Question: Backwater Construction Company is reviewing a major

> (a) On 1 October 2012, Paradigm acquired 75% of Strata’s equity shares by means of a share exchange of two new shares in Paradigm for every five acquired shares in Strata. In addition, Paradigm issued to the shareholders of Strata a $10

> Discuss the advantages to a company of: (a) purchasing and cancelling its own shares; (b) purchasing and holding its own shares in treasury.

> Applying the principles of control in IFRS 10 Consolidated Financial Statements, as described in Section 22.3.2 of this chapter, you are required to consider whether certain investments of Austin plc are subsidiaries. Austin plc has investments in a numb

> Base plc acquired 60% of the common shares of Ball plc on 1 January 20X0 and gained control. At that date the statements of financial position of the two companies were as follows: Note: The fair value of the property, plant and equipment in Ball at 1/

> Boldwin Construction has entered into a contract with Spears Retailers to construct a new department store on Spears land. The contract sum is £45 million. At 30 June 20X1 the situation is as follows: (a) the contract is 30% complete; (b) expenses to dat

> Norwik Construction plc is a large construction company involved in multiple large contracts around the world. One contract to build three stadiums is being undertaken by the Australasian division. Each stadium has an individual contract price. Jim Norwi

> IAS 10 deals with events after the reporting period. Required: (a) Define the period covered by IAS 10. (b) Explain when the financial statements should be adjusted. (c) Why should non-adjusting events be disclosed? (d) A customer made a claim for £50,

> During its financial year ended 30 June 20X7 Beavers, an engineering company, has worked on several contracts. Information relating to one for Dam Ltd which is being constructed to a specific customer design is given below: The plant and equipment is e

> The trial balance for LPO at 31 December 2013 was as follows: Notes: (i) Closing inventory at 31 December 2013 was $562,000. (ii) On 31 December 2013, LPO disposed of some obsolete plant and equipment for $3,000. The plant and equipment had originally

> MACTAR has a series of contracts to resurface sections of motorways. The scale of the contract means several years’ work and each motorway section is regarded as a separate contract. The M62 contract has had major difficulties due to

> Agriculture is a key business activity in many parts of the world, particularly in developing countries. Following extensive discussions with, and funding from, the World Bank, the International Accounting Standards Committee (IASC) developed an accounti

> The statement of income of Bottom, a manufacturing company, for the year ending 31 January 20X2 is as follows: Bottom has used the LIFO method of inventory valuation but the directors wish to assess the implications of using the FIFO method. Relevant d

> The following is the statement of financial position of Alpha Ltd as on 30 June 20X8: The following information is relevant: 1 There are contingent liabilities in respect of (i) a guarantee given to bankers to cover a loan of £30,000 made

> The following are the financial statements of the parent company Swish plc, a subsidiary company Broom and an associate company Handle. Swish acquired 90% of the shares in Broom on 1 January 20X1 when the balance on the retained earnings of Broom was

> The following are the statements of financial position of Garden plc, its subsidiary Rose Ltd and its associate Petal Ltd: On 1 January 20X3 Garden plc acquired 75% of Rose Ltd for £300,000 when Rose’s share capital and r

> The following are the financial statements of the parent company Alpha plc, a subsidiary company Beta and an associate company Gamma. On 1 January 20X5 Alpha plc acquired 80% of Beta plc for £216,000 when Beta plc’s share

> The statements of comprehensive income for Highway plc, Road Ltd and Lane Ltd for the year ended 31 December 20X9 were as follows: Highway plc acquired 80% of Road Ltd for $160,000 on 1.1.20X6 when Road Ltd’s share capital was $64,000

> The statements of income for Continent plc, Island Ltd and River Ltd for the year ended 31 December 20X9 were as follows: Continent plc acquired 80% of Island Ltd for €27,500 on 1 January 20X3, when Island Ltd’s retai

> Rumpus plc is a public listed manufacturing company. Its summarized consolidated financial statements for the year ended 31 March 2014 (and 2013 comparatives where relevant) are as follows: The following additional information is available: (i) The g

> H Ltd has one subsidiary, S Ltd. The company has held a controlling interest for several years. The latest financial statements for the two companies and the consolidated financial statements for the H Group are as shown below: Required: (a) Calculate

> The statements of financial position of Red Ltd and Pink Ltd at 31 December 20X2 are as follows: Statements of comprehensive income for the year ended 31 December 20x2 Red Ltd acquired 75% of the shares in Pink Ltd on 1 January 20X0 when Pink Ltd&aci

> The statements of financial position of Mars plc and Jupiter plc at 31 December 20X2 are as follows: Statements of comprehensive income for the year ended 31 December 20x2 Mars acquired 80% of the shares in Jupiter on 1 January 20X0 when Jupiter&acir

> Gamma is a company that manufactures power tools. Gamma was established by Mr Lee, who owns all of Gamma’s shares. Mrs Lee, Mr Lee’s wife, owns a controlling interest in Delta, a distributor of power tools. Delta is on

> Donna, Inc. operates a defined benefit pension scheme for staff. The pension scheme has been operating for a number of years but not following IAS 19. The finance director is unsure of which accounting policy to adopt under IAS 19 because he has heard ve

> River plc acquired 90% of the common shares and 10% of the 5% bonds in Pool Ltd on 31 March 20X1. All income and expenses are deemed to accrue evenly through the year. On 31 January 20X1 River sold Pool goods for £6,000 plus a markup of one-

> Morn Ltd acquired 90% of the shares in Eve Ltd on 1 January 20X1 for £90,000 when Eve Ltd’s accumulated profits were £50,000. On 10 January 20X1 Morn Ltd received a dividend of £10,800 from Eve Ltd

> Bill plc acquired 80% of the common shares and 10% of the preferred shares in Ben plc on 31 December three years ago when Ben’s retained profits were €45,000. During the year Bill sold Ben goods for €8,

> Forest plc acquired 80% of the ordinary shares of Bulwell plc some years ago. At acquisition, the fair values of the assets of Bulwell plc were the same as their carrying value. Bulwell plc manufacture plant and equipment. On 1 January 20X3, Bulwell sold

> The following are the summarized financial statements of two companies, Peel and Caval, for the financial year ended 31 October 2011. The following information is available: (i) Peel purchased 90% of the ordinary shares in Caval for £240m

> Hyson plc acquired 75% of the shares in Green plc on 1 January 20X0 for £6 million when Green plc’s accumulated profits were £4.5 million. At acquisition, the fair value of Green’s non-current

> The following accounts are the consolidated statement of financial position and parent company statement of financial position for Alpha Ltd as at 30 June 20X2: Notes: 1 There was only one subsidiary, called Beta Ltd. 2 There were no capital reserves i

> On 1 January 20X0 Hill plc purchased 70% of the ordinary shares of Valley plc for £1.3 million. The fair value of the non-controlling interest at that date was £0.5 million. At the date of acquisition, Valley’s

> Prop and Flap have produced the following statements of financial position as at 31 October 2008: The following information is relevant to the preparation of the financial statements of the Prop Group: 1 Prop acquired 80% of the issued ordinary share c

> On 30 September 20X0 Gold plc acquired 75% of the equity shares, 30% of the preferred shares and 20% of the bonds in Silver plc and gained control. The balance of retained earnings on 30 September 20X0 was £16,000. The fair value of the land

> A plc issues 50,000 share options to its employees on 1 January 2008 which the employees can only exercise if they remain with the company until 31 December 2010. The options have a fair value of £5 each on 1 January 2008. It is expected that the holders

> Maxpool plc, a listed company, owned 60% of the shares in Ching Ltd. Bay plc, a listed company, owned the remaining 40% of the £1 ordinary shares in Ching Ltd. The holdings of shares were acquired on 1 January 20X0. On 30 November 20X0 Ching Ltd sold a f

> Summer plc acquired 60% of the equity shares of Winter Ltd on 30 September 20X1 and gained control. At the date of acquisition, the balance of retained earnings of Winter was €35,000. At 31 December 20X1 the statements of financial posit

> Sweden acquired 100% of the equity shares of Oslo on 1 March 20X1 and gained control. At that date the balances on the reserves of Oslo were as follows: Revaluation reserve ………â€&brv

> Bleu plc acquired 80% of the shares of Verte plc on 1 January 20X0 and gained control. At that date the statements of financial position of the two companies were as follows: Required: Prepare a consolidated statement of financial position for Bleu plc

> Set out below is the summarized statement of financial position of Berlin plc at 1 January 20X0. On 1/1/20X0 Berlin acquired 100% of the shares of Hanover for £100,000 and gained control. Required: Prepare the statement of financial posit

> Ham plc acquired 100% of the common shares of Burg plc on 1 January 20X0 and gained control. At that date the statements of financial position of the two companies were as follows: Notes: 1 The fair value is the same as the book value. 2 â‚&

> Rouge plc acquired 100% of the common shares of Noir plc on 1 January 20X0 and gained control. At that date the statements of financial position of the two companies were as follows: Required: Prepare a consolidated statement of financial position for

> On 1 January 20X7 Parent Ltd acquired 75% of the ordinary shares in Daughter Ltd for £9,000 cash. The fair value of the net assets in Daughter Ltd was their book value. Assume in each case that the non controlling interest is measured using

> On 1 January 20X7 Parent Ltd acquired all the ordinary shares in Daughter Ltd for £6,000 cash. The fair value of the net assets in Daughter Ltd was their book value. Required: Prepare the statements of financial position of Parent Ltd and t

> (a) On 1 January 20X7 Parent Ltd acquired all the ordinary shares in Daughter Ltd for £16,200 cash. The fair value of the net assets in Daughter Ltd was £12,000. (b) The purchase consideration was satisfied by the issue of 5,400

> Simple SA has just purchased a roasting/salting machine to produce roasted walnuts. The finance director asks for your advice on how the company should calculate the depreciation on this machine. Details are as follows: Cost of machine ……………………………………….S

> (a) On 1 January 20X7 Parent Ltd acquired all the ordinary shares in Daughter Ltd for £16,200 cash. The fair value of the net assets in Daughter Ltd was their book value. (b) The purchase consideration was satisfied by the issue of 5,400 new

> (a) In 20X3 Arthur is a large loan creditor of X Ltd and receives interest at 20% p.a. on this loan. He also has a 24% shareholding in X Ltd. Until 20X1 he was a director of the company and left after a disagreement. The remaining 76% of the shares are h

> (a) Assume that on 1 January 20X7 Parent Ltd acquired all the ordinary shares in Daughter Ltd for £10,800 cash. The fair value of the net assets in Daughter Ltd was their book value. (b) The purchase consideration was satisfied by the issue

> During 2006, Jack Matelot set up a company, JTM, to construct and refurbish marinas in various ports around Europe. The company’s first accounting period ended on 31 October 2006 and during that period JTM won a contract to refurbish a

> The following information relates to Deferred plc: ● EBITDA (earnings before interest, tax, depreciation and amortization) for year ended 31.12.20X1 is £300,000 ● No interest payable in 20X1 ● No amortization ● Equipment cost £100,000 at 1.1.20X1 ● Depre

> Quick build Ltd entered into a two-year contract on 1 January 20X7 at a contract price of £250,000. The estimated cost of the contract was £150,000. At the end of the first year the following information was available: ● contract costs incurred totaled £

> Newbild SA commenced work on the construction of a block of flats on 1 July 20X0. During the period ended 31 March 20X1 contract expenditure was as follows: € Materials issued from stores …………………….13,407 Materials delivered direct to site ………………73,078 W

> At 31 October 20X9, Lytax Ltd was engaged in the following five long-term contracts. In each contract Lytax was building cold storage warehouses on five sites where the land was owned by the customer. Details are given below: It is not expected that an

> Beta Ltd commenced business on 1 January and is making up its first year’s accounts. The company uses standard costs. The company owns a variety of raw materials and components for use in its manufacturing business. The accounting recor

> HK Ltd has prepared its draft trial balance to 30 June 20X1, which is shown below. The following information is available: (a) The authorised share capital is 4,000,000 9% preference shares of $1 each and 18,000,000 ordinary shares of 50c each. (b) Pro

> Purchases of a certain product during July were: Units sold during the month were: Required: Assuming no opening inventories: (a) Determine the cost of goods sold for July under three different valuation methods. (b) Discuss the advantages and/or dis

> Sunhats Ltd manufactures patent hats. It carries inventory of these and sells to wholesalers and retailers via a number of salespeople. The following expenses are charged in the profit and loss account: Required: Which of these expenses can reasonably

> The following list of balances has been extracted from the records of Cowgale company as at 31 October 2011, the end of Cowgale’s most recent financial year: The following additional information is available: 1 Following an impairment

> James Bright has just taken up the position of managing director following the unsatisfactory achievements of the previous incumbent. James arrives as the accounts for the previous year are being finalised. James wants the previous performance to look po

> Brands plc is preparing its accounts for the year ended 31 October 20X8 and the following information is available relating to various intangible assets acquired on the acquisition of Countrywide plc: (a) A milk quota of 2,000,000 litres at 30p per litre

> Under IAS 22, the depletion of equity reserves caused by the accounting treatment for purchased goodwill resulted in some companies capitalizing brands on their statements of financial position. This practice was started by Rank Hovis McDougall (RHM) – a

> Hanson Products Ltd is a newly formed company. The company commenced trading on 1 January 20X1 when it purchased an item of plant and equipment for $240,000. The plant and equipment has an expected life of five years with zero residual value, and will be

> Ross Neale is the divisional accountant for the Research and Development division of Critical Pharmaceuticals PLC. He is discussing the third-quarter results with Tina Snedden who is the manager of the division. The conversation focuses on the fact that

> Oxlag plc, a manufacturer of pharmaceutical products, has the following research and development projects on hand at 31 January 20X2: (A) A general survey into the long-term effects of its sleeping pill Chalcedon upon human resistance to infections. At t

> As chief accountant at Italin NV, you have been given the following information by the director of research: The board of directors considers that this project is similar to the other projects that the company undertakes, and is confident of a successf

> Environmental Engineering plc is engaged in the development of an environmentally friendly personal transport vehicle. This will run on an electric motor powered by solar cells, supplemented by passenger effort in the form of pedal assistance. At the end

> Basalt plc is a wholesaler. The following is its trial balance as at 31 December 20X0. The following additional information is supplied: (i) Depreciate plant and machinery 20% on straight-line basis. (ii) Inventory at 31 December 20X0 is £

> IAS 38 Intangible Assets was issued primarily in order to identify the criteria that need to be present before expenditure on intangible items can be recognized as an asset. The standard also prescribes the subsequent accounting treatment of intangible a

> Under a contract between a customer, Charlie (C) and a freight carrier Solutions Ltd (S), S provides C with 10 rail cars for five years. The cars, which are owned by S, are specified in the contract. C determines when, where and which goods are to be tra

> Delta owned two assets which were sold on 1 April 20X1 – the first day of Delta’s accounting period. Both assets were sold for their fair value. Details of the sales are as follows: Asset 1 Asset 1 was sold for £500,000 and leased back on a five-year le

> Bertie prepares financial statements to 31 December each year. On 1 January 20X1 Bertie purchased a machine for £200,000 and immediately leased the machine to Carter. The lease term was five years – equal to the expected useful life of the asset. Bertie

> On 1 April 20Y1 Smarty (see question 2) reassessed its future strategy and concluded that it would take up the option to lease the machine for a further two years from 1 October 20Y2. This was regarded as a modification to the original lease and Smarty r

> Austin Mitchell MP proposed an Early Day Motion in the House of Commons on 17 May 2005 as follows: That this House urges the Government to clamp down on artificial tax avoidance schemes and end the . . . tax avoidance loop-holes that enable millionaires

> (a) When accounting for leases, accountants prefer to overlook legal form in favour of commercial substance. Required: Discuss the above statement in the light of the requirements of IFRS 16 Leases. (b) State briefly how you would distinguish between a f

> On 1 January 20X8, Grabbit plc entered into an agreement to lease a widgeting machine for general use in the business. The agreement, which may not be terminated by either party to it, runs for six years and provides for Grabbit to make an annual rental

> International Financial Reporting Standards (IFRS) support the use of fair values when reporting the values of assets wherever practical. This involves periodic re measurements of assets and the consequent recognition of gains and losses in the financial

> The Blissopia Leisure Group consists of three divisions: Blissopia 1, which operates mainstream bars; Blissopia 2, which operates large restaurants; and Blissopia 3, which operates one hotel – the Eden. Divisions 1 and 2 have been tradi

> Infinite Leisure Group owns and operates a number of pubs and clubs across Europe and South East Asia. Since inception the group has made exclusive use of the cost model for the purpose of its annual financial reporting. This has led to a number of share

> Discuss the arguments for and against discounting the deferred tax charge.

> For the following years, capital allowances are likely to continue to be in excess of depreciation for the foreseeable future. (d) Corporation tax is to be taken at 21%. Required: Calculate the deferred tax charges or credits for the next six years, com

> The following information is given in respect of Unambitious plc: (a) Non-current assets consist entirely of plant and machinery. The net book value of these assets as at 30 June 2010 is £100,000 in excess of their tax written-down value. (b

> A non-current asset (a machine) was purchased by Adjourn plc on 1 July 20X2 at a cost of £25,000. The company prepares its annual accounts to 31 March in each year. The policy of the company is to depreciate such assets at the rate of 15% straight line (

> In your capacity as chief assistant to the financial controller, your managing director has asked you to explain to him the differences between tax planning, tax avoidance and tax evasion. He has also asked you to explain to him your feelings as a profes

> George plc will need to adopt IFRS 9 from accounting periods beginning on or after 1 January 2018. George has three different instruments whose accounting George is concerned will change as a result of the adoption of the standard. The three instruments

> Formatone plc produced the following trial balance as at 30 June 20X6: The following information is available: (i) A revaluation of the Land and Buildings on 1 July 20X5 resulted in an increase of £3,240,000 in the Land and £9

> On 1 October 20X1, Little Raven plc issued 50,000 debentures, with a par value of £100 each, to investors at £80 each. The debentures are redeemable at par on 30 September 20X6 and have a coupon rate of 6%, which was significant

> Creasy plc needs to raise €20 million and is considering two different instruments that could be issued: (i) A 7% debenture with a par value of €20 million, repayable at par in five years. Interest is paid annually in arrears. (ii) A 5% convertible deben

> Milner Ltd issues a 6% cumulative preference share for €1 million that is repayable in cash at par 10 years after issue. The only condition on the dividends is that if the directors declare an ordinary dividend the preference dividend (and any arrears of

> On 1 October year 1, RPS plc issued one million £1 5% redeemable preference shares. The shares were issued at a discount of £50,000 and are due to be redeemed on 30 September Year 5. Dividends are paid on 30 September each year. Required: Show the accou

> Scott Ross, CFO of Ryan Industries PLC, is discussing the publication of the annual report with his managing director Nathan Davison. Graydon says: ‘The law requires us to comply with accounting standards and at the same time to provide a true and fair v

> On 1 January 2009 Henry Ltd issued a convertible debenture for €200 million carrying a coupon interest rate of 5%. The debenture is convertible at the option of the holders into 10 ordinary shares for each €100 of debenture stock on 31 December 2013. Hen

> Isabelle Limited borrows £100,000 from a bank on the following terms: (i) arrangement fees of £2,000 are charged by the bank and deducted from the initial proceeds on the loan; (ii) interest is payable at 5% for the first three years of the loan and then

> Fairclough plc borrowed €10 million from a bank on 1 January 2011. Fees of €100,000 were charged by the bank which were paid by Fairclough plc at inception of the loan. The terms of the loan are: Interest ● Interest of 6% until 31 December 2013 ● Interes

> The approach in IAS 39 to the impairment of financial assets was flawed because it did not allow financial institutions to recognize the true losses they expected on loans at the time they had made the loans. How does the final version of IFRS 9 address

> Procter Limited, a UK private company has the following financial assets and liabilities in the accounts: (i) An equity investment in Milner plc, a UK listed company. Procter recognises the investment as an ‘available for sale’ investment under IAS 39 Fi

> (a) IAS 16 Property, Plant and Equipment requires that where there has been a permanent diminution in the value of property, plant and equipment, the carrying amount should be written down to the recoverable amount. The phrase ‘recoverable amount’ is def

> At the start of the year Cornish plc entered into a number of financial instruments and is considering how to classify these instruments under IFRS 9. The instruments are as follows (a) Investment in listed 3% government bonds for €2 million. Cornish acq

> Tan plc has the following assets originated on 1 January 2016: (i) A loan receivable generated from lending £100,000 to a customer of the company. The loan carries interest at 7% per annum payable in arrears and is classified at amortized cost. The 12-mo

> Charles plc is applying IAS 32 and IFRS 9 for the first time this year and is uncertain about the application of the standard. Charles plc’s balance sheet is as follows: Note The forward contracts have been revalued to fair value in t