B. During 2018, SuperPlus Ltd discovered that certain items

valued at $4.2m had been included in inventories at 31 December 2017, and in

fact these items were sold before the year end. The draft figures (extract)

below were provided for you:

2017 2018

$'000 $'000

Sales 47,400 67,200

Cost of goods sold (34,570) (55,800)

Profit before taxation 12,830 11,400

Income taxes (3,880) (3,400)

Net profit 8,950 8,000

Other relevant information extracted from the accounting

records:

1. Retained earnings at 1 January 2017 were $13m

2. The cost of goods sold for 2017 includes the $4.2m error in

opening inventory

3. The income tax rate was 30% for 2017 and 2018

Required:

i. Prepare a detailed income statement for 2018 with 2017

comparative. (3 marks)

ii. Calculate the retained earnings for both years (2 marks)

C. Based on the Consumer Plus Ltd scenario, distinguish between

adjusting and non-adjusting events based on IAS 10 Events after Balance Sheet

date and in relation to IAS 37 Provisions, contingent liabilities and

contingent assets. (5 marks)

Question 3

A.

You are currently on work experience at CMAS Co-operative Ltd

and the General Manager has asked your supervisor to prepare an explanation for

some concerns raised by the Board of Directors. Your supervisor has to leave

the office as a result of an emergency, and he has asked you to prepare the

information for his review to be submitted to the General Manager.

You are also helping to prepare the organisation's year-end

financial statement and have been asked to carry out an impairment review of

non-current assets held. You have obtained details of two photocopiers in the

print room as follows:

i. Machine 1 - is six years old and is a relatively slow copier

based on old technology. The cost of this machine was $80,000 and depreciation

to date is $48,000, with NBV of $32,000. Since the arrival of the other copier,

this machine has been relegated to "standby" use. The fair value of the machine

is $10,000 if sold on the second-hand market and no selling cost will be

incurred and the value in use is $20,000.

ii. Machine 2 - is only a few months old. It is a digital copier

incorporating the latest technology, very fast and versatile and has the

capacity to meet the needs of the entire organisation. It costs $150,000 and

depreciation at the end of the accounting period will be $15,000, NBV of

$135,000. The fair value of the machine is $100,000 if sold on the second-hand

market and no selling cost. The value in use is $550,000. (14 marks)

B. TCM Developers constructed a townhouse for $30m in their last

financial year 2019. They secured a loan of $27 from CMAS Co-operative Ltd

which was paid over to the contractor $12m and $15m on 1 January and 1 July

2019 respectively. The interest rate on the debt is 9% per annum. The townhouse

was completed on 31 December 2019.

i. According to IAS 23, Borrowing Costs, how should the

borrowing cost be treated by TCM Developers? (1 mark)

ii. Calculate the amount that TCM Developers can capitalise into

the cost of the construction. (4 marks)

iii. Show the journal entry for recording the amount calculated

in part (ii.) (1 mark)