BACT 301: FINANCIAL REPORTING 1
INTERIM ASSESSMENT
TIME ALLOWED: ONE HOUR
QUESTION 1
Akosombo Leisure is a private limited liability company that operates a single cruise ship. The
ship was acquired on 1 October 2011. Details of the cost of the ship's components and their
estimated useful lives are:
component
original cost
depreciation basis
(GHSmillion)
ship's fabric (hull, decks etc.)
300
25 years straight-line
cabins and entertainment area fittings
150
12 years straight-line
propulsion system
100
useful life of 40,000 hours
At 30 September 2019 no further capital expenditure had been incurred on the ship. In the year
ended 30 September 2019 the ship had experienced a high level of engine trouble which had
cost the company considerable lost revenue and compensation costs. The measured expired life
of the propulsion system at 30 September 2019 was 30,000 hours. Due to the unreliability of
the engines, a decision was taken in early October 2019 to replace the whole propulsion system
at a cost of GHS140 million. The expected life of the new propulsion system was 50,000 hours
and in the year ended 30 September 2020 the ship had used its engines for 5,000 hours.
At the same time as the propulsion system replacement, the company took the opportunity to
do a limited upgrade to the cabin and entertainment facilities at a cost of GHS60 million and
repaint the ship's fabric at a cost of GHS20 million. After the upgrade of the cabin and
entertainment area fittings it was estimated that their remaining life was five years (from the
date of the upgrade). To calculate depreciation, all the work on the ship can be assumed to have
been completed on 1 October 2019. All residual values can be taken as nil.
Required:
Show the Profit or Loss Extract for the year ended 30 September 2020 and the Statement of
Financial Position Extract as at 30 September 2020 to represent the above.
QUESTION 2
A. Wilderness owns and operates an item of plant that cost GHS640,000 and had accumulated
depreciation of GHS400,000 at 1 October 2019. It is being depreciated at 12.5% on cost.
On 1 April 2020 (exactly half way through the year) the plant was damaged when a factory
vehicle collided into it. Due to the unavailability of replacement parts, it is not possible to
repair the plant, but it still operates, albeit at a reduced capacity. Also, it is expected that as
a result of the damage the remaining life of the plant from the date of the damage will be
only two years. Based on its reduced capacity, the estimated present value of the plant in
use is GHS150,000. The plant has a current disposal value of GHS20,000 (which will be
nil in two years' time), but Wilderness has been offered a trade-in value of GHS180,000
1
against a replacement machine which has a cost of GHS1 million (there would be no
disposal costs for the replaced plant). Wilderness is reluctant to replace the plant as it is
worried about the long-term demand for the product produced by the plant. The trade-in
value is only available if the plant is replaced.
Required:
Prepare extracts from the financial statements of Wilderness in respect of the plant for the
year ended 30 September 2020.
B. Explain the difference between investment property and owner-occupied property under
IAS 16.
QUESTION 3
The inventory of a motor vehicles dealer at the end of an accounting period includes the
following used vehicles (A-D). The dealer’s sales staff are paid a commission when they sell
a vehicle. This commission is calculated at 5% of the selling price.
Calculate the value at which these items should be shown in the dealer’s financial statements.
Vehicle A
Vehicle B
Vehicle C
Vehicle D
Cost incurred to date
GHS
14,200
17,500
11,900
13,000
Expected further
cost before sale GHS
1.250
1,000
1,240
2,760
2
Expected selling price
GHS
18,000
20,000
14,000
15,000