1. Bromyard Ltd had a balance of CU700,000 on its retained earnings at 1 January 20X7.

During the
year ended 31 December 20X7 the company:
 Revalued property with a cost of CU1 million and accumulated depreciation of CU600,000 to
CU1.2 million. No annual transfers between reserves are to be made
 Issued shares at a premium of CU100,000
 Made a profit for the year of CU400,000
On 1 December 20X7 the directors proposed a dividend of CU250,000 for the year ended 31
December 20X7.
2. In accordance with IAS 1 Presentation of Financial Statements, what is the closing balance on
retained earnings in Bromyard Ltd’s statement of changes in equity for the year ended 31 December
20X7? Worcester Ltd had a balance of CU2 million as its total equity at 1 January 20X2. During the
year ended 31 December 20X2 the company:
 Revalued property with a cost of CU2 million and accumulated depreciation of CU1,600,000 to
CU1.5 million
 Issued shares with a nominal value of CU500,000 at a premium of CU100,000
 Made a profit for the year of CU750,000
On 1 February 20X3 the directors declared a dividend of CU250,000 for the year ended 31 December
20X2.
In accordance with IAS 1 Presentation of Financial Statements, what is the closing balance on total
equity in Worcester Ltd’s statement of changes in equity for the year ended 31 December 20X2?
3. During the year ended 30 September 20X6, Kidderminster Ltd produced 10,000 widgets, compared to
a normal production level of 12,000 widgets. 1,000 finished widgets were held at the year end.
Production costs incurred for the year were as follows.
CU
Raw materials 100,000
Direct labour 50,000
Variable overheads 40,000
Fixed overheads 120,000
In accordance with IAS 2 Inventories, what is the value of Kidderminster Ltd’s finished goods at 30
September 20X6?
4. Tintagel Ltd commenced business on 1 October 20X5. During its first year of trading the company
produced 10,000 widgets, compared to an anticipated normal production level of 15,000 widgets. At
30 September 20X6 there were 1,000 finished widgets in closing inventory.
Production costs incurred for the year were as follows.
CU
Raw materials 100,000
Direct labour 50,000
Variable overheads 40,000
Fixed overheads 120,000
In accordance with IAS 2 Inventories, how much of the above costs will be carried forward in
inventory at 30 September 20X6 and how much will have been recognised in the income statement
for the year ended 30 September 20X6?
5. Wythenshawe Ltd commenced business on 1 June 20X4 manufacturing a single type of widget,
which had a selling price throughout that year of CU45. During the year the company made 10,000
widgets and incurred the following costs.
CU
Materials 150,000
Labour 75,000
Variable production overheads 50,000
Fixed production overheads 37,500
Administrative, selling and distribution costs 40,000
Towards the end of Wythenshawe Ltd’s first year of trading, market conditions deteriorated and the
company was left with 3,000 finished widgets in inventory at its year end. These widgets can be sold
for CU35 each but only after incurring CU6 per unit selling costs.
In accordance with IAS 2 Inventories, what was Wythenshawe Ltd’s net profit for the year ended 30
June 20X5?
6. Newcastle Ltd has the following units in inventory at the end of 20X5.
CU Units Cost per unit
Raw materials 7,000 20
Work in progress 2,500 25
Finished goods 1,000 30
Finished items usually sell for CU35 per unit. However, difficult trading conditions have meant that
the company expects to have to discount its finished items by 20% and to incur selling costs of CU2
per item. A further CU2.50 per unit is still to be incurred to finish off the items of work in progress.
In accordance with IAS 2 Inventories, at what amount should inventories be stated in the balance
sheet of Newcastle Ltd as at the end of 20X6?
7. The financial statements of Louise Ltd for the year ended 31 December 20X1 were approved for
publication on 20 May 20X2. The following events occurred after the year end.
a. The directors declared a dividend of 50p per ordinary share on 17 February 20X2. Louise Ltd
has 200,000 CU1 ordinary shares in issue.
b. An insurance claim for storm damage to property, caused by unusually high winds, was under
negotiation at the balance sheet date. The claim was settled with the insurers in March 20X2
leaving uninsured damage amounting to CU75,000.
What liabilities should be recognised in the financial statements of Louise Ltd for the year ended 31
December 20X1 in accordance with IAS 10 Events After the Balance Sheet Date?
8. The components of the cost of a major item of equipment are given below.
CU
Purchase price 780,000
Import duties 117,000
Sales tax (refundable) 78,000
Site preparation 30,000
Installation costs 28,000
Pre-production costs 18,000
Initial operating losses before the asset reaches
planned performance 50,000
Estimated cost of dismantling and removal of the asset,
recognised as a provision under BAS 37 Provisions,
Contingent Liabilities and Contingent Assets 100,000
1,201,000
 In accordance with IAS 16 Property, Plant and Equipment what amount should be recognised as the
cost of the asset?
9. Mario Ltd purchased a machine for CU50,000 on 1 January 20X1. The machine was judged to have a
five-year life with a residual value of CU5,000. On 31 December 20X2 CU15,000 was spent on an
upgrade to the machine. This extended its remaining useful life to five years, with the same residual
value. During 20X3, the market for the product declined and the machine was sold on 1 January
20X4 for CU7,000. According to IAS 16 Property, Plant and Equipment, what was the loss on
disposal?
10. Gray Ltd purchased a machine on 1 April 20X2 for CU16,000. In the years ended 31 March 20X3
and
31 March 20X4 Gray Ltd depreciated the machine at 25% per annum on a straight-line basis. On 1
April 20X4 the machine was revalued to CU12,000 with its estimated useful life being unchanged. In
accordance with BAS 16 Property, Plant and Equipment what was the effect of this revaluation on
Gray Ltd’s profit for the year ended 31 March 20X5?
11. White Ltd owns many items of property, plant and equipment and accounts for them on a revaluation
basis. In the year ended 31 March 20X2 White Ltd revalued three of its assets, all of which are in
current use, as set out below.
Carrying amount Valuation
CU CU
Turning machine (asset number 1001) 10,000 7,500
Turning machine (asset number 1007) 12,000 9,000
Finishing machine (asset number 1012) 8,000 6,500
The company had a revaluation reserve of CU6,500 at 1 April 20X1 due to previous revaluations.
This balance of CU6,500 relates to the following assets.
Turning machine (asset number 1001) CU3,000
Turning machine (asset number 1008) CU1,500
Finishing machine (asset number 1015) CU2,000
In accordance with IAS 16 Property, Plant and Equipment what amount should be charged to the
income statement for the year ended 31 March 20X2 in respect of the above revaluations?
12. On 1 July 20X7 Brown Ltd bought a machine for CU48,000. The machine was depreciated at 25%
per annum on a straight-line basis until 30 June 20X9. On 1 July 20X9 the machine was revalued to
CU30,000. Brown Ltd considers that its remaining useful life is now three years.
According to IAS 16 Property, Plant and Equipment, what should the depreciation charge for the year
ended 30 June 20Y0 and the minimum balance on the revaluation reserve as at 30 June 20Y0 be?
13. Captain Ltd purchased a piece of land during the year ended 30 June 20X5 for CU1 million and
revalued this land on 30 June 20X5 to CU1.3 million. On 1 March 20X6 the land was sold for CU1.4
million. In accordance with IAS 16 Property, Plant and Equipment what is the net amount in respect
of this land which will appear in Captain Ltd’s statement of changes in equity for the year ended 30
June 20X5 and year ended 30 June 20X6?
14. On 1 January 20X1, Barbosa Ltd purchased an item of plant for CU300,000 which was to be
depreciated over its useful life of 10 years.
On 1 January 20X5, the plant was revalued to its fair value of CU600,000, with no revision to its
remaining useful life.
On 1 January 20X6, the plant was sold for CU700,000. In accordance with IAS 16 Property, Plant
and Equipment, what was the profit on disposal to be included in Barbosa Ltd’s income statement for
the year ended 31 December 20X6?
15. Sparrow Ltd owns a building, currently carried in its accounting records at CU800,000. It has agreed
to exchange this building for a building owned by Turner Ltd. The building currently owned by
Sparrow Ltd has a fair value of CU1 million. The building currently owned by Turner Ltd has a fair
value of CU1.1 million. Sparrow Ltd has agreed to pay the legal costs of the transfer which amount to
CU10,000. According to IAS 16 Property, Plant and Equipment at what value should the building
currently owned by Turner Ltd be recorded at initially in Sparrow Ltd’s accounting records?
16. A non-current asset has a carrying amount of CU20,000. It could be sold for CU18,500 with selling
costs of CU500. Its value in use is CU22,000 and its replacement cost CU50,000.
According to IAS 36 Impairment of Assets what is the recoverable amount of this asset?
17. Chloe Ltd purchased equipment on 1 April 20X2 for CU100,000. The equipment was depreciated
using the reducing balance method at 25% per annum. Chloe Ltd prepares accounts to 31 March
annually.
Depreciation was charged up to and including 31 March 20X6. At that date, the recoverable amount
of this equipment was CU22,000.
According to IAS 36 Impairment of Assets what was the impairment loss on this equipment
calculated on 31 March 20X6?
18. Lauren Ltd bought some land on 1 January 20X4 for CU500,000. On 31 December 20X5 this land
was revalued to CU700,000. On 31 December 20X7 the fair value less costs to sell of this land was
estimated at CU400,000 and its value in use at CU450,000.
19. According to IAS 36 Impairment of Assets what amount will be included in the income statement of
Lauren Ltd for the year ended 31 December 20X7 in respect of the impairment loss on this land?
Alayna Ltd bought a machine on 1 January 20X2 for CU50,000. The useful life of this machine was
assessed as 10 years and it was depreciated on a straight-line basis.
On 31 December 20X3 the machine was revalued to a fair value of CU80,000 with no change to its
remaining useful life. On 31 December 20X6 the machine was identified as impaired and revalued to
CU20,000. Alayna Ltd makes a transfer between the revaluation reserve and retained earnings each
year as a result of the revaluation in accordance with best practice.
According to IAS 36 Impairment of Assets what amount will be included in the income statement of
Alayna Ltd for the year ended 31 December 20X6 in respect of this impairment loss?
20. During the year ended 30 June 20X3, Emily Ltd spent CU300,000 on the development of a new range
of garden machinery. In order to carry out this work, Emily Ltd purchase some highly specialized
equipment, on 1 July 20X2 at a cost of CU100,000. The equipment is expected to have a useful life of
five years and is to be depreciated over that period by the straight-line method.
According to IAS 38 Intangible Assets, what is the maximum amount that Emily Ltd can carry
forward as development expenditure as at 30 June 20X3?
21. During the current accounting period Jack Ltd considered the recognition of the following costs as
intangible assets.
(1) CU40,000 spent on evaluating research findings
(2) CU60,000 spent on acquiring a brand name from a competitor
(3) CU50,000 spent on acquiring the legal rights to a production process, without which Jack
Ltd’s business cannot function
In accordance with IAS 38 Intangible Assets what is the maximum amount that Jack Ltd could
recognize as intangible assets?