Chapter 10

Chapter 10 - Solutions to Gripping IFRS : Graded Questions...

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Solutions to Gripping IFRS : Graded Questions Property, plant and equipment and impairment of assets © Kolitz & Sowden-Service, 2009 Chapter 10: Page 1 Solution 10.1 KERSHAW LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20X4 1. Accounting policies 1.1 Statement of compliance These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case the requirements differ, the provisions or the directives of the Companies Ordinance, 1984 shall prevail. 1.2 Basis of preparation The financial statements are prepared in accordance with the historical cost convention. The financial statements incorporate the following principle accounting policies, which are consistent in all material respects with those applied in the previous year. 1.2 Property, plant and equipment No depreciation is provided on land. Fixtures and fittings are depreciated at 10% per annum using the reducing balance method. Buildings are depreciated at 2% per annum on the straight line method. 2. Property, plant and equipment Land Buildings Fixtures and fittings Total C C C C Cost Balance 1/7/20X3 80 000 - 60 000 140 000 Constructed - 50 000 50 000 Balance 30/6/20X4 80 000 50 000 60 000 190 000 Accumulated depreciation Balance 1/7/20X3 - - 10 000 10 000 Current depreciation - - 5 000 5 000 Balance 30/6/20X4 - - 15 000 15 000 Carrying amount 1/7/20X3 80 000 - 50 000 130 000 30/6/20X4 80 000 50 000 45 000 175 000 Cost of land 1 January 20X2 80 000 Buildings erected thereon 30 June 20X4 50 000 130 000
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Solutions to Gripping IFRS : Graded Questions Property, plant and equipment and impairment of assets © Kolitz & Sowden-Service, 2009 Chapter 10: Page 2 Calculation of current depreciation: (60 000 – 10 000) x 10%
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Solutions to Gripping IFRS : Graded Questions Property, plant and equipment and impairment of assets © Kolitz & Sowden-Service, 2009 Chapter 10: Page 3 Solution 10.2 TREASURE LIMITED EXTRACT FROM STATEMENT OF FINANCIAL POSITION AT 31 MARCH 20X3 Note C ASSETS Non-current assets Property, plant and equipment 125 000 EQUITY AND LIABILITIES Non-current liabilities Debentures 96 000 Current liabilities Accounts payable 5 000 EXTRACT FROM THE NOTES TO THE FINANCIAL STATEMENTS 4. Non-current liability C Unsecured Debentures 100 000 Debenture discount not yet written off 4 000 96 000 100 000 C1 unsecured debentures bearing interest at 15%, redeemable at par on 1 April 20X8 5. Property, plant and equipment Land C Buildings C Total C Cost Balance 1/4/20X2 - - - Acquisitions 120 000 5 000 125 000 Balance 31/3/20X3 120 000 5 000 125 000 Accumulated depreciation Balance 1/4/20X2 - - - Current depreciation - - - Balance 31/3/20X3 - - - Carrying amount 1/4/20X2 - - - 31/3/20X3 120 000 5 000 125 000
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Solutions to Gripping IFRS : Graded Questions Property, plant and equipment and impairment of assets © Kolitz & Sowden-Service, 2009 Chapter 10: Page 4 Solution 10.2 continued … 6. Capital commitments Contracted [ (20 000 X ¾) + 10 000 ] 25 000
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Chapter 10 - Solutions to Gripping IFRS : Graded Questions...

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