Question 1: (Approximately 400 words)
TDM Ltd is a manufacturing business at Mudjimba on the Sunshine Coast. You are the accountant for the company and the following items/issues relate to the financial year ending 30th June, 2016:
Question 2: (Approximately 600 words)
On 1st July, 2016, SC Airlines Ltd acquired a new aeroplane for a total cost of $10 million dollars. The following breakdown of the costs to build the aeroplane was given by the manufacturers.
Aircraft body | $3,000,000 |
Engines (2) | $4,000,000 |
Fitting out of aircraft: | |
Seats | $1,000,000 |
Carpets | $ 50,000 |
Electrical equipment: | |
Passenger seats | $ 200,000 |
Cockpit | $1,500,000 |
Food preparation equipment | $ 250,000 |
All costs include installation and labour costs associated with the relevant part.
It is expected that the aircraft will be kept for 10 years and then sold. The main value of the aircraft at that stage will be the body and the engines. The expected selling price is $2.1 million, with the body and engines retaining the existing proportionate value.
Costs in relation to the aircraft over the next 10 years are expected to be as follows:
Question 3: (Approximately 200 words)
In the discussion by Upton (2001, 71) regarding the lives of intangible assets it is noted that the formula for Coca-Cola has grown more valuable over time, not less, and that Sir David Tweedie, former chairman of the IASB, jokes that the brand name of his favourite Scotch whisky is older than the United States of America — and, in Sir David’s view, the formula for Scotch whisky has contributed more to the sum of human happiness.
Required:
Outline the accounting treatment for brands under AASB 138/IAS 38, and discuss the difficulties for standard setters in allowing the recognition of all brands and formulas on statements of financial position.
Question 4: (Approximately 300 words)
Provisions are recognised as a liability in the statement of financial position whereas contingent liabilities are not recognised in the financial statements but disclosed in the notes to financial statements. Paragraph 12 of AASB 137/IAS 37 Provisions, Contingent Liabilities and Contingent Assets states that ‘in a general sense, all provisions are contingent because they are uncertain in timing or amount’.
SAMPLE SOLUTION
Accounting is a systematic way of managing a company’s belongings through proper records known as book keeping (Neel, 2017). For the financial statements to reflect the true and fair value for an organization, it is prudent that all items be accounted. In the case of TDM Company, the items below will be accounted for as follows;
Photographs and Original Buildings
The above items are non-current assets for the company since the company will be in possession of them for a period which is more than one year. According Anton (2016), International Financial Reporting Standards law 9 requires that all assets be recognized in the statement of financial position. However, these items are not used in revenue generation hence they will be categorized as other non-current assets and not as part of Plant Properties and Equipment. Before recognizing in the annual financial reports, valuation for them has to be done.
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