Question 30

Part A

Management is reviewing its draft statement of profit or loss for the period. They are concerned this draft profit result will make next year's bonus target too difficult and are seeking ways to decrease it.

Which of the following measures would decrease the draft profit?

A. Decrease the fair value estimate of land carried under the revaluation model.

B. Increase the estimated useful life of a major item of plant and equipment acquired during the period.

C. All of these measures would decrease draft profit.

D. Increase the allowance for doubtful debts.

E. Decrease the estimated warranty provisions.

Part B

Which of the following would NOT be included in the calculation of earnings before interest and tax (EBIT)?

A. Sales revenue

B. Other income

C. Other revenue

D. Other comprehensive income

E. None - all of these would be included in the calculation of EBIT.

Part C

On 1/11/2020, Asfalisi Insurance Limited entered into an insurance contract with a customer who paid the annual premium of $240,000 on that date.

State the dollar amount Asfalisi Insurance Ltd would report as revenue for the year ended 30 June 2021.

Part D

On 1/12/2020, Asfalisi Insurance Limited entered into an insurance contract with a customer who paid the annual premium of $240,000 on that date.

State the dollar amount Asfalisi Insurance Ltd would report as a liability at 30 June 2021.

Part E

On 28 February 2021, Esoda Ltd invested $850,000 in a 2-year fixed term deposit earning 2% p.a. Interest is paid quarterly and Esoda Ltd received the interest it was due on 31 May 2021.

Calculate, to the nearest whole dollar, the amount of revenue Esoda Ltd would recognise for the year ended 30 June 2021.