 Moo was being sued by a supplier over a disputed contract Moo's solicitors advise that the supplier is more likely to be successful and that damages of $100,000 will be awarded against them. How should this be dealt with in the accounts? Solution Question 2: (4 marks) a. 'Short-Term Obligations Expected to be Refinanced can be Excluded from current liabilities if certain conditions are met Explain with examples these conditions? b. Mariam has a $25,000 short-term obligation due on March 1, 2016. The CFO discussed with its lender whether the payment could be extended to March 1, 2018. An agreement is reached on December 1, 2016, to change the loan terms to extend the obligation's maturity to March 1. 2018. The financial statements are authorized for issuance on April 1, 2017. What should the short-term obligation be classified, assuming the financial of the company ended 314 December. Question 3: (8 marks) a) Prepare the journal entries for the following transactions in the records of all companies (VAT 5%): . Company A Sold taxable goods to Company B for 250. - Company B sold it to company for 500. Company C sold it to consumers for 600. Question 1: (10 marks) A York operates in the oil industry and is regularly involved in the contamination of land, seas and rivers given the nature of the business. It does however have a publicised environmental policy on its website and in its annual report that states that it will clean up any environmental damage incurred. It is currently involved in three major projects where the costs of cleaning up the contamination and the local laws regarding environmental clean-up are given. Environmental clean-up costs $4 million $5 million $6 million Law enforces the clean-up of environmental damage No law exists for the clean-up of environmental damage Law to enforce clean-up of environmental damage will come into force in the next accounting period No law enforce clean- u nting period Explain how York should account for the above environmental clean-up costs in its financial statements. Answer B. The following two issues relate to Suliman Co's mining activities: Issue 1: Suliman Co began operating a new mine in January 2017 under a five-year government licence which required Suliman Co to landscape the area after mining ceased at an estimated cost of $100,000. Issue 2: During 2018, Suliman Co's mining activities caused environmental pollution on an adjoining piece of government land. There is no legislation which requires Suliman Co to rectify this damage, however, Suliman Co does have a published environmental policy which includes assurances that it will do so. The estimated cost of the rectification is $1,000,000. In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, Can Suliman Co recognize provision for the two issues in the financial statements for the year ended 31 December 20X4? Answer C. A company has a legal obligation to remove an asset after it has finished with it in 8 years time. How is this dealt with in the accounts? Solution D. At 31 May 2018 Moo was being sued by a supplier over a disputed contract Moo's solicitors advise that the supplier is more likely to be successful and that damages of $100,000 will be awarded against them. How should this be dealt with in the accounts? Solution Question 2: (4 marks) a. 'Short-Term Obligations Expected to be Refinanced can be Excluded from current liabilities if certain conditions are met Explain with examples these conditions? b. Mariam has a $25,000 short-term obligation due on March 1, 2016. The CFO discussed with its lender whether the payment could be extended to March 1, 2018. An agreement is reached on December 1, 2016, to change the loan terms to extend the obligation's maturity to March 1. 2018. The financial statements are authorized for issuance on April 1, 2017. What should the short-term obligation be classified, assuming the financial of the company ended 314 December. Question 3: (8 marks) a) Prepare the journal entries for the following transactions in the records of all companies (VAT 5%): . Company A Sold taxable goods to Company B for 250. - Company B sold it to company for 500. Company C sold it to consumers for 600
