Question 3 (15 marks)

Paper (Pty) Ltd leased an equipment with estimated life time of eight (8) years at $282,624 on 31 March 2022. Lease payment is $38,400 payable at the end of every year. Incremental borrowing interest is charged at 8%.

You are asked to record the above information in journals and prepare the Financial Statements (extract) for the year ending 31 March 2022. (15 marks)

Question 4 (15 marks)

According to IFRS 15, give the criterion for a contract to be accounting for. (3 marks)

Explain the steps involved in recognition of revenue according to IFRS5. (5 marks)

A contract commenced on 1 April 2021, for the price of $500,000. On 31 December 2021, 40% completed and cost incurred for the amount of $160,000 and further $200,000 to be paid for completing the work. Invoices have been issued for $60,000 but not yet been received.

Calculate the estimated profit and revenue amount that should be shown in Statement of Profit and Loss for the year ending 31 December 2021. (7 marks)