Discuss by Keeping in View The IAS-38, Weather Following Costs Will Be Capitalized
Discuss by Keeping in View The IAS-38, Weather Following Costs Will Be Capitalized
Discuss by Keeping in View The IAS-38, Weather Following Costs Will Be Capitalized
2 (A)
Ans.
YEAR-1 1,300,000 X 7/85 = 107,058
Rs. 16,000 is the Research Cost and expensed out in income statement for the year. This
cost is totally research based because it is still incomplete and future benefits are not
known.
Rs. 150,000 can be capitalized. It is research done by others we pay it to buy and start
development phase on it. Eg: Oxford researches buy by largest medicines companies.
Rs. 16,000- Testing cost should be capitalized It is testing cost should be capitalized.
Rs. 110,000 development cost can be capitalized. When feasibility report shows that the
project is technically sound and can be completed. The management has intentions to
develop, use or sell the asset. It is expected that the entity will drive economic benefits
from the use of asset.
Show expense out in income statement. This cost is totally research based because it is
still incomplete and future benefits are not known.
Q. 3 (A)
Ans.
Items A B C
B)
ANS:
(4,000,000 * 4years)
Y-3 Depreciation Expense – SOCI 1,000,000
Accumulated Depreciation - SOFP 1,000,000
(3,000,000 * 3years)
Q. 4 (A)
ANS:
A damage claim of Rs. 5 million for breach of contract has been
served to the company. The company’s legal council is of the
opining that it probable the damages will be awarded to the
plaintiff.
A suit has been decided against the company for Rs. 5 million in
the High Court.
The company has appealed to the court for the settlement of the
sales tax liability of Rs. 3million.
B.
ANS:
Contingent Assets
Q.5
ANS:
IAS-37
IAS-11
Retentions are amounts of progress billings that are not paid until
the satisfaction of conditions specified in the contract for the
payment of such amounts or until defects have been rectified.
Progress billings are amounts billed for work performed on a
contract whether or not they have been paid by the customer.
Advances are amounts received by the contractor before the
related work is performed.
An entity shall present:
The gross amount due from customers for contract work is the net
amount of:
Q.no.1
Ans.
• B Limited has obtained a generator for official lease on 2 years period whose useful life
is 6 years.
Operating Lease: The period over which lease agreement is enforceable is not
comprised of major part (more than 50%) of the economic useful life of the asset.
• C Ltd. has acquired an asset on lease the ownership of which will be transferred to the
company at the end of lease term.
Finance Lease: The title of the asset is passed from lessor to lessee at the end of the
lease term.
• The D Ltd. has acquired an asset on lease with an option to buy it at the end of lease
term at scrap value.
Finance Lease: (We assume it they will buy the asset at the end of lease term) Under the
terms and conditions of lease, the lessee has right/option to purchase the underlying
asset. In this respect the price has to be paid by the lessee for the purchase of asset is
not the market price but lesser one. It is quite certain that lessee will purchase the asset
as per terms.
• The Z Ltd has acquired an asset on lease for 8 years. The economic life of the asset is 10
years. The company has no intention to purchase it at the end of lease term.
Finance Lease: The period over which lease agreement is enforceable should be
comprised on major part (more than 50%) of the economic useful life of the asset.
• X Ltd. Has acquired an asset with annual lease payment of Rs. 50,000 for ten years
whereas the fair value of the asset is Rs. 310,000.
Finance Lease: Present value of minimum lease payments equals to fair value of asset.
Where,
Fv = future value = 0