F7 (FR) – PART B – Section B – CBE MCQs

These are ACCA F7 (FR) Financial Reporting MCQs for Part-B of the Syllabus “Accounting for transactions in financial statements”.

These multiple-choice questions (MCQs) are designed to help ACCA F7 students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams. By doing so, students can reduce exam stress and prepare more effectively.

Please note:

  • Students should not attempt these MCQs until they have finished the entire chapter.
  • All questions are compulsory, so please do not skip any.

We hope that these MCQs will be a valuable resource for students preparing for the ACCA F7 (FR) exam.

INFORMATION ABOUT THESE CBE MCQs Test/Quiz

Course:ACCA – Association of Chartered Certified Accountants
Fundamental Level:Applied Skills
Subject:Financial Reporting
Paper:F7 – FR
Chapters and Topics Covered:
  • Tangible non-current assets,
  • Intangible assets,
  • Impairment of assets,
  • Inventory and biological assets,
  • Financial instruments,
  • Leasing,
  • Provisions and events after the reporting period,
  • Taxation,
  • Reporting financial performance,
  • Revenue,
  • Government grants,
  • Foreign currency transactions
Questions:01 – Plethora plc
02 – Dearing Co
03 – Elite Leisure Co
04 – Dexterity Co
05 – Advent Co
06 – Systria Co
07 – Derringdo Co
08 – Bridgenorth Co
09 – Apex Co
10 – Bertrand Co
11 – Fino Co
12 – Rainbird Co
13 – Julian Co
14 – Tunshill Co
Syllabus Area:B – “Accounting for transactions in financial statements”
Questions Type:CBE MCQs
Exam Section:Section B

Syllabus Area

These Multiple Choice Questions (MCQs) cover the Syllabus Area Part B of the Syllabus; “Accounting for transactions in financial statements” of ACCA F7 (FR) Financial Reporting Module.

Time

These MCQs are not time-bound. Take your time and solve them without stress. Pay proper attention and focus. Do not rush or hesitate

Result

Students will get their F7 CBE MCQs Test results after they finish the entire test. They will also be able to see the correct and incorrect answers, as well as explanations for the incorrect questions.

Types of Questions

MCQs: Choose one from the given options.
Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “(select all those which are correct/ or incorrect)“.
Drop-down: Select from the list provided.
Type numbers: Type your answer in numbers as per the requirement of the question.

Question – Plethora plc – 01/14)

/5
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16

F7 (FR) - Part B - MCQs - Plethora plc

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Question Name: Plethora plc
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

Information relevant to questions 1 – 5.

Scenario

The draft financial statements of Plethora plc for the year to 31 December 20X9 are being prepared and the accountant has requested your advice on dealing with the following issues.

  1. Plethora plc has an administration building which it no longer On 1 July 20X9 Plethora plc entered into an agreement to lease the building out to another company. The building cost $600,000 on 1 January 20X0 and is being depreciated over 50 years, based on the IAS 16 Property, Plant and Equipment cost model. Plethora plc applies the fair value model under IAS 40 Investment Property and the fair value of the building was assessed as $800,000 on 1 July 20X9. This valuation had not changed at 31 December 20X9.
  2. Plethora plc owns another building which has been leased out for a number of It had a fair value of $550,000 at 31 December 20X8 and $740,000 at 31 December 20X9.
  3. Plethora plc owns a retail business which has suffered badly during the Plethora plc treats this business as a separate cash-generating unit.

The carrying amounts of the assets comprising the retail business are:

$'000
Building 900
Plant and equipment 300
Inventory 70
Other current assets 130
Goodwill 40

An impairment review has been carried out as at 31 December 20X9 and the recoverable amount of the cash-generating unit is estimated at $1.3m.

REQUIREMENT

In respect of the building in (ii), how will the increase in value from $550,000 to $740,000 be accounted for?

2 / 5

Information relevant to questions 1 – 5.

Scenario

The draft financial statements of Plethora plc for the year to 31 December 20X9 are being prepared and the accountant has requested your advice on dealing with the following issues.

  1. Plethora plc has an administration building which it no longer On 1 July 20X9 Plethora plc entered into an agreement to lease the building out to another company. The building cost $600,000 on 1 January 20X0 and is being depreciated over 50 years, based on the IAS 16 Property, Plant and Equipment cost model. Plethora plc applies the fair value model under IAS 40 Investment Property and the fair value of the building was assessed as $800,000 on 1 July 20X9. This valuation had not changed at 31 December 20X9.
  2. Plethora plc owns another building which has been leased out for a number of It had a fair value of $550,000 at 31 December 20X8 and $740,000 at 31 December 20X9.
  3. Plethora plc owns a retail business which has suffered badly during the Plethora plc treats this business as a separate cash-generating unit.

The carrying amounts of the assets comprising the retail business are:

$'000
Building 900
Plant and equipment 300
Inventory 70
Other current assets 130
Goodwill 40

An impairment review has been carried out as at 31 December 20X9 and the recoverable amount of the cash-generating unit is estimated at $1.3m.

REQUIREMENT

What will be the carrying amount of the building after the impairment loss in (iii) has been accounted for?

3 / 5

Information relevant to questions 1 – 5.

Scenario

The draft financial statements of Plethora plc for the year to 31 December 20X9 are being prepared and the accountant has requested your advice on dealing with the following issues.

  1. Plethora plc has an administration building which it no longer On 1 July 20X9 Plethora plc entered into an agreement to lease the building out to another company. The building cost $600,000 on 1 January 20X0 and is being depreciated over 50 years, based on the IAS 16 Property, Plant and Equipment cost model. Plethora plc applies the fair value model under IAS 40 Investment Property and the fair value of the building was assessed as $800,000 on 1 July 20X9. This valuation had not changed at 31 December 20X9.
  2. Plethora plc owns another building which has been leased out for a number of It had a fair value of $550,000 at 31 December 20X8 and $740,000 at 31 December 20X9.
  3. Plethora plc owns a retail business which has suffered badly during the Plethora plc treats this business as a separate cash-generating unit.

The carrying amounts of the assets comprising the retail business are:

$'000
Building 900
Plant and equipment 300
Inventory 70
Other current assets 130
Goodwill 40

An impairment review has been carried out as at 31 December 20X9 and the recoverable amount of the cash-generating unit is estimated at $1.3m.

REQUIREMENT

Using the picklist provided, select the amount at which an impaired asset is measured, following an impairment has taken place?

4 / 5

Information relevant to questions 1 – 5.

Scenario

The draft financial statements of Plethora plc for the year to 31 December 20X9 are being prepared and the accountant has requested your advice on dealing with the following issues.

  1. Plethora plc has an administration building which it no longer On 1 July 20X9 Plethora plc entered into an agreement to lease the building out to another company. The building cost $600,000 on 1 January 20X0 and is being depreciated over 50 years, based on the IAS 16 Property, Plant and Equipment cost model. Plethora plc applies the fair value model under IAS 40 Investment Property and the fair value of the building was assessed as $800,000 on 1 July 20X9. This valuation had not changed at 31 December 20X9.
  2. Plethora plc owns another building which has been leased out for a number of It had a fair value of $550,000 at 31 December 20X8 and $740,000 at 31 December 20X9.
  3. Plethora plc owns a retail business which has suffered badly during the Plethora plc treats this business as a separate cash-generating unit.

The carrying amounts of the assets comprising the retail business are:

$'000
Building 900
Plant and equipment 300
Inventory 70
Other current assets 130
Goodwill 40

An impairment review has been carried out as at 31 December 20X9 and the recoverable amount of the cash-generating unit is estimated at $1.3m.

REQUIREMENT

What will be the carrying amount of the inventory after the impairment loss in (iii) has been accounted for?

5 / 5

Information relevant to questions 1 – 5.

Scenario

The draft financial statements of Plethora plc for the year to 31 December 20X9 are being prepared and the accountant has requested your advice on dealing with the following issues.

  1. Plethora plc has an administration building which it no longer On 1 July 20X9 Plethora plc entered into an agreement to lease the building out to another company. The building cost $600,000 on 1 January 20X0 and is being depreciated over 50 years, based on the IAS 16 Property, Plant and Equipment cost model. Plethora plc applies the fair value model under IAS 40 Investment Property and the fair value of the building was assessed as $800,000 on 1 July 20X9. This valuation had not changed at 31 December 20X9.
  2. Plethora plc owns another building which has been leased out for a number of It had a fair value of $550,000 at 31 December 20X8 and $740,000 at 31 December 20X9.
  3. Plethora plc owns a retail business which has suffered badly during the Plethora plc treats this business as a separate cash-generating unit.

The carrying amounts of the assets comprising the retail business are:

$'000
Building 900
Plant and equipment 300
Inventory 70
Other current assets 130
Goodwill 40

An impairment review has been carried out as at 31 December 20X9 and the recoverable amount of the cash-generating unit is estimated at $1.3m.

REQUIREMENT

What is the amount of the revaluation surplus that will be recognised in respect of the building in (i)?

Your score is

Question – Dearing Co – (02/14)

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0 votes, 0 avg
10

F7 (FR) - Part B - MCQs - Dearing Co

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Question Name: Dearing Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

Information relevant to questions 1 – 5

Scenario

On 1 October 20X5 Dearing Co acquired a machine under the following terms.

$
Cost 1,050,000
Trade discount (applying to cost only) 20%
Freight charges 30,000
Electrical installation cost 28,000
Staff training in use of machine 40,000
Pre-production testing 22,000
Purchase of a three-year maintenance contract 60,000

On 1 October 20X7 Dearing Co decided to upgrade the machine by adding new components at a cost of $200,000. This upgrade led to a reduction in the production time per unit of the goods being manufactured using the machine.

REQUIREMENT

What amount should be recognised under non-current assets as the cost of the machine?

2 / 5

Information relevant to questions 1 – 5

Scenario

On 1 October 20X5 Dearing Co acquired a machine under the following terms.

$
Cost 1,050,000
Trade discount (applying to cost only) 20%
Freight charges 30,000
Electrical installation cost 28,000
Staff training in use of machine 40,000
Pre-production testing 22,000
Purchase of a three-year maintenance contract 60,000

On 1 October 20X7 Dearing Co decided to upgrade the machine by adding new components at a cost of $200,000. This upgrade led to a reduction in the production time per unit of the goods being manufactured using the machine.

REQUIREMENT

Every five years the machine will need a major overhaul in order to keep running.

How should this be accounted for?

3 / 5

Information relevant to questions 1 – 5

Scenario

On 1 October 20X5 Dearing Co acquired a machine under the following terms.

$
Cost 1,050,000
Trade discount (applying to cost only) 20%
Freight charges 30,000
Electrical installation cost 28,000
Staff training in use of machine 40,000
Pre-production testing 22,000
Purchase of a three-year maintenance contract 60,000

On 1 October 20X7 Dearing Co decided to upgrade the machine by adding new components at a cost of $200,000. This upgrade led to a reduction in the production time per unit of the goods being manufactured using the machine.

REQUIREMENT

On 30 September 20X7 the impairment review was carried The following amounts were established in respect of the machine:

$
Carrying amount 850,000
Value in use 760,000
Fair value 850,000
Costs of disposal 30,000

What should be the carrying amount of the machine following the impairment review? $_______

Note. You are not required to put $ sign nor any coma. (e.g. 1000)

4 / 5

Information relevant to questions 1 – 5

Scenario

On 1 October 20X5 Dearing Co acquired a machine under the following terms.

$
Cost 1,050,000
Trade discount (applying to cost only) 20%
Freight charges 30,000
Electrical installation cost 28,000
Staff training in use of machine 40,000
Pre-production testing 22,000
Purchase of a three-year maintenance contract 60,000

On 1 October 20X7 Dearing Co decided to upgrade the machine by adding new components at a cost of $200,000. This upgrade led to a reduction in the production time per unit of the goods being manufactured using the machine.

REQUIREMENT

By 27 September 20X7 internal evidence had emerged suggesting that Dearing Co's machine was impaired.

Which of the following are external indicators of impairment?

  1. The performance of the machine had declined leading to reduced economic benefits
  2. There were legal and regulatory changes affecting the operating of the machine.
  3. There was an unexpected fall in the market value of the machine.
  4. New technological innovations were producing more efficient machines.

5 / 5

Information relevant to questions 1 – 5

Scenario

On 1 October 20X5 Dearing Co acquired a machine under the following terms.

$
Cost 1,050,000
Trade discount (applying to cost only) 20%
Freight charges 30,000
Electrical installation cost 28,000
Staff training in use of machine 40,000
Pre-production testing 22,000
Purchase of a three-year maintenance contract 60,000

On 1 October 20X7 Dearing Co decided to upgrade the machine by adding new components at a cost of $200,000. This upgrade led to a reduction in the production time per unit of the goods being manufactured using the machine.

REQUIREMENT

How should the $200,000 worth of new components be accounted for?

Question – Elite Leisure Co – (03/14)

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0 votes, 0 avg
7

F7 (FR) - Part B - MCQs - Elite Leisure Co

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Question Name: Elite Leisure Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

The following scenario relates to questions 1–5.

Scenario

Elite Leisure Co is a private limited liability company that operates a single cruise ship. The ship was acquired on 1 October 20W6 (ten years before 20X6). Details of the cost of the ship's components and the basis on which they are depreciated is as follows:

Component Original cost Depreciation basis
$m
Ship's fabric (hull, decks etc) 300 25 years straight-line
Cabins and entertainment area fittings 150 12 years straight-line
Propulsion system 100 Useful life of 40,000 hours

At 30 September 20X4 no further capital expenditure had been incurred on the ship.

The propulsion system has been used for 30,000 hours at 30 September 20X4. Due to the unreliability of the engines, a decision was taken in early October 20X4 to replace the whole of the propulsion system at a cost of $140 million. The useful life of the new propulsion system was 50,000 hours and in the year ended 30 September 20X5 the ship had used the system for 5,000 hours.

At the same time as the propulsion system replacement, Elite Leisure Co took the opportunity to do a limited upgrade to the facilities at a cost of $60 million and repaint the ship's fabric at a cost of $20 million. After the upgrade of the facilities it was estimated that their remaining useful life was five years (from the date of the upgrade). For the purpose of calculating depreciation, all the work on the ship can be assumed to have been completed on 1 October 20X4. All residual values can be taken as nil.

REQUIREMENT

Elite Leisure Co's ship has to have a safety check carried out every five years at a cost of $50,000 in order to be licensed to operate. How should this be accounted for?

2 / 5

The following scenario relates to questions 1–5.

Scenario

Elite Leisure Co is a private limited liability company that operates a single cruise ship. The ship was acquired on 1 October 20W6 (ten years before 20X6). Details of the cost of the ship's components and the basis on which they are depreciated is as follows:

Component Original cost Depreciation basis
$m
Ship's fabric (hull, decks etc) 300 25 years straight-line
Cabins and entertainment area fittings 150 12 years straight-line
Propulsion system 100 Useful life of 40,000 hours

At 30 September 20X4 no further capital expenditure had been incurred on the ship.

The propulsion system has been used for 30,000 hours at 30 September 20X4. Due to the unreliability of the engines, a decision was taken in early October 20X4 to replace the whole of the propulsion system at a cost of $140 million. The useful life of the new propulsion system was 50,000 hours and in the year ended 30 September 20X5 the ship had used the system for 5,000 hours.

At the same time as the propulsion system replacement, Elite Leisure Co took the opportunity to do a limited upgrade to the facilities at a cost of $60 million and repaint the ship's fabric at a cost of $20 million. After the upgrade of the facilities it was estimated that their remaining useful life was five years (from the date of the upgrade). For the purpose of calculating depreciation, all the work on the ship can be assumed to have been completed on 1 October 20X4. All residual values can be taken as nil.

REQUIREMENT

Apart from depreciation, what is the charge to profit or loss for the year ended 30 September 20X5?

3 / 5

The following scenario relates to questions 1–5.

Scenario

Elite Leisure Co is a private limited liability company that operates a single cruise ship. The ship was acquired on 1 October 20W6 (ten years before 20X6). Details of the cost of the ship's components and the basis on which they are depreciated is as follows:

Component Original cost Depreciation basis
$m
Ship's fabric (hull, decks etc) 300 25 years straight-line
Cabins and entertainment area fittings 150 12 years straight-line
Propulsion system 100 Useful life of 40,000 hours

At 30 September 20X4 no further capital expenditure had been incurred on the ship.

The propulsion system has been used for 30,000 hours at 30 September 20X4. Due to the unreliability of the engines, a decision was taken in early October 20X4 to replace the whole of the propulsion system at a cost of $140 million. The useful life of the new propulsion system was 50,000 hours and in the year ended 30 September 20X5 the ship had used the system for 5,000 hours.

At the same time as the propulsion system replacement, Elite Leisure Co took the opportunity to do a limited upgrade to the facilities at a cost of $60 million and repaint the ship's fabric at a cost of $20 million. After the upgrade of the facilities it was estimated that their remaining useful life was five years (from the date of the upgrade). For the purpose of calculating depreciation, all the work on the ship can be assumed to have been completed on 1 October 20X4. All residual values can be taken as nil.

REQUIREMENT

What is the amount of depreciation that should be charged in respect of the propulsion system for the year ended 30 September 20X5?

4 / 5

The following scenario relates to questions 1–5.

Scenario

Elite Leisure Co is a private limited liability company that operates a single cruise ship. The ship was acquired on 1 October 20W6 (ten years before 20X6). Details of the cost of the ship's components and the basis on which they are depreciated is as follows:

Component Original cost Depreciation basis
$m
Ship's fabric (hull, decks etc) 300 25 years straight-line
Cabins and entertainment area fittings 150 12 years straight-line
Propulsion system 100 Useful life of 40,000 hours

At 30 September 20X4 no further capital expenditure had been incurred on the ship.

The propulsion system has been used for 30,000 hours at 30 September 20X4. Due to the unreliability of the engines, a decision was taken in early October 20X4 to replace the whole of the propulsion system at a cost of $140 million. The useful life of the new propulsion system was 50,000 hours and in the year ended 30 September 20X5 the ship had used the system for 5,000 hours.

At the same time as the propulsion system replacement, Elite Leisure Co took the opportunity to do a limited upgrade to the facilities at a cost of $60 million and repaint the ship's fabric at a cost of $20 million. After the upgrade of the facilities it was estimated that their remaining useful life was five years (from the date of the upgrade). For the purpose of calculating depreciation, all the work on the ship can be assumed to have been completed on 1 October 20X4. All residual values can be taken as nil.

REQUIREMENT

Elite Leisure Co is being sued for $250,000 by a passenger who slipped on one of the gangways and twisted an ankle. The company's lawyer estimates that there is a 55% chance that it will lose the case. Legal costs for Elite Leisure Co will be $40,000.

Using the picklist provided, select the amount at which Elite Leisure Co provide in respect of this case

5 / 5

The following scenario relates to questions 1–5.

Scenario

Elite Leisure Co is a private limited liability company that operates a single cruise ship. The ship was acquired on 1 October 20W6 (ten years before 20X6). Details of the cost of the ship's components and the basis on which they are depreciated is as follows:

Component Original cost Depreciation basis
$m
Ship's fabric (hull, decks etc) 300 25 years straight-line
Cabins and entertainment area fittings 150 12 years straight-line
Propulsion system 100 Useful life of 40,000 hours

At 30 September 20X4 no further capital expenditure had been incurred on the ship.

The propulsion system has been used for 30,000 hours at 30 September 20X4. Due to the unreliability of the engines, a decision was taken in early October 20X4 to replace the whole of the propulsion system at a cost of $140 million. The useful life of the new propulsion system was 50,000 hours and in the year ended 30 September 20X5 the ship had used the system for 5,000 hours.

At the same time as the propulsion system replacement, Elite Leisure Co took the opportunity to do a limited upgrade to the facilities at a cost of $60 million and repaint the ship's fabric at a cost of $20 million. After the upgrade of the facilities it was estimated that their remaining useful life was five years (from the date of the upgrade). For the purpose of calculating depreciation, all the work on the ship can be assumed to have been completed on 1 October 20X4. All residual values can be taken as nil.

REQUIREMENT

At 30 September 20X4 the ship is eight years old. What is the carrying amount of the ship at that date?

Your score is

Question – Dexterity Co – (04/14)

/5
0 votes, 0 avg
5

F7 (FR) - Part B - MCQs - Dexterity Co

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Question Name: Dexterity Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

Information relevant to questions 1–5.

Scenario

Dexterity Co is a public listed company. It has been considering the accounting treatment of its intangible assets and how the matters below should be treated in its financial statements for the year to 31 March 20X4.

  1. On 1 October 20X3 Dexterity Co acquired Temerity Co, a small company that specialises in pharmaceutical drug research and development. The purchase consideration was by way of a share exchange and valued at $35 million. The fair value of Temerity Co's net assets was $15 million (excluding any items referred to below). Temerity Co owns a patent for an established successful drug that has a remaining life of eight years. A firm of specialist advisors, Leadbrand, has estimated the current value of this patent to be $10 million, however the company is awaiting the outcome of clinical trials where the drug has been tested to treat a different illness. If the trials are successful, the value of the drug is then estimated to be $15 million. Also included in the company's statement of financial position is $2 million for medical research that has been conducted on behalf of a client.
  2. Dexterity Co has developed and patented a new drug which has been approved for clinical use. The costs of developing the drug were $12 million. Based on early assessments of its sales success, Leadbrand have estimated its market value at $20 million, which can be taken as a reliable measurement.
  3. Dexterity Co's manufacturing facilities have recently received a favourable inspection by government medical scientists. As a result of this the company has been granted an exclusive five-year licence to manufacture and distribute a new vaccine. Although the licence had no direct cost to Dexterity Co, its directors feel its granting is a reflection of the company's standing and have asked Leadbrand to value the licence.
    Accordingly they have placed a value of $10 million on it.
  4. In the current accounting period, Dexterity Co has spent $3 million sending its staff on specialist training courses. While these courses have been expensive, they have led to a marked improvement in production quality and staff now need less supervision. This in turn has led to an increase in revenue and cost reductions. The directors of Dexterity Co believe these benefits will continue for at least three years and wish to treat the training costs as an asset.

REQUIREMENT

At what amount should the patent acquired from Temerity Co be valued at 31 March 20X4?

2 / 5

Information relevant to questions 1–5.

Scenario

Dexterity Co is a public listed company. It has been considering the accounting treatment of its intangible assets and how the matters below should be treated in its financial statements for the year to 31 March 20X4.

  1. On 1 October 20X3 Dexterity Co acquired Temerity Co, a small company that specialises in pharmaceutical drug research and development. The purchase consideration was by way of a share exchange and valued at $35 million. The fair value of Temerity Co's net assets was $15 million (excluding any items referred to below). Temerity Co owns a patent for an established successful drug that has a remaining life of eight years. A firm of specialist advisors, Leadbrand, has estimated the current value of this patent to be $10 million, however the company is awaiting the outcome of clinical trials where the drug has been tested to treat a different illness. If the trials are successful, the value of the drug is then estimated to be $15 million. Also included in the company's statement of financial position is $2 million for medical research that has been conducted on behalf of a client.
  2. Dexterity Co has developed and patented a new drug which has been approved for clinical use. The costs of developing the drug were $12 million. Based on early assessments of its sales success, Leadbrand have estimated its market value at $20 million, which can be taken as a reliable measurement.
  3. Dexterity Co's manufacturing facilities have recently received a favourable inspection by government medical scientists. As a result of this the company has been granted an exclusive five-year licence to manufacture and distribute a new vaccine. Although the licence had no direct cost to Dexterity Co, its directors feel its granting is a reflection of the company's standing and have asked Leadbrand to value the licence.
    Accordingly they have placed a value of $10 million on it.
  4. In the current accounting period, Dexterity Co has spent $3 million sending its staff on specialist training courses. While these courses have been expensive, they have led to a marked improvement in production quality and staff now need less supervision. This in turn has led to an increase in revenue and cost reductions. The directors of Dexterity Co believe these benefits will continue for at least three years and wish to treat the training costs as an asset.

REQUIREMENT

Which TWO of the following are required if Dexterity Co adopts the revaluation model for the measurement of its intangible assets? 

  1. The entire class of intangible assets must be revalued at the same time
  2. Valid active market for the asset
  3. Can be used at initial recognition of the asset if there is an active market
  4. The asset may include costs of prepaid marketing expenses and training costs

3 / 5

Information relevant to questions 1–5.

Scenario

Dexterity Co is a public listed company. It has been considering the accounting treatment of its intangible assets and how the matters below should be treated in its financial statements for the year to 31 March 20X4.

  1. On 1 October 20X3 Dexterity Co acquired Temerity Co, a small company that specialises in pharmaceutical drug research and development. The purchase consideration was by way of a share exchange and valued at $35 million. The fair value of Temerity Co's net assets was $15 million (excluding any items referred to below). Temerity Co owns a patent for an established successful drug that has a remaining life of eight years. A firm of specialist advisors, Leadbrand, has estimated the current value of this patent to be $10 million, however the company is awaiting the outcome of clinical trials where the drug has been tested to treat a different illness. If the trials are successful, the value of the drug is then estimated to be $15 million. Also included in the company's statement of financial position is $2 million for medical research that has been conducted on behalf of a client.
  2. Dexterity Co has developed and patented a new drug which has been approved for clinical use. The costs of developing the drug were $12 million. Based on early assessments of its sales success, Leadbrand have estimated its market value at $20 million, which can be taken as a reliable measurement.
  3. Dexterity Co's manufacturing facilities have recently received a favourable inspection by government medical scientists. As a result of this the company has been granted an exclusive five-year licence to manufacture and distribute a new vaccine. Although the licence had no direct cost to Dexterity Co, its directors feel its granting is a reflection of the company's standing and have asked Leadbrand to value the licence.
    Accordingly they have placed a value of $10 million on it.
  4. In the current accounting period, Dexterity Co has spent $3 million sending its staff on specialist training courses. While these courses have been expensive, they have led to a marked improvement in production quality and staff now need less supervision. This in turn has led to an increase in revenue and cost reductions. The directors of Dexterity Co believe these benefits will continue for at least three years and wish to treat the training costs as an asset.

REQUIREMENT

Which of the following items should be capitalised as an intangible asset?

  1. Patent for the new drug
  2. Licence for the new vaccine
  3. Specialist training courses undertaken by Dexterity staff
  4. Temerity Co's patent on the existing drug currently licenced for use

4 / 5

Information relevant to questions 1–5.

Scenario

Dexterity Co is a public listed company. It has been considering the accounting treatment of its intangible assets and how the matters below should be treated in its financial statements for the year to 31 March 20X4.

  1. On 1 October 20X3 Dexterity Co acquired Temerity Co, a small company that specialises in pharmaceutical drug research and development. The purchase consideration was by way of a share exchange and valued at $35 million. The fair value of Temerity Co's net assets was $15 million (excluding any items referred to below). Temerity Co owns a patent for an established successful drug that has a remaining life of eight years. A firm of specialist advisors, Leadbrand, has estimated the current value of this patent to be $10 million, however the company is awaiting the outcome of clinical trials where the drug has been tested to treat a different illness. If the trials are successful, the value of the drug is then estimated to be $15 million. Also included in the company's statement of financial position is $2 million for medical research that has been conducted on behalf of a client.
  2. Dexterity Co has developed and patented a new drug which has been approved for clinical use. The costs of developing the drug were $12 million. Based on early assessments of its sales success, Leadbrand have estimated its market value at $20 million, which can be taken as a reliable measurement.
  3. Dexterity Co's manufacturing facilities have recently received a favourable inspection by government medical scientists. As a result of this the company has been granted an exclusive five-year licence to manufacture and distribute a new vaccine. Although the licence had no direct cost to Dexterity Co, its directors feel its granting is a reflection of the company's standing and have asked Leadbrand to value the licence.
    Accordingly they have placed a value of $10 million on it.
  4. In the current accounting period, Dexterity Co has spent $3 million sending its staff on specialist training courses. While these courses have been expensive, they have led to a marked improvement in production quality and staff now need less supervision. This in turn has led to an increase in revenue and cost reductions. The directors of Dexterity Co believe these benefits will continue for at least three years and wish to treat the training costs as an asset.

REQUIREMENT

IAS 38 gives examples of activities that would be regarded as research and therefore not eligible for recognition as an intangible asset.

Which of the following would be an example of research costs?

5 / 5

Information relevant to questions 1–5.

Scenario

Dexterity Co is a public listed company. It has been considering the accounting treatment of its intangible assets and how the matters below should be treated in its financial statements for the year to 31 March 20X4.

  1. On 1 October 20X3 Dexterity Co acquired Temerity Co, a small company that specialises in pharmaceutical drug research and development. The purchase consideration was by way of a share exchange and valued at $35 million. The fair value of Temerity Co's net assets was $15 million (excluding any items referred to below). Temerity Co owns a patent for an established successful drug that has a remaining life of eight years. A firm of specialist advisors, Leadbrand, has estimated the current value of this patent to be $10 million, however the company is awaiting the outcome of clinical trials where the drug has been tested to treat a different illness. If the trials are successful, the value of the drug is then estimated to be $15 million. Also included in the company's statement of financial position is $2 million for medical research that has been conducted on behalf of a client.
  2. Dexterity Co has developed and patented a new drug which has been approved for clinical use. The costs of developing the drug were $12 million. Based on early assessments of its sales success, Leadbrand have estimated its market value at $20 million, which can be taken as a reliable measurement.
  3. Dexterity Co's manufacturing facilities have recently received a favourable inspection by government medical scientists. As a result of this the company has been granted an exclusive five-year licence to manufacture and distribute a new vaccine. Although the licence had no direct cost to Dexterity Co, its directors feel its granting is a reflection of the company's standing and have asked Leadbrand to value the licence.
    Accordingly they have placed a value of $10 million on it.
  4. In the current accounting period, Dexterity Co has spent $3 million sending its staff on specialist training courses. While these courses have been expensive, they have led to a marked improvement in production quality and staff now need less supervision. This in turn has led to an increase in revenue and cost reductions. The directors of Dexterity Co believe these benefits will continue for at least three years and wish to treat the training costs as an asset.

REQUIREMENT

How should Dexterity Co treat the goodwill arising on its acquisition of Temerity Co?

Question – Advent Co – (05/14)

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0 votes, 0 avg
6

F7 (FR) - Part B - MCQs - Advent Co

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Question Name: Advent Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
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1 / 5

The following scenario relates to questions 1–5.

Scenario

Advent Co is a publicly listed company. Details of Advent Co's non-current assets at 1 October 20X8 were:

Land and
building
Plant Telecommunications
licence
Total
$m $m $m $m
Cost/valuation 280
Accumulated depreciation/amortisation (40) (103) (30) (175)
Carrying amount  240    45    270   555 

The following information is relevant:

  1. The land and building were revalued on 1 October 20X3 with $80 million attributable to the land and $200 million to the building. At that date the estimated remaining life of the building was 25 years. A further revaluation was not needed until 1 October 20X8 when the land and building were valued at $85 million and $180 million respectively. The remaining estimated life of the building at this date was 20 years.
  2. Plant is depreciated at 20% per annum on cost with time apportionment where On 1 April 20X9 new plant costing $45 million was acquired. In addition, this plant cost $5 million to install and commission. No plant is more than four years old.
  3. The telecommunications licence was bought from the government on 1 October 20X7 and has a ten-year life. It is amortised on a straight-line In September 20X9, a review of the sales of the products related to the licence showed them to be very disappointing. As a result of this review the estimated recoverable amount of the licence at 30 September 20X9 was estimated at only $100 million.

There were no disposals of non-current assets during the year to 30 September 20X9.

REQUIREMENT

What is the amount of the impairment loss on the licence? Select your answer from the drop down box options below.

2 / 5

The following scenario relates to questions 1–5.

Scenario

Advent Co is a publicly listed company. Details of Advent Co's non-current assets at 1 October 20X8 were:

Land and
building
Plant Telecommunications
licence
Total
$m $m $m $m
Cost/valuation 280
Accumulated depreciation/amortisation (40) (103) (30) (175)
Carrying amount  240    45    270   555 

The following information is relevant:

  1. The land and building were revalued on 1 October 20X3 with $80 million attributable to the land and $200 million to the building. At that date the estimated remaining life of the building was 25 years. A further revaluation was not needed until 1 October 20X8 when the land and building were valued at $85 million and $180 million respectively. The remaining estimated life of the building at this date was 20 years.
  2. Plant is depreciated at 20% per annum on cost with time apportionment where On 1 April 20X9 new plant costing $45 million was acquired. In addition, this plant cost $5 million to install and commission. No plant is more than four years old.
  3. The telecommunications licence was bought from the government on 1 October 20X7 and has a ten-year life. It is amortised on a straight-line In September 20X9, a review of the sales of the products related to the licence showed them to be very disappointing. As a result of this review the estimated recoverable amount of the licence at 30 September 20X9 was estimated at only $100 million.

There were no disposals of non-current assets during the year to 30 September 20X9.

REQUIREMENT

Having revalued its property Advent Co is required to make certain disclosures in respect of the revaluation.

Which of the following disclosures are required in respect of revaluation?

  1. The effective date of revaluation
  2. Professional qualifications of the valuer
  3. The basis used to revalue the assets
  4. The carrying amount of assets if no revaluation had taken place

3 / 5

The following scenario relates to questions 1–5.

Scenario

Advent Co is a publicly listed company. Details of Advent Co's non-current assets at 1 October 20X8 were:

Land and
building
Plant Telecommunications
licence
Total
$m $m $m $m
Cost/valuation 280
Accumulated depreciation/amortisation (40) (103) (30) (175)
Carrying amount  240    45    270   555 

The following information is relevant:

  1. The land and building were revalued on 1 October 20X3 with $80 million attributable to the land and $200 million to the building. At that date the estimated remaining life of the building was 25 years. A further revaluation was not needed until 1 October 20X8 when the land and building were valued at $85 million and $180 million respectively. The remaining estimated life of the building at this date was 20 years.
  2. Plant is depreciated at 20% per annum on cost with time apportionment where On 1 April 20X9 new plant costing $45 million was acquired. In addition, this plant cost $5 million to install and commission. No plant is more than four years old.
  3. The telecommunications licence was bought from the government on 1 October 20X7 and has a ten-year life. It is amortised on a straight-line In September 20X9, a review of the sales of the products related to the licence showed them to be very disappointing. As a result of this review the estimated recoverable amount of the licence at 30 September 20X9 was estimated at only $100 million.

There were no disposals of non-current assets during the year to 30 September 20X9.

REQUIREMENT

What is the carrying amount of the land and buildings at 30 September 20X9?

4 / 5

The following scenario relates to questions 1–5.

Scenario

Advent Co is a publicly listed company. Details of Advent Co's non-current assets at 1 October 20X8 were:

Land and
building
Plant Telecommunications
licence
Total
$m $m $m $m
Cost/valuation 280
Accumulated depreciation/amortisation (40) (103) (30) (175)
Carrying amount  240    45    270   555 

The following information is relevant:

  1. The land and building were revalued on 1 October 20X3 with $80 million attributable to the land and $200 million to the building. At that date the estimated remaining life of the building was 25 years. A further revaluation was not needed until 1 October 20X8 when the land and building were valued at $85 million and $180 million respectively. The remaining estimated life of the building at this date was 20 years.
  2. Plant is depreciated at 20% per annum on cost with time apportionment where On 1 April 20X9 new plant costing $45 million was acquired. In addition, this plant cost $5 million to install and commission. No plant is more than four years old.
  3. The telecommunications licence was bought from the government on 1 October 20X7 and has a ten-year life. It is amortised on a straight-line In September 20X9, a review of the sales of the products related to the licence showed them to be very disappointing. As a result of this review the estimated recoverable amount of the licence at 30 September 20X9 was estimated at only $100 million.

There were no disposals of non-current assets during the year to 30 September 20X9.

REQUIREMENT

Advent Co's licence is now carried at its recoverable amount.

The RECOVERABLE AMOUNT of an asset of an asset is the higher of ____________________ and _______________.

5 / 5

The following scenario relates to questions 1–5.

Scenario

Advent Co is a publicly listed company. Details of Advent Co's non-current assets at 1 October 20X8 were:

Land and
building
Plant Telecommunications
licence
Total
$m $m $m $m
Cost/valuation 280
Accumulated depreciation/amortisation (40) (103) (30) (175)
Carrying amount  240    45    270   555 

The following information is relevant:

  1. The land and building were revalued on 1 October 20X3 with $80 million attributable to the land and $200 million to the building. At that date the estimated remaining life of the building was 25 years. A further revaluation was not needed until 1 October 20X8 when the land and building were valued at $85 million and $180 million respectively. The remaining estimated life of the building at this date was 20 years.
  2. Plant is depreciated at 20% per annum on cost with time apportionment where On 1 April 20X9 new plant costing $45 million was acquired. In addition, this plant cost $5 million to install and commission. No plant is more than four years old.
  3. The telecommunications licence was bought from the government on 1 October 20X7 and has a ten-year life. It is amortised on a straight-line In September 20X9, a review of the sales of the products related to the licence showed them to be very disappointing. As a result of this review the estimated recoverable amount of the licence at 30 September 20X9 was estimated at only $100 million.

There were no disposals of non-current assets during the year to 30 September 20X9.

REQUIREMENT

What is the depreciation charge on the plant for the year ended 30 September 20X9?

Question – Systria Co – (06/14)

/5
0 votes, 0 avg
5

F7 (FR) - Part B - MCQs - Systria Co

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Question Name: Systria Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

The following scenario relates to questions 1–5.

Scenario

Systria Co is preparing its financial statements for the year ended 31 December 20X7 and has a number of issues to deal with regarding non-current assets.

  1. Systria Co has suffered an impairment loss of $90,000 to one of its cash-generating The carrying amounts of the assets in the cash-generating unit prior to adjusting for impairment are:
    $'000
    Goodwill 50
    Patent 10
    Land and buildings 100
    Plant and machinery 50
    Net current assets 10
    The patent is now estimated to have no value.
  2. During the year to 31 December 20X7 Systria Co acquired Dominica for $10 million, its tangible assets being valued at $7 million and goodwill on acquisition being $3 million. Assets with a carrying amount of $2.5 million were subsequently destroyed. Systria Co has carried out an impairment review and has established that Dominica Co could be sold for $6 million, while its value in use is $5.5 million.
  3. A freehold property originally costing $100,000 with a 50-year life has accumulated depreciation to date of $20,000. The asset is to be revalued to $130,000 at 31 December 20X7.

REQUIREMENT

What will be the depreciation charge relating to the asset in (iii) for the year ended 31 December 20X8?

2 / 5

The following scenario relates to questions 1–5.

Scenario

Systria Co is preparing its financial statements for the year ended 31 December 20X7 and has a number of issues to deal with regarding non-current assets.

  1. Systria Co has suffered an impairment loss of $90,000 to one of its cash-generating The carrying amounts of the assets in the cash-generating unit prior to adjusting for impairment are:
    $'000
    Goodwill 50
    Patent 10
    Land and buildings 100
    Plant and machinery 50
    Net current assets 10
    The patent is now estimated to have no value.
  2. During the year to 31 December 20X7 Systria Co acquired Dominica for $10 million, its tangible assets being valued at $7 million and goodwill on acquisition being $3 million. Assets with a carrying amount of $2.5 million were subsequently destroyed. Systria Co has carried out an impairment review and has established that Dominica Co could be sold for $6 million, while its value in use is $5.5 million.
  3. A freehold property originally costing $100,000 with a 50-year life has accumulated depreciation to date of $20,000. The asset is to be revalued to $130,000 at 31 December 20X7.

REQUIREMENT

The finance director has been asked to report to the board on the reasons for the impairment review on the cash-generating unit.

Which TWO of the following would be an internal indicator of impairment of an asset under IAS 36 Impairment of Assets?

3 / 5

The following scenario relates to questions 1–5.

Scenario

Systria Co is preparing its financial statements for the year ended 31 December 20X7 and has a number of issues to deal with regarding non-current assets.

  1. Systria Co has suffered an impairment loss of $90,000 to one of its cash-generating The carrying amounts of the assets in the cash-generating unit prior to adjusting for impairment are:
    $'000
    Goodwill 50
    Patent 10
    Land and buildings 100
    Plant and machinery 50
    Net current assets 10
    The patent is now estimated to have no value.
  2. During the year to 31 December 20X7 Systria Co acquired Dominica for $10 million, its tangible assets being valued at $7 million and goodwill on acquisition being $3 million. Assets with a carrying amount of $2.5 million were subsequently destroyed. Systria Co has carried out an impairment review and has established that Dominica Co could be sold for $6 million, while its value in use is $5.5 million.
  3. A freehold property originally costing $100,000 with a 50-year life has accumulated depreciation to date of $20,000. The asset is to be revalued to $130,000 at 31 December 20X7.

REQUIREMENT

What is the post-impairment carrying amount of plant and machinery in (i) above? $_______

Note. You are not required to put $ sign nor any coma. (e.g. 1000)

4 / 5

The following scenario relates to questions 1–5.

Scenario

Systria Co is preparing its financial statements for the year ended 31 December 20X7 and has a number of issues to deal with regarding non-current assets.

  1. Systria Co has suffered an impairment loss of $90,000 to one of its cash-generating The carrying amounts of the assets in the cash-generating unit prior to adjusting for impairment are:
    $'000
    Goodwill 50
    Patent 10
    Land and buildings 100
    Plant and machinery 50
    Net current assets 10
    The patent is now estimated to have no value.
  2. During the year to 31 December 20X7 Systria Co acquired Dominica for $10 million, its tangible assets being valued at $7 million and goodwill on acquisition being $3 million. Assets with a carrying amount of $2.5 million were subsequently destroyed. Systria Co has carried out an impairment review and has established that Dominica Co could be sold for $6 million, while its value in use is $5.5 million.
  3. A freehold property originally costing $100,000 with a 50-year life has accumulated depreciation to date of $20,000. The asset is to be revalued to $130,000 at 31 December 20X7.

REQUIREMENT

What double entries required to record the revaluation in (iii)?

OPTIONS DEBIT CREDIT
(A) Accumulated depreciation $20,000
Property at cost $30,000
Revaluation surplus $50,000
(B) Accumulated depreciation $30,000
Revaluation surplus $20,000
Property at cost $50,000
(C) Revaluation surplus $20,000
Property at cost $30,000
Accumulated depreciation $50,000
(D) Revaluation surplus $20,000
Accumulated depreciation $20,000

5 / 5

The following scenario relates to questions 1–5.

Scenario

Systria Co is preparing its financial statements for the year ended 31 December 20X7 and has a number of issues to deal with regarding non-current assets.

  1. Systria Co has suffered an impairment loss of $90,000 to one of its cash-generating The carrying amounts of the assets in the cash-generating unit prior to adjusting for impairment are:
    $'000
    Goodwill 50
    Patent 10
    Land and buildings 100
    Plant and machinery 50
    Net current assets 10
    The patent is now estimated to have no value.
  2. During the year to 31 December 20X7 Systria Co acquired Dominica for $10 million, its tangible assets being valued at $7 million and goodwill on acquisition being $3 million. Assets with a carrying amount of $2.5 million were subsequently destroyed. Systria Co has carried out an impairment review and has established that Dominica Co could be sold for $6 million, while its value in use is $5.5 million.
  3. A freehold property originally costing $100,000 with a 50-year life has accumulated depreciation to date of $20,000. The asset is to be revalued to $130,000 at 31 December 20X7.

REQUIREMENT

What is the carrying amount of the goodwill in (ii) following the impairment review? Select your answer from the drop down box options below.

Question – Derringdo Co – (07/14)

/5
0 votes, 0 avg
5

F7 (FR) - Part B - MCQs - Derringdo Co

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Question Name: Derringdo Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

Information relevant to questions 1-5.

Scenario

Derringdo Co is a broadband provider which receives government assistance to provide broadband to remote areas.
Derringdo Co invested in a new server at a cost of $800,000 on 1 October 20X2. The server has an estimated useful life of ten years with a residual value equal to 15% of its cost. Derringdo Co uses straight-line depreciation on a time apportioned basis.

The company received a government grant of 30% of its cost price of the server at the time of purchase. The terms of the grant are that if the company retains the asset for four years or more, then no repayment liability will be incurred. Derringdo Co has no intention of disposing of the server within the first four years. Derringdo Co's accounting policy for capital-based government grants is to treat them as deferred income and release them to income over the life of the asset to which they relate.

REQUIREMENT

Derringdo Co also sells a package which gives customers a free laptop when they sign a two-year contract for provision of broadband services. The laptop has a stand-alone price of $200 and the broadband contract is for $30 per month.

In accordance with IFRS 15 Revenue from Contracts with Customers, what amount will be recognised as revenue on each package in the first year?

Select the correct answer from the options below

2 / 5

Information relevant to questions 1-5.

Scenario

Derringdo Co is a broadband provider which receives government assistance to provide broadband to remote areas.
Derringdo Co invested in a new server at a cost of $800,000 on 1 October 20X2. The server has an estimated useful life of ten years with a residual value equal to 15% of its cost. Derringdo Co uses straight-line depreciation on a time apportioned basis.

The company received a government grant of 30% of its cost price of the server at the time of purchase. The terms of the grant are that if the company retains the asset for four years or more, then no repayment liability will be incurred. Derringdo Co has no intention of disposing of the server within the first four years. Derringdo Co's accounting policy for capital-based government grants is to treat them as deferred income and release them to income over the life of the asset to which they relate.

REQUIREMENT

Derringdo Co is carrying out a transaction on behalf of another entity and the finance director is unsure whether Derringdo Co should be regarded as an agent or a principal in respect of this transaction.

Which of the following would indicate that Derringdo Co is acting as an agent?

3 / 5

Information relevant to questions 1-5.

Scenario

Derringdo Co is a broadband provider which receives government assistance to provide broadband to remote areas.
Derringdo Co invested in a new server at a cost of $800,000 on 1 October 20X2. The server has an estimated useful life of ten years with a residual value equal to 15% of its cost. Derringdo Co uses straight-line depreciation on a time apportioned basis.

The company received a government grant of 30% of its cost price of the server at the time of purchase. The terms of the grant are that if the company retains the asset for four years or more, then no repayment liability will be incurred. Derringdo Co has no intention of disposing of the server within the first four years. Derringdo Co's accounting policy for capital-based government grants is to treat them as deferred income and release them to income over the life of the asset to which they relate.

REQUIREMENT

Determining the amount to be recognised in the first year is an example of which stage in the process of applying IFRS 15?

4 / 5

Information relevant to questions 1-5.

Scenario

Derringdo Co is a broadband provider which receives government assistance to provide broadband to remote areas.
Derringdo Co invested in a new server at a cost of $800,000 on 1 October 20X2. The server has an estimated useful life of ten years with a residual value equal to 15% of its cost. Derringdo Co uses straight-line depreciation on a time apportioned basis.

The company received a government grant of 30% of its cost price of the server at the time of purchase. The terms of the grant are that if the company retains the asset for four years or more, then no repayment liability will be incurred. Derringdo Co has no intention of disposing of the server within the first four years. Derringdo Co's accounting policy for capital-based government grants is to treat them as deferred income and release them to income over the life of the asset to which they relate.

REQUIREMENT

What amount will be presented under non-current liabilities at 31 March 20X3 in respect of the grant?

5 / 5

Information relevant to questions 1-5.

Scenario

Derringdo Co is a broadband provider which receives government assistance to provide broadband to remote areas.
Derringdo Co invested in a new server at a cost of $800,000 on 1 October 20X2. The server has an estimated useful life of ten years with a residual value equal to 15% of its cost. Derringdo Co uses straight-line depreciation on a time apportioned basis.

The company received a government grant of 30% of its cost price of the server at the time of purchase. The terms of the grant are that if the company retains the asset for four years or more, then no repayment liability will be incurred. Derringdo Co has no intention of disposing of the server within the first four years. Derringdo Co's accounting policy for capital-based government grants is to treat them as deferred income and release them to income over the life of the asset to which they relate.

REQUIREMENT

What is the net amount that will be charged to operating expenses in respect of the server for the year ended 31 March 20X3?

Your score is

Question – Bridgenorth Co – (08/14)

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0 votes, 0 avg
1

F7 (FR) - Part B - MCQs - Bridgenorth Co

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Question Name: Bridgenorth Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

Information relevant to questions 1–5.

Scenario

Bridgenorth Co has undertaken a $5 million contract to repair a railway tunnel. The contract was signed on 1 April 20X8 and the work is expected to take two years. This is a contract where performance obligations are satisfied over time and progress in satisfying performance obligations is to be measured according to % of work completed as certified by a surveyor. Bridgenorth Co has an enforceable right to payment for performance completed to date.

At 31 December 20X9 the details of the contract were as follows:

20X9 20X8
$ $
Total contract value 5,000,000 5,000,000
Costs to date 3,600,000 2,300,000
Estimated costs to completion 700,000 2,100,000
Work invoiced to date 3,000,000 2,000,000
Cash received to date 2,400,000 1,500,000
% certified complete 75% 40%

REQUIREMENT

What is the contract asset to be recognised at 31 December 20X9?

2 / 5

Information relevant to questions 1–5.

Scenario

Bridgenorth Co has undertaken a $5 million contract to repair a railway tunnel. The contract was signed on 1 April 20X8 and the work is expected to take two years. This is a contract where performance obligations are satisfied over time and progress in satisfying performance obligations is to be measured according to % of work completed as certified by a surveyor. Bridgenorth Co has an enforceable right to payment for performance completed to date.

At 31 December 20X9 the details of the contract were as follows:

20X9 20X8
$ $
Total contract value 5,000,000 5,000,000
Costs to date 3,600,000 2,300,000
Estimated costs to completion 700,000 2,100,000
Work invoiced to date 3,000,000 2,000,000
Cash received to date 2,400,000 1,500,000
% certified complete 75% 40%

REQUIREMENT

If at 31 December 20X8 Bridgenorth Co had completed only 10% of the contract for costs of $400,000 and felt that it was too early to predict whether or not the contract would be profitable, what amount, if any, could Bridgenorth Co have recognised as revenue?

3 / 5

Information relevant to questions 1–5.

Scenario

Bridgenorth Co has undertaken a $5 million contract to repair a railway tunnel. The contract was signed on 1 April 20X8 and the work is expected to take two years. This is a contract where performance obligations are satisfied over time and progress in satisfying performance obligations is to be measured according to % of work completed as certified by a surveyor. Bridgenorth Co has an enforceable right to payment for performance completed to date.

At 31 December 20X9 the details of the contract were as follows:

20X9 20X8
$ $
Total contract value 5,000,000 5,000,000
Costs to date 3,600,000 2,300,000
Estimated costs to completion 700,000 2,100,000
Work invoiced to date 3,000,000 2,000,000
Cash received to date 2,400,000 1,500,000
% certified complete 75% 40%

REQUIREMENT

Using the drop down box, select what amount would have been included in trade receivables at 31 December 20X8?

4 / 5

Information relevant to questions 1–5.

Scenario

Bridgenorth Co has undertaken a $5 million contract to repair a railway tunnel. The contract was signed on 1 April 20X8 and the work is expected to take two years. This is a contract where performance obligations are satisfied over time and progress in satisfying performance obligations is to be measured according to % of work completed as certified by a surveyor. Bridgenorth Co has an enforceable right to payment for performance completed to date.

At 31 December 20X9 the details of the contract were as follows:

20X9 20X8
$ $
Total contract value 5,000,000 5,000,000
Costs to date 3,600,000 2,300,000
Estimated costs to completion 700,000 2,100,000
Work invoiced to date 3,000,000 2,000,000
Cash received to date 2,400,000 1,500,000
% certified complete 75% 40%

REQUIREMENT

Bridgenorth Co measures performance obligations completed by reference to percentage of completion.

Identify which TWO of the following would be an acceptable method of measuring the performance obligations completed?

5 / 5

Information relevant to questions 1–5.

Scenario

Bridgenorth Co has undertaken a $5 million contract to repair a railway tunnel. The contract was signed on 1 April 20X8 and the work is expected to take two years. This is a contract where performance obligations are satisfied over time and progress in satisfying performance obligations is to be measured according to % of work completed as certified by a surveyor. Bridgenorth Co has an enforceable right to payment for performance completed to date.

At 31 December 20X9 the details of the contract were as follows:

20X9 20X8
$ $
Total contract value 5,000,000 5,000,000
Costs to date 3,600,000 2,300,000
Estimated costs to completion 700,000 2,100,000
Work invoiced to date 3,000,000 2,000,000
Cash received to date 2,400,000 1,500,000
% certified complete 75% 40%

REQUIREMENT

What is the profit recognised for the year ended 31 December 20X8? $_______

Note. You are not required to put $ sign nor any coma. (e.g. 1000)

Question – Apex Co – (09/14)

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0 votes, 0 avg
4

F7 (FR) - Part B - MCQs - Apex Co

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Question Name: Apex Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

The following scenario relates to questions 1–5.

Scenario

Apex Co is a publicly listed supermarket chain. During the current year it started the building of a new store. The directors are aware that in accordance with IAS 23 Borrowing Costs certain borrowing costs have to be capitalised.

Details relating to construction of Apex Co's new store:

Apex Co issued a $10 million unsecured loan with a coupon (nominal) interest rate of 6% on 1 April 20X8. The loan is redeemable at a premium which means the loan has an effective finance cost of 7.5% per annum. The loan was specifically issued to finance the building of the new store which meets the definition of a qualifying asset in IAS 23. Construction of the store commenced on 1 May 20X8 and it was completed and ready for use on 28 February 20X9, but did not open for trading until 1 April 20X9.

REQUIREMENT

What is the total of the finance costs which can be capitalised in respect of Apex Co's new store? $_______

Note. You are not required to put $ sign nor any coma. (e.g. 1000)

2 / 5

The following scenario relates to questions 1–5.

Scenario

Apex Co is a publicly listed supermarket chain. During the current year it started the building of a new store. The directors are aware that in accordance with IAS 23 Borrowing Costs certain borrowing costs have to be capitalised.

Details relating to construction of Apex Co's new store:

Apex Co issued a $10 million unsecured loan with a coupon (nominal) interest rate of 6% on 1 April 20X8. The loan is redeemable at a premium which means the loan has an effective finance cost of 7.5% per annum. The loan was specifically issued to finance the building of the new store which meets the definition of a qualifying asset in IAS 23. Construction of the store commenced on 1 May 20X8 and it was completed and ready for use on 28 February 20X9, but did not open for trading until 1 April 20X9.

REQUIREMENT

If Apex Co had been able to temporarily invest the proceeds of the loan from 1 April to 1 May when construction began, how would the proceeds be accounted for?

3 / 5

The following scenario relates to questions 1–5.

Scenario

Apex Co is a publicly listed supermarket chain. During the current year it started the building of a new store. The directors are aware that in accordance with IAS 23 Borrowing Costs certain borrowing costs have to be capitalised.

Details relating to construction of Apex Co's new store:

Apex Co issued a $10 million unsecured loan with a coupon (nominal) interest rate of 6% on 1 April 20X8. The loan is redeemable at a premium which means the loan has an effective finance cost of 7.5% per annum. The loan was specifically issued to finance the building of the new store which meets the definition of a qualifying asset in IAS 23. Construction of the store commenced on 1 May 20X8 and it was completed and ready for use on 28 February 20X9, but did not open for trading until 1 April 20X9.

REQUIREMENT

Apex Co issued the loan stock on 1 April 20X8. Three events or transactions must be taking place for capitalisation of borrowing costs to commence in accordance with IAS 23.

Which of the following is NOT one of these?

4 / 5

The following scenario relates to questions 1–5.

Scenario

Apex Co is a publicly listed supermarket chain. During the current year it started the building of a new store. The directors are aware that in accordance with IAS 23 Borrowing Costs certain borrowing costs have to be capitalised.

Details relating to construction of Apex Co's new store:

Apex Co issued a $10 million unsecured loan with a coupon (nominal) interest rate of 6% on 1 April 20X8. The loan is redeemable at a premium which means the loan has an effective finance cost of 7.5% per annum. The loan was specifically issued to finance the building of the new store which meets the definition of a qualifying asset in IAS 23. Construction of the store commenced on 1 May 20X8 and it was completed and ready for use on 28 February 20X9, but did not open for trading until 1 April 20X9.

REQUIREMENT

Rather than take out a loan specifically for the new store Apex Co could have funded the store from existing borrowings which are:

  1. 10% bank loan $50 million
  2. 8% bank loan $30 million

In this case it would have applied a 'capitalisation rate' to the expenditure on the asset.

What would that rate have been?

5 / 5

The following scenario relates to questions 1–5.

Scenario

Apex Co is a publicly listed supermarket chain. During the current year it started the building of a new store. The directors are aware that in accordance with IAS 23 Borrowing Costs certain borrowing costs have to be capitalised.

Details relating to construction of Apex Co's new store:

Apex Co issued a $10 million unsecured loan with a coupon (nominal) interest rate of 6% on 1 April 20X8. The loan is redeemable at a premium which means the loan has an effective finance cost of 7.5% per annum. The loan was specifically issued to finance the building of the new store which meets the definition of a qualifying asset in IAS 23. Construction of the store commenced on 1 May 20X8 and it was completed and ready for use on 28 February 20X9, but did not open for trading until 1 April 20X9.

REQUIREMENT

Apex Co's new store meets the definition of a qualifying asset under IAS 23.

Which of the following is the correct description of a qualifying asset under IAS 23?

Question – Bertrand Co – (10/14)

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0 votes, 0 avg
2

F7 (FR) - Part B - MCQs - Bertrand Co

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Question Name: Bertrand Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

Information relevant to questions 1–5.

Scenario

Bertrand Co issued $10 million convertible loan notes on 1 October 20X0 that carry a nominal interest (coupon) rate of 5% per annum. They are redeemable on 30 September 20X3 at par for cash or can be exchanged for equity shares in Bertrand Co on the basis of 20 shares for each $100 of loan. A similar loan note, without the conversion option, would have required Bertrand Co to pay an interest rate of 8%.

The present value of $1 receivable at the end of each year, based on discount rates of 5% and 8%, can be taken as:

5% 8%
End of year 1 0.95 0.93
2 0.91 0.86
3 0.86 0.79
Cumulative 0.72 2.58

REQUIREMENT

If Bertrand Co had incurred transaction costs in issuing these loan notes, how should these have been accounted for?

2 / 5

Information relevant to questions 1–5.

Scenario

Bertrand Co issued $10 million convertible loan notes on 1 October 20X0 that carry a nominal interest (coupon) rate of 5% per annum. They are redeemable on 30 September 20X3 at par for cash or can be exchanged for equity shares in Bertrand Co on the basis of 20 shares for each $100 of loan. A similar loan note, without the conversion option, would have required Bertrand Co to pay an interest rate of 8%.

The present value of $1 receivable at the end of each year, based on discount rates of 5% and 8%, can be taken as:

5% 8%
End of year 1 0.95 0.93
2 0.91 0.86
3 0.86 0.79
Cumulative 0.72 2.58

REQUIREMENT

How should the convertible loan notes be accounted for?

3 / 5

Information relevant to questions 1–5.

Scenario

Bertrand Co issued $10 million convertible loan notes on 1 October 20X0 that carry a nominal interest (coupon) rate of 5% per annum. They are redeemable on 30 September 20X3 at par for cash or can be exchanged for equity shares in Bertrand Co on the basis of 20 shares for each $100 of loan. A similar loan note, without the conversion option, would have required Bertrand Co to pay an interest rate of 8%.

The present value of $1 receivable at the end of each year, based on discount rates of 5% and 8%, can be taken as:

5% 8%
End of year 1 0.95 0.93
2 0.91 0.86
3 0.86 0.79
Cumulative 0.72 2.58

REQUIREMENT

What is the amount that will be recognised as finance costs for the year ended 30 September 20X1? $_______

Note. You are not required to put $ sign nor any coma. (e.g. 1000)

4 / 5

Information relevant to questions 1–5.

Scenario

Bertrand Co issued $10 million convertible loan notes on 1 October 20X0 that carry a nominal interest (coupon) rate of 5% per annum. They are redeemable on 30 September 20X3 at par for cash or can be exchanged for equity shares in Bertrand Co on the basis of 20 shares for each $100 of loan. A similar loan note, without the conversion option, would have required Bertrand Co to pay an interest rate of 8%.

The present value of $1 receivable at the end of each year, based on discount rates of 5% and 8%, can be taken as:

5% 8%
End of year 1 0.95 0.93
2 0.91 0.86
3 0.86 0.79
Cumulative 0.72 2.58

REQUIREMENT

What is the amount that should be shown under liabilities at 30 September 20X1?

5 / 5

Information relevant to questions 1–5.

Scenario

Bertrand Co issued $10 million convertible loan notes on 1 October 20X0 that carry a nominal interest (coupon) rate of 5% per annum. They are redeemable on 30 September 20X3 at par for cash or can be exchanged for equity shares in Bertrand Co on the basis of 20 shares for each $100 of loan. A similar loan note, without the conversion option, would have required Bertrand Co to pay an interest rate of 8%.

The present value of $1 receivable at the end of each year, based on discount rates of 5% and 8%, can be taken as:

5% 8%
End of year 1 0.95 0.93
2 0.91 0.86
3 0.86 0.79
Cumulative 0.72 2.58

REQUIREMENT

Bertrand Co also purchased a debt instrument which will mature in five years' time. Bertrand Co intends to hold the debt instrument to maturity to collect interest payments.

Complete the following statement using the options below.

"This debt instrument will be measured as a financial _____________ at ___________ in the financial statements of Bertrand Co."