CPE Class Test

Course CA Test IAS-23, IAS-20, SOCIE, Concepts

Paper CAF-05 FAR-1
Total Marks: 35 TIME: 60 Min

Q 1. The following information pertains to Wednesday Limited (WL) for the year ended 30 June 2019:
(i) Shareholders' equity as at 1 July 2018:

(ii) On 30 November 2018, WL issued 30% right shares at a premium of Rs. 120 per share.
(iii) Cash dividend and bonus shares for the last two years:

*Declared with half yearly accounts

(iv) Profit for the year amounted to Rs. 95 million.
(v) Revaluation surplus arising during the year amounted to Rs. 35 million whereas transfer of
incremental depreciation for the year was Rs. 9 million.
Required: Prepare WL’s Statement of Changes in Equity for the year ended 30 June 2019.
(Column for total and comparative figures are not required) (08)

Q 2. Discuss how the following should be dealt with in the financial statements of relevant entities
according to IAS 20 Accounting for Government Grants and Disclosure of Government Assistance:
a) The government makes a grant to an entity which is planning to develop teaching software for
children with learning difficulties. The purpose of the grant is to help the entity to meet its
general financing requirement in the initial phase. There are no further conditions attached to
the grant. (02)
b) A manufacturing entity sets up a plant in an area of high unemployment. A government grant of
Rs. 4 million is received with a condition that the grant is repayable in full if the number of its
employees fell below 100 at any time during the next four years. It is highly probable that the
entity will comply with the condition attached to the grant. (03)
c) Free technical advice has been provided by the government’s export promotion department to
help an exporter to market his new technology in North America. (01)

Q 3. On 1 January 2018, ML commenced construction of a manufacturing plant. The whole process of

assembling and installation was completed on 31 October 2018. However, the work was stopped from
16 to 31 August 2018 due to unexpected rains. The total cost of Rs. 660 million incurred on the plant
was paid as under:

The plant was financed through a bank loan of Rs. 500 million obtained on 1 March 2018. The loan
carries a mark-up of 18% payable annually. The surplus funds available from the loan were invested in a
saving account and earned Rs. 17 million during capitalization period.
Required:
Calculate the cost at which this asset will be capitalized. (05)

By: HM Umar Farooq Rana 1

CPE Class Test
Q 4. Fill in the Blanks with accurate answer. Each Blank carries equal marks. (10)
(i) An entity made a profit of Rs. 350,000 for the year 2019 based on historical cost accounting
principles. It had opening capital of Rs. 1,000,000. Specific price indices increase during the
year by 20% and general price indices by 5%. How much profit should be recorded for 2019
under money financial capital maintenance concept? Rs. ___________
(ii) An entity made a profit of Rs. 350,000 for the year 2019 based on historical cost accounting
principles. It had opening capital of Rs. 1,000,000. Specific price indices increase during the
year by 20% and general price indices by 5%. How much profit should be recorded for 2019
under real financial capital maintenance concept? Rs. ___________
(iii) An entity made a profit of Rs. 350,000 for the year 2019 based on historical cost accounting
principles. It had opening capital of Rs. 1,000,000. Specific price indices increase during the
year by 20% and general price indices by 5%. How much profit should be recorded for 2019
under physical capital maintenance concept? Rs. ___________
(iv) An entity acquired an item of plant on 1 October 2012 at a cost of Rs. 500,000. It is being
depreciated over five years, using straight-line depreciation and an estimated residual value
of 10% of its historical cost or current cost as appropriate. As at 30 September 2014, the
manufacturer of the plant still makes the same item of plant and its current price is Rs.
600,000. What is the correct carrying amount to be shown in the statement of financial
position as at 30 September 2014 under historical cost accounting? Rs. ___________
(v) An entity acquired an item of plant on 1 October 2012 at a cost of Rs. 500,000. It is being
depreciated over five years, using straight-line depreciation and an estimated residual value
of 10% of its historical cost or current cost as appropriate. As at 30 September 2014, the
manufacturer of the plant still makes the same item of plant and its current price is Rs.
600,000. What is the correct carrying amount to be shown in the statement of financial
position as at 30 September 2014 under current cost accounting? Rs. ___________

Q 5. Briefly describe the measurement bases that may be used to measure the value of assets in the
financial statements. (06)

By: HM Umar Farooq Rana 2