IFRS 9 REVIEW QUESTIONS

QUESTION 01

A company purchased 10% loan note with a nominal value of Tshs 50,000,000 and classified it as measured
at amortized cost. The loan note is purchased at a discount of 5% and Tshs 500,000 transaction cost incurred.
The loan note will be received at nominal value after 3 years . the effective rate of interest is 11.67%.
Required: Calculate the amortised cost of the loan and show the interest income for each year to maturity.

QUESTION 02

A company issues 5% loan note with a nominal value of Tshs 100,000,000 and classified it as measured at
amortized cost. The loan note is purchased at a discount of 7%and Tshs 3,000,000 transaction cost incurred.
The loan note will be received at premium of Tshs 3,240,000 after 3 years . the effective rate of interest is
10%.
Required: Calculate the amortised cost of the loan and show the interest income for each year to maturity.

QUESTION 02

A company issues 6% convertible loan note with a nominal value of Tshs 100,000,000. after 3 years . the
effective rate of interest is 10%.
Required: Calculate the amortised cost of the loan and show the interest income for each year to maturity.

IAS 02 QUESTIONS

Question 1

ABC Co. has the following items in inventory:

i) Goods purchased for resale at a cost of $40,000. The recent downturn in the economy has meant that these goods
will now sell for$42,000 with costs to sell of$2,500.

ii) Materials purchased at a cost of $30,000 per tonne which will be sold at a profit. The manufacturer of the
materials has just announced that from now on they will sell these materials to you at a lower price of$28,000 per
tonne.

iii) Plant constructed for a specific customer at a cost of $50,000 and an agreed price to the customer of $60,000.
New health and safety requirements mean that the plant will need to be modified at a cost to ABC Co. Of
$4,000beforeitcan be delivered to the customer.

At what value should each of the above be included in the inventory of ABC Co.

Question 2(Inventory valuation)

Neil paid $3 per unit for the raw materials of its products. To complete each unit incurred $2 per unit in direct labour.
Production overheads for the year based on normal output of 12,000 units was $72,000. Due to industrial action only
10,000 units were produced and 1,000 units were in inventory at the end of the year. As a result of the industrial
action some units were badly stored and became damaged. It’s is estimated that 200 of the units will now only be sold
for $12 each after minor repairs of $2 each.

What figure for closing inventory would be shown in the Statement of Financial Position?

Question 02

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On 1 April 2015, a company’s inventory included 10,000 items which had been acquired for Tshs 140 per item.
Purchases and sales of the items during the year to 31 March 2016 were as follows:

Purchases Number of items Cost per item sales Number of items

bought sold

2-Jul-15 10,000 142 26-Aug-15 16,000

2-Oct-15 6,000 146 5-Nov-15 7,000

22-Jan-16 15,000 150 12-Mar-16 17,000

Required

Calculate the cost of bricks sold during the year and the cost of inventory of bricks remaining at 31 March 2016, using

i. First-in, First-out (FIFO)

ii. Last-in, First-out (LIFO)

iii. Weighted average cost (AVCO)

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IAS 1 QUESTIONS

QUESTION 1
You are the accountant of Trott Ltd, a business that buys and sells cricket
equipment. The trial balance at 31 December 2017 was as follows:
$ $
Equity share capital ($1) 5,000
Retained earnings at 1 January 2017 5,835
Revenue 66,980
Staff costs 5,400
Inventory at 1 January 2017 3,930
Purchases 38,760
Distribution costs 3,130
Administrative expenses 3,790
Loan interest 200
Investment income 250

Receivables and payables 9,490 2,360

Bank 3,125
Motor vehicles – cost 5,000
Buildings – cost 12,000
Motor vehicles – accumulated depreciation 1 January
1,000
2017
Buildings - accumulated depreciation 1 January 2017 2,400
Debentures (2020) 1,000
84,825 84,825

Additional
information

Motor vehicles – 20% reducing

balance Buildings – 25 years straight
line
The depreciation expense for the year is charged to cost of sales.
Inventory at the end of the year was valued as follows:

Cost ($) NRV ($)

Bats 2,500 4,000
Gloves 650 500
Pads 1,000 2,000
Total 4,150 6,500
Staff costs are to be apportioned equally across cost of sales, distribution costs and
administrative expense.
Tax rate is 30%

Prepare in a statement of profit or loss for the year-ended 31 December 2017 and a statement of
financial position at that date.

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QUESTION 2
The following trial balance relates to Xtol at 31 March 2014:
$’000 $’000
Revenue (note (i)) 490,000

Cost of sales 290,600

Distribution costs 33,500
Administrative expenses 36,800
Loan note interest 13,380
Bank interest 900
20-year leased property at cost (note (ii)) 100,000
Plant and equipment at cost (note (ii)) 155,500
Accumulated amortisation/depreciation at 1 April 2013:
leased property 25,000
plant and equipment 43,500
Inventory at 31 March 2014 61,000
Trade receivables 66,200
Trade payables 32,200
Bank 5,500
Equity shares of 25 cents each 56,000
Share premium 25,000
Retained earnings at 1 April 2013 ` 26,080
5% convertible loan note 54,600
757,880 757,880

The following notes are relevant:

(i) Revenue includes an amount of $20 million for cash sales made through Xtol’s retail outlets
during the year on behalf of Francais. Xtol, acting as agent, is entitled to a commission of 10% of
the selling price of these goods. By 31 March 2014, Xtol had remitted to Francais $15 million (of
the $20 million sales) and recorded this amount in cost of sales.
(ii) Plant and equipment is depreciated at 12½% per annum on the reducing balance basis.
All amortisation/depreciation of non-current assets is charged to cost of sales.
(iii) tax is 30%

Required:
(a) Prepare the statement of profit or loss for Xtol for the year ended 31 March 2014. 8 Marks
(b) Prepare the statement of changes in equity for Xtol for the year ended 31 March 2014. 6
Marks
(c) Prepare the statement of financial position for Xtol as at 31 March 2014. 8 Marks
(d) Calculate the basic earnings per share (EPS) for Xtol for the year ended 31 March 2014. 3
Marks
Note: Answers and workings (for parts (a) to (c)) should be presented to the nearest $1,000;
notes to the financial statements are not required.