1. Smithson Co purchased a new building with a 50-year life for $10 million on 1 January 20X3.

On 30 June 20X5,
Smithson Co moved out of the building and rented it out to third parties on a short-term lease. Smithson Co uses
the fair value model for investment properties.
At 30 June 20X5 the fair value of the property was $11 million and at 31 December 20X5 it was $11.5 million.
What is the total net amount to be recorded in the statement of profit or loss in respect of the office for the
year ended 31 December 20X5?
A Net income $400,000
B Net income $500,000
C Net income $1,900,000
D Net income $2,000,000

2. A division of an entity has the following balances in its financial statements:

Goodwill $700,000
Plant $950,000
Building $2,300,000
Intangibles $800,000
Other net assets $430,000
Following a period of losses, the recoverable amount of the division is deemed to be $4 million.
A recent valuation of the building showed that the building has a market value of $2.5 million. The other net assets
are at their recoverable amount. The entity uses the cost model for valuing building and plant.
To the nearest thousand, what is the balance on the building following the impairment review?__________
To the nearest thousand, what is the balance on plant following the impairment review?___________

3. According to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations which of the following
amounts in respect of a discontinued operation must be shown on the face of the statement of profit or loss?

Shown on the face of the statement of profit or loss Not shown

Revenue
Gross profit
Profit after tax

4. Which of the following statements regarding IFRS 13 Fair Value Measurement is not true?
A Level 1 inputs are likely to be used without adjustment.
B Level 3 inputs are based on the best information available to market participants and are therefore regarded as
providing the most reliable evidence of fair value.
C Level 2 inputs may include quoted prices for similar (but not identical) assets and liabilities in active markets.
D Level 1 inputs comprise quoted prices in active markets for identical assets and liabilities at the reporting date.

5. In which TWO of the following situations can a change in accounting policy be made by an entity?
A If the change is required by an IFRS Standard
B If the entity thinks that a new accounting policy would be easier to report
C If a new accounting policy would show more favourable results
D If a new accounting policy results in more reliable and relevant presentation of events or transactions

The following scenario relates to questions 6-10

Schrute owns a herd of cattle, which produce milk. Schrute then turns this into cheese. On 1 April 20X5, Shrute
purchased a flock of sheep for $100,000, which included transaction costs of $5,000. At 31 March 20X6, the flock
was valued at $120,000. Every time animals are sold there is a 5% commission fee payable to the national farming
agency.
Shrute uses the historical cost model and charges all depreciation as an operating expense.
In addition to this, Schrute uses a number of items of specialised farm machinery. This machinery cost Schrute
$200,000 on 1 April 20X2 and has a 10-year useful life. At 31 March 20X6, there is only one supplier who still sells
this machinery and the current price of new machinery is $300,000.
6. Which of the following items held by Schrute will be accounted for under the provisions of IAS 41
Agriculture?
(i) Herd of cattle
(ii) Milk
(iii) Cheese
A (i) only
B (ii) and (iii) only
C (i) and (ii) only
D All three items

7. What gain should be taken to Shrute’s statement of profit or loss for the year ended 31 March 20X6 in
respect of the flock of sheep? $_____________

8. Using current cost accounting, what is the value of the machinery at 31 March 20X6?
A $120,000 B $180,000 C $200,000 D $300,000

9. At 31 March 20X6, a valuations expert informed the directors of Schrute that the property owned and used by
Shrute for farming had significantly increased in value. This had been decided by looking at the price per square
metre at similar properties in the area and concluded that this could be used to value Schrute’s farm with no
adjustments necessary.
Which of the following bases describes the fair value method used to value the farm?
A Level 1 input
B Level 2 input
C Level 3 input
D Level 4 input

10. If Schrute chooses to value the farm at the market value, which TWO of the following ratios will NOT be
affected?
A Current ratio
B Return on capital employed
C Gross profit margin
D Gearing
E Net profit (before tax) margin

11. Statements of financial position as at:

31 March 20X3 31 March 20X2
$000 $000 $000 $000
Assets
Non-current assets
Property, plant and equipment 14,000 10,700
Deferred development expenditure 1,000 nil

15,000 10,700
Current assets
Inventory 3,300 3,800
Trade receivables 2,950 2,200
Bank 1,980 8,230 1,300 7,300

Total assets 23,230 18,000

Equity and liabilities

Equity
Equity shares of $1 each 7,000 7,000
Revaluation surplus 1,350 nil
Retained earnings 3,200 1,750

11,550 8,750
Non-current liabilities
8% loan notes (note(iii)) 4,080 4,000
Deferred tax 1,500 800
Lease liability 1,200 900
Government grant 200 100
6,980 5,800
Current liabilities
Lease liability 750 600
Trade payables 2,650 2,100
Current tax payable 1,250 725
Government grant 50 4,700 25 3,450

Total equity and liabilities 23,230 18,000

Notes:
(i) On 1 July 20X2, Monty acquired additional plant under a lease with an initial value of $1.5 million. The
right-of-use asset is included within property, plant and equipment. On this date it also revalued its
property upwards by $2 million and transferred $650,000 of the resulting revaluation surplus this created
to deferred tax. There were no disposals of non-current assets during the period.
(ii) Depreciation of property, plant and equipment was $900,000 and amortisation of the deferred
development expenditure was $200,000 for the year ended 31 March 20X3.
(iii) The 8% loan notes are repayable at a premium, giving them an effective rate of 10%. No loan notes were
issued or redeemed during the year.
(iv) $25,000 was credited to administrative expenses in respect of government grants during the year.

Required:
(a) Prepare a statement of cash flows for Monty for the year ended 31 March 20X3, in accordance with
IAS 7 Statement of Cash Flows, using the indirect method.

(Total: 20 marks)

(b) (homework) Comment on cash flow position of Monty (10 marks)

12. On 1 June 20X0, Premier acquired 80% of the equity share capital of Sanford. The consideration consisted of two
elements: a share exchange of three shares in Premier for every five acquired shares in Sanford and $800,000
cash. The share issue has not yet been recorded by Premier. At the date of acquisition shares in Premier had a
market value of $5 each. Below are the summarised draft financial statements of both entities.
Extracts from statements of profit or loss for the year ended 30 September 20X0
Premier Sanford
$000 $000
Revenue 92,500 45,000
Cost of sales (70,500) (36,000)

Gross profit 22,000 9,000

Other expenses (12,000) (5,100)

Profit for the year 10,000 3,900

Other comprehensive income:
Gains on revaluation nil nil

Total comprehensive income 10,000 3,900

Statements of financial position as at 30 September 20X0

Assets
Non-current assets
Property, plant and equipment 25,500 13,900
Investments 1,800 nil

27,300 13,900
Current assets 12,500 2,400

Total assets 39,800 16,300

Equity and liabilities
Equity
Equity shares of $1 each 12,000 5,000
Other equity reserve - 30 September 20W9 (note (iv)) 500 nil
Retained earnings 12,300 4,500
24,800 9,500
Liabilities
Current liabilities 15,000 6,800
Total equity and liabilities 39,800 16,300

The following information is relevant:

(i) At the date of acquisition, the fair values of Sanford’s assets were equal to their carrying amounts with the
exception of its property. This had a fair value of $1.2 million below its carrying amount, and had a remaining useful
life of 8 years at the date of acquisition. Sanford has not incorporated this in its financial statements.

(ii) Sales from Sanford to Premier throughout the year ended 30 September 20X0 had consistently been $1 million
per month. Sanford made a mark-up on cost of 25% on these sales. Premier had $2 million (at cost to Premier) of
inventory that had been supplied in the post-acquisition period by Sanford as at 30 September 20X0.

(iii) Premier had a trade payable balance owing to Sanford of $350,000 as at 30 September 20X0. This did not agree
with the corresponding receivable in Sanford’s books due to a $130,000 payment made to Sanford, which Sanford
has not yet recorded.

(iv) Premier’s investments include investments in shares which at the date of acquisition were classified as fair value
through other comprehensive income (FVTOCI). The investments have increased in value by $300,000 during the
year. The other equity reserve relates to these investments and is based on their value as at 30 September 20W9.
There were no acquisitions or disposals of any of these investments during the year ended 30 September 20X0.

(v) Premier’s policy is to value the non-controlling interest at fair value at the date of acquisition, deemed to be $3.5
million.
(vi) There has been impairment of consolidated goodwill of $2m.

Required:
(a) Prepare the consolidated statement of profit or loss and other comprehensive income for Premier for the
year ended 30 September 20X0. (6 marks)
(b) Prepare the consolidated statement of financial position for Premier as at 30 September 20X0. (14 marks)
(Total: 20 marks)