Which of the following elements should be recognised in the financial statements of an entity in the manner described？

As a non-current liability: a provision for possible hurricane damage to property for a company located in an area which experiences a high incidence of hurricanes
B. In equity: irredeemable preference shares
C. As a trade receivable: an amount of $10,000 due from a customer which has been sold (factored) to a finance company with no recourse to the seller
D. In revenue: the whole of the proceeds from the sale of an item of manufactured plant which has to be maintained by the seller for three years as part of the sale agreement

(a) The objective of IAS 10 Events after the Reporting Period is to prescribe the treatment of events that occur after an entity’s reporting period has ended.<br>Required:<br>Define the period to which IAS 10 relates and distinguish between adjusting and non-adjusting events.<br>(5 marks)<br>(b) Waxwork’s current year end is 31 March 2009. Its financial statements were authorised for issue by its directors on 6 May 2009 and the AGM (annual general meeting) will be held on 3 June 2009. The following matters have been brought to your attention:<br>(i) On 12 April 2009 a fire completely destroyed the company’s largest warehouse and the inventory it<br>contained. The carrying amounts of the warehouse and the inventory were $10 million and $6 million<br>respectively. It appears that the company has not updated the value of its insurance cover and only expects<br>to be able to recover a maximum of $9 million from its insurers. Waxwork’s trading operations have been<br>severely disrupted since the fire and it expects large trading losses for some time to come. (4 marks)<br>(ii) A single class of inventory held at another warehouse was valued at its cost of $460,000 at 31 March<br>2009. In April 2009 70% of this inventory was sold for $280,000 on which Waxworks’ sales staff earned<br>a commission of 15% of the selling price. (3 marks)<br>(iii) On 18 May 2009 the government announced tax changes which have the effect of increasing Waxwork’s<br>deferred tax liability by $650,000 as at 31 March 2009. (3 marks)<br>Required:<br>Explain the required treatment of the items (i) to (iii) by Waxwork in its financial statements for the year<br>ended 31 March 2009.<br>Note: assume all items are material and are independent of each other. (10 marks as indicated)

Top Trades Co has been trading for a number of years and is currently going through a period of expansion.<br>An extract from the statement of cash flows for the year ended 31 December 20X7 for Top Trades Co is presented as follows:<br>Which of the following statements is correct according to the extract of Top Trades Co’s statement of cash flows？

A. The company has good working capital management
B. Net cash generated from financing activities has been used to fund the additions to non-current assets
C. Net cash generated from operating activities has been used to fund the additions to non-current assets
D. Existing non-current assets have been sold to cover the cost of the additions to non-current assets

What is the carrying amount of the production equipment in Bash Co’s statement of financial position as at 30 September 20X2？

A. $5,016,000
B. $6,270,000
C. $6,330,000
D. $6,360,000

On 1 October 20X5, Anita Co purchased 75,000 of Binita Co’s 100,000 equity shares when Binita Co’s retained earnings amounted to $90,000.<br>On 30 September 20X7, extracts from the statements of financial position of the two companies were:<br>What is the total equity which should appear in Anita Co’s consolidated statement of financial position as at 30 September 20X7？

A. $125,000
B. $470,000
C. $345,000
D. $537,500

During the year to 31 December 20X6, Marek Co sold goods to Rooney Co, giving rise to an unrealised profit in inventory of $550,000 at the year end. Marek Co’s profit after tax for the year ended 31 December 20X6 was $3·2m.<br>What amount will be presented as the non-controlling interest in the consolidated statement of financial position of Rooney Co as at 31 December 20X6？

A. $1,895,000
B. $1,495,000
C. $1,910,000
D. $1,880,000

Patula Co acquired 80% of Sanka Co on 1 October 20X5. At this date, some of Sanka Co’s inventory had a carrying amount of $600,000 but a fair value of $800,000. By 31 December 20X5, 70% of this inventory had been sold by Sanka Co.<br>The individual statements of financial position at 31 December 20X5 for both companies show the following:<br>What will be the total inventories figure in the consolidated statement of financial position of Patula Co as at 31 December 20X5？

A. $5,250,000
B. $5,330,000
C. $5,130,000
D. $5,238,000

Shiba Co entered into a non-cancellable four-year operating lease to hire a photocopier on 1 January 20X7. The terms of the lease agreement were as follows:<br>What is the charge in the statement of profit or loss of Shiba Co for the year ended 31 December 20X7 in respect of this operating lease？

A. $2,375
B. $4,000
C. $4,750
D. $5,250

The following two issues relate to Spiko Co’s mining activities:<br>Issue 1: Spiko Co began operating a new mine in January 20X3 under a five-year government licence which required Spiko Co to landscape the area after mining ceased at an estimated cost of $100,000.<br>Issue 2: During 20X4, Spiko Co’s mining activities caused environmental pollution on an adjoining piece of government land. There is no legislation which requires Spiko Co to rectify this damage, however, Spiko Co does have a published environmental policy which includes assurances that it will do so. The estimated cost of the rectification is $1,000,000.<br>In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, which of the following statements is correct in respect of Spiko Co’s financial statements for the year ended 31 December 20X4？

A provision is required for the cost of both issues 1 and 2
Both issues 1 and 2 require disclosure only
C. A provision is required for the cost of issue 1 but issue 2 requires disclosure only
D. Issue 1 requires disclosure only and issue 2 should be ignored

Included within the financial assets of Zinet Co at 31 March 20X9 are the following two recently purchased investments in publically-traded equity shares:<br>Investment 1 – 10% of the issued share capital of Haruka Co. This shareholding was acquired as a long-term investment as Zinet Co wishes to participate as an active shareholder of Haruka Co.<br>Investment 2 – 10% of the issued share capital of Lukas Co. This shareholding was acquired for speculative purposes and Zinet Co expects to sell these shares in the near future.<br>Neither of these shareholdings gives Zinet Co significant influence over the investee companies.<br>Wherever possible, the directors of Zinet Co wish to avoid taking any fair value movements to profit or loss, so as to minimise volatility in reported earnings.<br>How should the fair value movements in these investments be reported in Zinet Co’s financial statements for the year ended 31 March 20X9？

A. In profit or loss for both investments
B. In other comprehensive income for both investments
C. In profit or loss for investment 1 and in other comprehensive income for investment 2
D. In other comprehensive income for investment 1 and in profit or loss for investment 2