MCQs IAS 1 (continuation)

2-10 Which of the following could appear as separate items in the statement of changes in equity
required by IAS 1 “Presentation of Financial Statements” as part of a company’s
financial statements?

(1) Transfer to retained earnings

(2) Loss on sale of investments
(3) Proceeds of an issue of ordinary shares
(4) Dividends proposed after the year end

A 1 and 3
B 1 and 4
C 2 and 3
D 2 and 4

2-11 Which of the following items may appear in a company’s statement of changes in equity,
according to IAS 1 “Presentation of Financial Statements”?

(1) Revaluation surplus

(2) Dividends proposed
(3) Proceeds of equity share issue
(4) Total comprehensive income for the period

A 1, 2 and 3
B 1, 2 and 4
C 1, 3 and 4
D 2, 3 and 4

2-12 DT’s final dividend for the year ended 31 October 2016 of $150,000 was declared on 1 February
2017 and paid on 1 April 2017. The financial statements were approved on 31 March 2017.

Which TWO of the following statements describe the correct treatment of the dividend in
DT’s financial statements?

(1) The payment settles an accrued liability in the statement of financial position as at 31
October 2016
(2) The dividend is shown as a deduction in the statement of profit or loss for the year
ended 31 October 2017
(3) The dividend is shown as an accrued liability in the statement of financial position as
at 31 October 2017
(4) The dividend is disclosed in the notes to the financial statements at 31 October 2016
(5) The dividend is presented in the statement of changes in equity for the year ended 31
October 2017

A 1 and 2
B 1 and 4
C 3 and 5
D 4 and 5
2-13 Which of the following should NOT appear in a company’s statement of profit or loss and
other comprehensive income?

A A loss after taxation for the financial year

B Dividends received from investments
C Gain on revaluation of a non-current asset
D Dividends paid to shareholders during the year (2 marks)

2-14 Monksford is preparing its financial statements for the year ended 31 December 2016. Its draft trial
balance shows the following balances:

$
Income tax payable at 1 January 2016 2,091
Income tax paid in full settlement of 2015 liability 1,762

Income tax due for the year ended 31 December 2016 is estimated to be $2,584.

What is Monksford’s income tax expense in its statement of profit or loss for the year
ended 31 December 2016?

A $1,269
B $2,255
C $2,584
D $2,913 (2 marks)

2-15 When reporting profit for a period, companies are required to ensure that income and expenses are
correctly classified.

Which one of the following items will NOT be included in profit or loss for the period?

A Interest payable
B Dividend paid to ordinary shareholders
C Depreciation charge for the year
D Income tax expense (2 marks)

2-16 Which of the following should be recognised in other comprehensive income as an unrealised
gain?

(1) Interest earned but not yet credited

(2) Rental income received for a future period
(3) An increase in the value of a non-current asset
(4) A gain on the sale of shares held in a quoted company

A 3 only
B 3 and 4 only
C 2, 3 and 4 only
D 1, 2, 3 and 4
2-17 The accountant of Verse is preparing the company’s draft financial statements and must decide how
the following items should be reported:

(1) Gain on revaluation of property

(2) Interest charge on long-term borrowings

Which items should be included in the calculation of total comprehensive income for the
year?

A 1 only B 2 only С 1 and 2 D Neither 1 nor 2

2-18 Fudge Co’s statement of profit or loss for the year ended 31 March 2017 shows a profit for the year
of $575,000. During the year, an ordinary dividend of $130,000 was paid and land costing
$600,000 was revalued to $640,000.

What was the total comprehensive income for the year?

A $40,000
B $485,000
C $575,000
D $615,000
2-19

CRONOS. The following items have been extracted from the trial balance of Cronos as at 30
September 2016:

Reference
to notes $
Opening inventory 186,400
Purchases 1,748,200
Carriage inwards 38,100
Carriage outwards (2) 47,250
Sales 3,210,000
Trade receivables 318,000
Wages and salaries (2 & 3) 694,200
Sundry administrative expenses (2) 381,000
Loss allowance for trade receivables,
at 1 October 2015 (4) 18,200
Irrecoverable debts written off during the year (4) 14,680
Office equipment as at 1 October 2015: (5)
Cost 214,000
Accumulated depreciation 88,700
Office equipment: additions during year 48,000
proceeds from sale 12,600
Interest paid (2) 30,000

Notes

(1) Closing inventory amounted to $219,600.

(2) Prepayments and accruals:

Prepayments Accruals
$ $
Carriage outwards 1,250
Wages and salaries 5,800
Sundry administrative expenses 4,900 13,600
Interest payable 30,000

(3) Wages and salaries cost is to be allocated:

– cost of sales 10%
– distribution costs 20%
– administrative expenses 70%

(4) Further irrecoverable debts totalling $8,000 are to be written off, and the closing loss allowance
is to amount to 5% of the final trade receivables figure. All irrecoverable debt expenses are to
be included in administrative expenses.

(5) Office equipment: Depreciation is to be provided at 20% per annum on the straight line basis,
with a full year’s charge in the year of purchase and none in the year of sale. During the year
equipment which had cost $40,000, with accumulated depreciation of $26,800, was sold for
$12,600.

Prepare the company’s statement of profit or loss in accordance with IAS 1 “Presentation of
Financial Statements”.
2-20 MINICA

The following balances have been extracted from the accounting records of Minica at 31 December
2016:
Reference $
to notes
Revenue 2 3,845,000
Opening inventory 360,000
Purchases 3 2,184,000
Carriage inwards 119,000
Carriage outwards 227,000
Office equipment at 1 January 2016 2, 3 and 4
Cost 460,000
Accumulated depreciation 92,000
Trade receivables 620,000
Loss allowance for receivables at 1 January 2016 5 20,000
Irrecoverable debts written off during the year 15,000
Sundry administrative expenses 416,000

The following further information is available:

(1) Closing inventory amounts to $450,000.

(2) Some office equipment, which had cost $20,000, with accumulated depreciation at 1 January
2016 of $14,000, was sold for $15,000 during the year. The sale proceeds were included in the
sales figure of $3,845,000.

(3) The cost of new equipment purchased on 1 July 2016 for $60,000 has been included in the
purchases figure of $2,184,000

(4) The company depreciates its office equipment at 20 % per year on the straight line basis, with
proportionate depreciation in the year of purchase but none in the year of sale. None of the
equipment held at 1 January 2016 was more than three years old.

(5) The loss allowance for trade receivables at 31 December 2016 is to be 5% of accounts
receivable.

(6) Accruals and prepayments on sundry administrative expenses at 31 December 2016 were:
$
Accrued expenses 28,700 Prepaid expenses 14,400

(7) The directors propose a dividend of 6c per share on the ordinary share capital (4,000,000 shares
of 25c each) to be paid in July 2017.

No dividends were paid in 2016.

Required:

(a) Prepare Minica’s statement of profit or loss for the year ended 31 December 2016 for
internal use. (13 marks)

(b) Calculate the total amount of the proposed dividend and state how it should be dealt with
in Minica’s published financial statements. (2 marks)
2-21 COUGAR

At 1 July 2016 the statement of financial position of Cougar contained the following items:
$m
Share capital (ordinary shares of 50c each) 100
Share premium account 140
Revaluation surplus 60
Retained earnings 120
––––
420
——

During the year ended 30 June 2016 the following events took place:

(i) A material error in calculating the inventory at 30 June 2016 was discovered. The effect of the
error was a reduction in the inventory at that date from $30 million to $24 million.
(ii) On 1 July 2016 the company issued 200 million ordinary shares, ranking equally with those
already in issue, at $1.40 per share.
(iii) Some land held by the company as a non-current asset was sold for $100 million. The land had
originally cost $25 million and was revalued to $85 million in 2015, giving rise to the
revaluation surplus of $60 million shown above.
(iv) The company’s draft pre-tax profit for the year ended 30 June 2017 was $40 million. In
calculating this figure the opening inventory was taken as $30 million, and $15 million was
included as the profit on the sale of the land. (See items (i) and (iii) above).

(v) Dividends totalling 2c per share were paid in the year on the enlarged capital.

Required:

Prepare Cougar’s statement of changes in equity for the year ended 30 June 2017.
2-22 ARBALEST

The summarised statement of financial position of Arbalest at 30 September 2015 was as follows:
Cost Aggregate Carrying
depreciation amount
$000 $000 $000
Non-current assets
Land 2,000 nil 2,000
Buildings 1,500 450 1,050
Plant and equipment 2,800 1,000 1,800
_____ _____ _____
6,300 1,450 4,850
_____ _____
Current assets 3,180
______
Total assets 8,030

Equity and liabilities ———

Ordinary share capital (3,000,000 shares of 50c each) 1,500
Share premium account 400
Retained earnings 4,060
_____
5,960
Current liabilities 2,070
______
Total equity and liabilities 8,030

———
During the year ended 30 September 2016 the company had the following transactions:

(1) 1 November 2015: The company made an issue to its members of one share for every three
held (a rights issue) at a price of $1.50 per share. All the rights issue shares were taken up.

(2) 1 December 2015: Sale for $70,000 of a plant and equipment which had cost $1,000,000 and a
carrying amount of $200,000.

(3) 1 March 2016: A bonus (capitalisation) issue of one share for every one held at that date, using
the share premium account as far as possible for the purpose.

(4) 1 June 2016: Purchased a new factory block for $3,000,000 (including land $600,000).

(5) 1 July 2016: Purchased plant and equipment for $1,600,000.

(6) 30 September 2016: The company decided to revalue the land held at 30 September 2015 from
$2,000,000 to $2,500,000. The company depreciation policies are:

Land no depreciation
Buildings 2% per annum on cost, straight-line basis
Plant and equipment 10% per annum on cost, straight-line basis

Proportionate depreciation is allowed for in the year of purchase of an asset, with none in the
year of disposal.

Profit for the year was $370,000.

Required:

(a) Prepare a statement of changes in equity (as required by IAS 1 “Presentation of

Financial Statements”) for the year ended 30 September 2016. (6 marks)

(b) Prepare for the company’s statement of financial position at 30 September 2016, a note
showing movements on non-current assets (as required by IAS 16 “Property, Plant and
Equipment”). (9 marks)

(15 marks)