RFJPIA-R12

2ND Annual Regional Convention 2008

QUIZ BEE PA1 & TOA

AVERAGE ROUND

1.

2.

3.

The Scandium Company is commencing a new construction project, which

is to be financed by borrowing. The key dates are as follows: 15 May
20X8 Loan interest relating to the project starts to be incurred

3 June 20X8 Technical site planning commences

According to IAS29 Financial reporting in hyperinflationary economies,12 June 20X8 Expenditures on the project start to be incurred
18 July 20X8 Construction work commences
which TWO of the following are monetary items?
a. Trade payables
According to IAS23 Borrowing costs, from what date can Scandium
b. Inventories
commence the capitalization of borrowing costs?
c. Administration costs paid in cash
a 15 May 20X8
d. Loan repayable at par value
b 3 June 20X8
Question 4 - A & D
Monetary items are to be received (or settled) in fixed monetary terms (per c 12 June 20X8
IAS29 para 12). This includes trade payables and loans to be repaid at par d 18 July 20X8
Question 4 - C
value.
All relevant conditions in IAS23 para 17 are fulfilled by the date when
expenditures on the project start to be incurred.
The Hopkins Company is a manufacturing company. The cost per unit of
an item of inventory is shown on its card as follows:
PHP
The Palila Company purchased a varnishing machine for PHP150,000 on 1
Materials
30
January 20X7.
Production labor costs
33
Production overheads
12
The company received a government grant of PHP13,500 in respect of this
General administration costs
10
asset. Company policy was to depreciate the asset over 4 years on a
Marketing costs
5
According to IAS2 Inventories, what is the value of one completed item ofstraight-line basis and to treat the grant as deferred income. Under IAS20
Government grants and government assistance, what should be the
inventory in Hopkins's statement of financial position?
carrying amounts of the machine and the deferred income ("DI") balance at
e. PHP63
31 December 20X8?
f. PHP85
Carrying amount
DI balance
g. PHP75
a
PHP75,000
PHP6,750
h. PHP90
b
PHP112,500
PHP10,125
Question 11 - C
c
PHP81,750
PHP6,750
PHP75 is the correct answer.
d
PHP75,000
PHP13,500
IAS2 paras 10-12 define the cost of inventory. In this example the cost
Question 5 - A
includes materials, production labor and production overheads, but not
Carrying amount PHP75,000, Deferred income PHP6,750 is the correct
general administration or marketing costs.
answer.
See IAS20 para 26, where the grant is recognized as income on a
On 1 January 20X8 The Ebro Company commenced trading to provide key
systematic
skills education facilities in a region identified for technology
and rational basis over the life of the asset. The deferred income in the
development. Also on 1 January 20X8, the company received two grants
statement of financial position is reduced each year by the amount credited
from its government for setting up its operations in this location:
to
profit or loss.
Grant (a) was paid to give financial assistance for start-up costs already
The asset is depreciated over its useful life per IAS16.
incurred.
Grant (b) was paid to subsidize the costs of purchasing computer The Coral Company accounts for non-current assets using the cost model.
software over the five-year period. The company is almost certain to keep On 20 July 20X7 Coral classified a non-current asset as held for sale in
accordance with IFRS5 Non-current assets held for sale and discontinued
the facilities operational for the next five years.
operations. At that date the asset's carrying amount was PHP14,500, its fair
The company's accounting year end is 31 December. Are the following value was estimated at PHP21,500 and the costs to sell at PHP1,450. The
statements concerning recognition of the income from the two government asset was sold on 18 October 20X7 for PHP21,200. In accordance with
grants true or false, according to IAS20 Government grants and IFRS5, at what amount should the asset be stated in Coral's statement of
financial position at 30 September 20X7?
government assistance?
(1) Income from Grant (a) should be recognized in full on receipt in 20X8. A PHP20,050
(2) Income from Grant (b) should be recognized in full at the end of 5 B PHP21,500
C PHP21,200
years.
D PHP14,500
Question 8 - D
Statement (1)
Statement (2)
IFRS5 para 15 requires that a non-current asset held for sale should be
a
False
False
stated at the lower of (i) the carrying amount and (ii) the fair value less
b
False
True
costs
c
True
False
to sell.
d
True
True
Question 2 - C
IAS20 para 20 requires grants for expenditure already incurred to be
The Markab Company has acquired a trademark relating to the introduction
recognized immediately. Para 12 requires grants such as that for the
of
software
a new manufacturing process. The costs incurred were as follows:
to be matched against the related costs, so that grant would be recognized
Cost of trademark
over the five-year period.
PHP 3,500,000

Expenditure on promoting the new product

PHP The White Company set up a defined benefit post-employment plan with
effect from 1 January 20X7. In the first year the expected return on plan
Employee benefits relating to the testing of the
assets was PHP5,000, the actual return on plan assets was PHP4,000, the
proper functioning of the new process
PHP current service cost was PHP12,000 and White's contributions paid into the
200,000
plan were PHP7,500.
According to IAS38 Intangible assets, what is the total cost that should be What is the net expense to be recognized in profit or loss for the year ended
capitalized as an intangible non-current asset in respect of the new process? 31 December 20X7, according to IAS19 Employee benefits?
A PHP3,750,000
A PHP8,000
B PHP3,700,000
B PHP3,500
C PHP3,500,000
C PHP7,000
D PHP3,550,000
D PHP2,500
Question 11 - B
Question 11 - C
IAS38 paras 27-29 specify the costs attributable to a separately acquired The amounts to be recognized as an expense in profit or loss are the current
intangible asset. This requires the trademark costs and costs of testing to be service cost less the expected return on plan assets. See IAS19 para 61.
included.
Note that the difference between the expected and the actual return on plan
assets is an actuarial loss, while the employer contributions increase plan
assets.
The Dipper Company operates chemical plants. Its published policies
include a commitment to making good any damage caused to10.
the The Pinder Company is completing the preparation of its draft financial
environment by its operations. It has always honored this commitment. statements for the year ended 31 May 20X7. On 24 July 20X7, a dividend
Which ONE of the following scenarios relating to Dipper would give rise of PHP175,000 was declared and a contractual profit share payment of
to an environmental provision as defined by IAS37 Provisions, contingent PHP35,000 was made, both based on the profits for the year to 31 May
liabilities and contingent assets?
20X7. On 20 June 20X7, a customer went into liquidation having owed the
a. On past experience it is likely that a chemical spill which would result company PHP34,000 for the past 5 months. No allowance had been made
in Dipper having to pay fines and penalties will occur in the next year against this debt in the draft financial statements. On 17 July 20X7, a
b. Recent research suggests there is a possibility that the company's manufacturing plant was destroyed by fire, resulting in a financial loss of
PHP260,000.
actions may damage surrounding wildlife
According to IAS10 Events after the reporting period, which TWO
c. The government has outlined plans for a new law requiring allamounts should be recognized in Pinder's profit or loss for the year to 31
environmental damage to be rectified
May 20X7 to reflect adjusting events after the end of reporting period?
d. A chemical spill from one of the company's plants has caused harm to A PHP175,000 dividend
the surrounding area and wildlife
B PHP35,000 bonus
Question 11 - D
C PHP34,000 allowance for uncollectible trade receivables
The published policy creates a constructive obligation as defined by IAS37 D PHP260,000 loss on manufacturing plant
para 10. The spill is a past event which gives rise to a present obligation
Question 7 - B & C
and
The correct answers are PHP35,000 bonus and PHP34,000 allowance.
the need for a provision under para 14.
See IAS10 paras 9, 12 and 22. Also, dividends are recognized in the
The government plans and any chemical spill relate to future events, while statement of changes in equity, not profit or loss
the
"possible" damage to wildlife gives rise to a contingent liability which
should
be disclosed.
50,000

8.