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Final term Solved paper of mgt401 on 20 July 2011

Solved by Abr

Q. 1-------- 5 marks

Sale of Goods - IAS 18

• Revenue from the sale of goods shall be recognized when all of the following

conditions are satisfied;

a) The entity has transferred to the buyer the significant risks an rewards of the

ownership of goods;

b) The entity retains neither continuing managerial involvement to the degree usually

associated with

ownership nor effective control over the goods sold;

c) The amount of revenue can be measured reliably;

d) It is probable that the economic benefits associated with the transaction will flow to

the entity; and

e) The costs incurred or to be incurred in respect of the transaction can be measured

reliably.

Q. 2-------- 5marks

Selection and Application of Accounting Policies – IAS 8

• When a Standard or an Interpretation specifically applies to a transaction, other event

or condition, the accounting policy or policies applied to that item shall be determined

by applying the Standard or Interpretation

and considering any relevant Implication Guidance issued by IASB for the standard or

interpretation.

• In the absence of a Standard or an Interpretation that specifically applies to a

transaction, other event or condition, management shall use its judgment in developing

and applying an accounting policy that results in information that is:

a. Relevant to the economic decision making needs of the user; and

b. Reliable, in that the financial statements;

• Represents faithfully the financial position, financial performance and cash flow of the

entity;

• Reflects the economic substance of transactions, other events and conditions, and not

merely the legal form;

• Are neutral, i.e. free from bias;

• Are prudent; and

• Are complete in all material respects

Q. 3-------- 3 marks

Administrative Costs

• Administrative costs include expense incurred on administration and management of

the business.

• Administrate costs include:

.. Administrative staff salaries and related costs

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.. Depreciation, maintenance, rent, utilities and management costs of administrative

offices

.. Other administrative costs such as printing, entertainment, postage etc.

Q. 4-------- 5 marks

Historical cost: Consideration paid (payable) or received (receivable) at the time of

recording of transaction

(no relation to current costs).

.. Current cost: The consideration that would have to be paid if a same or an

equivalent asset is acquired.

The undisclosed amount of cash or cash equivalents, that would be required to settle an

obligation currently.

.. Realisable value: The consideration that would be realised by selling an asset in an

orderly disposal.

Q. 5-------- 3 marks

accounts payable at the begning Rs 250000

accounts payable at the end Rs. 190000

Credit purchases Rs. 200000

calculate cash payment in the form of accounts payable ledger.

Q. 6-------- 3 marks

T Co. deals in sports goods. it exchanges some of its plant with R Co.

Assets of T Co. are:

cost 25000

accumulated depreciation 15000

fair value of asset 12000

Assets of R Co. are:

cost 000 i forgot :(

accumulated depreciation 000 i forgot :(

fair value of asset 18000

note :

T co. also pays Rs. 6000 for settlement of transaction.

Required:

pass journal entry in the books of T Co.

Q. 7-------- 5 marks

numerical question about lease.

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Q. 8-------- 3 marks

what do you know about accruals with respect to IAS 37?

Accruals are liabilities to pay for goods or services that have been received but have not

been paid, invoiced

or formally agreed with the supplier including amounts due to employees.

• Although it is sometimes necessary to estimate the amount or timing of accrual, the

uncertainty is generally much less than provision.

80% mcqs were from past papers.

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