Important Topics in Financial Accounting

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Assignment Question(s): Marks 5

Chapters covered 10, 11, 12, 13 & 14

IFRS requires capitalizing actual interest (with modification). What items are to be considered for capitalization? Explain.

On November 1, 2010, Saif Company contracted Ahmed Construction Co. to construct a building for $1,600,000 on land costing $400,000 (purchased from the contractor and included in the first payment). Saif made the following payments to the construction company during 2011.

Date      Amount $

1st Jan  500,000

1st Mar 400,000

1st  Jun 350,000

1st   Sep               500,000

1st     Dec             250,000

Required: Compute weighted-average accumulated expenditures for 2011

Presented below are the components related to an office building that ABC Company is considering purchasing for SAR10,000,000.

Component                                        Useful Life                          Value

Building structure                            60-year life                 5,400,000

Building engineering                       30-year life                 2,400,000

Building external works   30-year life                  900,000

(a)    Compute depreciation expense for 2010, assuming that ABC uses component depreciation.

(b)   Assume that the building engineering was replaced in 20 years at a cost of SAR 2,600,000 cash. Prepare the entry to record the replacement of the old component with the new component.

Q3. A long-lived tangible asset is impaired when a company is not able to recover the asset’s carrying amount either through using it or by selling it. The management to identify whether the asset has impairment or no impairment conducts an impairment test.

Explain how the impairment test conducted in both situations with numerical examples. (1 Mark)

Q4. Explain the classified Intangible Assets with examples. (0.5Mark)

Q5. Describe the procedure to issuing and marketing bonds to the public, and indicates the factors considered in determining selling price of the bond? (0.5Mark)