Kings Plc made the following investments: a. 15 million shares in Yaka Limited on 30 June...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Kings Plc made the following investments: a. 15 million shares in Yaka Limited on 30 June 20X1 for K25 million, when the reserves of Y Limited were K10 million b. 8 million shares in Zulu Limited on 30 June 20X3 for K12 million, when the reserves of Zulu Limited were K8 million The summarized Income Statements for the year ended 30 June 20Y0 were as follows: King Plc Yaka Ltd Zulu Ltd Km Km Km 200 111 51.6 100 55.5 25.8 100 55.5 25.8 8 108 32 Sales revenue Operating costs Operating profit Investment income Profit before tax Income tax Profit for the period 76 Statements of changes in equity for the year ended 30 June 20Y0 55.5 18.5 37.0 25.8 8.6 17.2 Balance at 1 July 20X9 Profit for the year Dividends paid Balance at 30 June 20Y0 Balance Sheets as at 30 June 2010 Non-current assets Investments Issued share capital Kl Reserves Additional information: i) ii) Kings Plc Ima 82.8 76.0 (30.0) 128.8 . Kings Plc Km 118.0 48.6 166.6 60.0 106.6 166.6 Yaka Ltd Km 33 37 (10) 60 Yaka Ltd Km 60 1888 60 60 Zulu Ltd Km 30.8 17.2 (8.0) 40 Zulu Ltd Km 40 158881. Included in the serves of Kings Ltd is K37.8 million relating to the proceeds of sale of all the shares held in Zulu Ltd. The shares were disposed of on the 31 March 2010. A tax liability of K2.6 million in relation to the sale of shares has yet been provided for by Kings Plc. not Required: Prepare the kings Plc group entities Consolidated Income Statement and Statement of Financial Position as at 30 June 20Y0. (30 Marks) The following are brief descriptions of several companies in different lines of business. 1. Company A is a construction company. It has recently signed a contract to build a highway over a 3-year period. A down payment was collected; the remaining collections will occur periodically over the construction period based upon the degree of completion. 2. Company B is a retailer. It makes sales on a daily basis for cash and on credit cards. 3. Company C is a health spa. It has recently signed contracts with numerous individuals to use its facilities over a 2-year period. The contract price was collected in advance. 4. Company D is a land development company. It has recently begun developing a retirement community and has sold lots to senior citizens. The sales contract requires a small down payment and periodic payments until completion of the roads and clubhouse, after which the remainder of the purchase price is due. Prior to this point, a purchaser may cancel the contract and receive a refund of all payments. Required: Describe when revenue should be recognized by each company. If revenue should not be recognized at the time of sale, indicate what method should be used to recognize the revenue. Justify your decision. (10 Mark) Kings Plc made the following investments: a. 15 million shares in Yaka Limited on 30 June 20X1 for K25 million, when the reserves of Y Limited were K10 million b. 8 million shares in Zulu Limited on 30 June 20X3 for K12 million, when the reserves of Zulu Limited were K8 million The summarized Income Statements for the year ended 30 June 20Y0 were as follows: King Plc Yaka Ltd Zulu Ltd Km Km Km 200 111 51.6 100 55.5 25.8 100 55.5 25.8 8 108 32 Sales revenue Operating costs Operating profit Investment income Profit before tax Income tax Profit for the period 76 Statements of changes in equity for the year ended 30 June 20Y0 55.5 18.5 37.0 25.8 8.6 17.2 Balance at 1 July 20X9 Profit for the year Dividends paid Balance at 30 June 20Y0 Balance Sheets as at 30 June 2010 Non-current assets Investments Issued share capital Kl Reserves Additional information: i) ii) Kings Plc Ima 82.8 76.0 (30.0) 128.8 . Kings Plc Km 118.0 48.6 166.6 60.0 106.6 166.6 Yaka Ltd Km 33 37 (10) 60 Yaka Ltd Km 60 1888 60 60 Zulu Ltd Km 30.8 17.2 (8.0) 40 Zulu Ltd Km 40 158881. Included in the serves of Kings Ltd is K37.8 million relating to the proceeds of sale of all the shares held in Zulu Ltd. The shares were disposed of on the 31 March 2010. A tax liability of K2.6 million in relation to the sale of shares has yet been provided for by Kings Plc. not Required: Prepare the kings Plc group entities Consolidated Income Statement and Statement of Financial Position as at 30 June 20Y0. (30 Marks) The following are brief descriptions of several companies in different lines of business. 1. Company A is a construction company. It has recently signed a contract to build a highway over a 3-year period. A down payment was collected; the remaining collections will occur periodically over the construction period based upon the degree of completion. 2. Company B is a retailer. It makes sales on a daily basis for cash and on credit cards. 3. Company C is a health spa. It has recently signed contracts with numerous individuals to use its facilities over a 2-year period. The contract price was collected in advance. 4. Company D is a land development company. It has recently begun developing a retirement community and has sold lots to senior citizens. The sales contract requires a small down payment and periodic payments until completion of the roads and clubhouse, after which the remainder of the purchase price is due. Prior to this point, a purchaser may cancel the contract and receive a refund of all payments. Required: Describe when revenue should be recognized by each company. If revenue should not be recognized at the time of sale, indicate what method should be used to recognize the revenue. Justify your decision. (10 Mark)
Expert Answer:
Related Book For
Financial Accounting and Reporting
ISBN: 978-1292080505
17th edition
Authors: Barry Elliott, Jamie Elliott
Posted Date:
Students also viewed these accounting questions
-
? Kings Plc made the following investments: a. 15 million shares in Yaka Limited on 30 June 20X1 for K25 million, when the reserves of Y Limited were K10 million b. 8 million shares in Zulu Limited...
-
Foxtrot Ltd. made the following investments during its 2011 fiscal year. a. The company places $30,000 in a six-month term deposit with its bank. b. The company purchases from its broker a call...
-
Complete the following summary income statements for the year ended December 31, 2010, by calculating the missing numbers. A Company 8 Company 450,000 300,000 Sales Cost of goods sold Gross profit...
-
Case 2: First Year on the Job Joe finally received that job offer in the mail. He worked part-time for First Cirrus Bank during the spring semester and the work experience had paid off. Beginning on...
-
What is an audit adjustment, and why is the resolution of such adjustments important to audit quality? What role should professional skepticism play when management disagrees with the auditor about...
-
Company A is headquartered in Country A and reports in the currency unit of Country A, the Apeso. Company B is headquartered in Country B and reports in the currency unit of Country B, the Bol....
-
1. Your instructor will divide the class into teams and assign each team the task of investigating the start-up of one of the following businesses: a. Submarine sandwich shop b. Day care service c....
-
Ms. Winnie Lins company sells computers. Monthly sales for a six-month period are as follows: MONTH SALES Jan ........ 18,000 Feb ........ 22,000 Mar ........ 16,000 Apr ........ 18,000 May ...........
-
Users complain that a database server has slowed down over the last hour despite the fact that no more users have connected Option. You run an antimalware scan, which comes up clean Option. The...
-
Bryant Corporation was incorporated on December 1, 2009, and began operations one week later. Before closing the books for the fiscal year ended November 30, 2010, Bryants controller prepared the...
-
31. Fred is a successful dentist in Boston. He has a com- prehensive injury and a disability insurance policy that he has carried since shortly after he started his practice. During the first 15...
-
Are there any disadvantages or challenges in offering telecommuting?
-
How should Dale approach the determination of the consultants salaries as expatriates?
-
Explain leased employee arrangements. Discuss employee benefits for leased workers.
-
Should Jenkins offer any incentive compensation or additional benefits to the expatriates? Why or why not?
-
What are some labor-related factors that Threads should consider when comparing Mexico and Canada?
-
Find x rounded to one decimal place. X = 60 120 [-/5.55 Points] DETAILS 35 Find x rounded to one decimal place. X= 60% SPRECALC7 6.2.049. 30 65
-
Evaluate the integral, if it exists. Jo y(y + 1) dy
-
Five G Telephones enters into telephone contracts on the following terms and options: Xyz mobile phones ......................1,000 Basic Y phones .......................... 200 Basic connection...
-
On 1 January 20X0 Walpole Ltd acquired 90% of the ordinary shares of a French subsidiary Paris SA. At that date the balance on the retained earnings of Paris SA was 10,000. The non-controlling...
-
On 1 April 20W9 Kroner began to lease an office block on a 20-year lease. The useful economic life of the office buildings was estimated at 40 years on 1 April 20W9. The supply of leasehold...
-
The microfinance concept has been a blessing for many people in developing countries. Its success there causes some to wonder if it can spur growth in areas of developed nations that need...
-
An institution that many people know little about and some governments find worrisome is offshore financial centers. They operate with little oversight, few regulations, and often little taxation....
-
What is the appeal of the eurocurrency market?
Study smarter with the SolutionInn App