Topic03 Questions - AF3110 Intermediate Accounting 1...

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1 AF3110 Intermediate Accounting 1 2009/10 Semester 2 Topic 3 Question 1 (Chapter 5 Q5) (a) Set out below is a draft statement of retained profits/reserves for Triathlon Ltd for the year ended 31 March 20X3 and the comparative figures for the year ended 31 March 20X2 Statement of Retained Profits/Reserves 20X3 20X2 $000 $000 Retained profit for the year 400 350 Retained profit at the beginning of the year 500 150 Retained profit at the end of the year 900 500 Two errors have just been discovered which consist of unreported profits that had been omitted from the above statement of retained profits/reserves. In the year ended 31 March 20X0, there was an unreported profit before tax of $80,000 (tax $40,000), and in the year ended 31 March 20X2, an unreported profit before tax of $100,000 (tax $45,000). Required: Amended the above statement of profits/reserves in order to account for these two errors. (b) State, with reasons, whether you consider the following events, which are all material, should be accounted for by adjusting prior year s profit: (i) A company changes its accounting policies in order to comply with a new HKFRS. (ii) An error in the valuation of the closing stock in the financial statements issued two years previously has been discovered. (iii) The directors of a company engaged in a long-term contract which had previously been valued in the financial statements at cost plus attributable profit are now of the opinion that there will be a loss on the contract as a whole. (iv) A computer which was purchased three years previously for $100,000 and was being depreciated at 15% per annum on the straight-line basis has been sold for $15,000.
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2 (v) A company has leased premises for five years and the terms of the lease state that the tenant is responsible for all the repairs during the lease. The lease has expired and the landlord has
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This note was uploaded on 10/20/2010 for the course AD abc123 taught by Professor Cat during the Summer '09 term at City University of Hong Kong.

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Topic03 Questions - AF3110 Intermediate Accounting 1...

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