Financial Accounting and Reporting I
Syed Huzaifa Sami
ARTT Business School
Certificate in Accounting and Finance (CAF)
60 Minutes – 30 Marks
Faculty: ARM & AMK
Quiz: IAS 07 and IAS 40
CAF-5 – Financial Accounting and Reporting 1
Question 1
(20 Marks)
Youngs Limited (YL), has provided you with the following balances for the year ended December 31, 2019
Youngs Limited
Statement of Financial Position
As At December 31, 2019
ASSETS
2019
2018
EQUITY & LIABILITIES
2019
2018
Rs. In Million
Rs. In Million
Non-Current Assets
Equity
Property plant and equipment
582
475
Share capital
200
150
Loan to Old Limited (OL)@ 16%
75
50
Share premium
25
8
657
525
Retained earnings
348
329
Current Assets
573
487
Inventory
18
21
Non-Current Liabilities
Debtors
42
26
Loan From Bran Bank @ 12%
50
65
Prepaid
7
9
Interest receivable
18
8
Current Liabilities
Cash and Bank
11
20
Creditors
85
35
96
84
Accrued expenses
45
22
130
57
753
609
753
609
Additional Information
1. Profit after tax for the year ended December 31, 2019 was Rs.19 million
2. During the year YL purchased a new plant at a cost of Rs. 180 million and paid 5 million for its installation.
Depreciation expense for the year was Rs.40 million
3. A plant having a NBV of 79 million and remaining useful life of 3 years, was tested for impairment and following
information was obtained
a. The fair value of the plant was assessed at Rs.78 million and in order to sell the plant, a brokerage cost of
Rs.3 million, transportation cost of Rs.4 million and site restoration cost of Rs.9 million will have to be paid.
b. The value in use of the plant was calculated to be 64 million
4. Another plant was disposed of at a loss of Rs.5 million
5. On June 30, 2019 YL paid Rs.15 million along with the interest due to Bran Bank. Interest of Rs.3.9 million was
accrued at the beginning of the year which is included in accrued expenses.
6. Additional loan of Rs. 25 million was given to OL on July 1, 2019. There was no capital repayment from OL
7. Accrued expense include tax payable at the beginning of the year Rs.5.1 million and that of on year end was Rs.8
million. Tax paid to the authorities amounted to Rs.17.1 million
8. During the year, ordinary shares were issued at market price
Required
Prepare a statement of cash flows for the year ended December 31, 2019
From The Desk Of Syed Huzaifa Sami
Page 1 of 2
Financial Accounting and Reporting I
Syed Huzaifa Sami
ARTT Business School
Question 2
Following are the details of buildings owned by Babu Limited for the year ended December 31, 2020:
Location
Purchase
Price
Purchase
Date
FV on 31
Dec 2019
FV on 31
Dec 2020
Status on
year end
Defence
PECHS
FB Area
Orangi
Liyari
Kati Pahari
N. Karachi
Golimar
530,000
800,000
474,000
270,000
130,000
800,000
356,000
200,000
01-Jan-15
1-Jul-18
04-Jan-19
30-Jun-18
1-Aug-17
14-May-18
30-Jun-20
01-Jul-20
700,000
1,200,000
380,000
520,000
N/A
900,000
-
900,000
875,000
620,500
350,500
210,000
N/A
500,000
230,000
Occupied
Occupied
Rented
Occupied
Rented
Rented
Vacant
Rented
(20 Marks)
Additional Information
1. The building in PECHS was on rent from the date of purchase but evacuated on June 30, 2020 and is now being used
as training facility for new employees. The FV on this date was Rs.1,000,000.
2. The building in Orangi was vacated by the owner on February 1, 2020 in view of earning rental income and capital
appreciation income but no tenant was found by October 1, 2020. Therefore, on this date, the directors decided to
use the building for employee housing. the FV on Feb 1, 2020 was Rs.480,000 while that of on Oct 1, 2020 was
400,000.
3. The FV of the building in Liyari was never reliably measurable. However, during the year 2020 due to better law and
order situations in the area, the market for real state developed and now the company is of the view that FV shall be
determinable in the future as well.
4. The FV of the building in Kati Pahari was reliably measurable until last year. On 30 June 2020, however, gang wars
started in the area and now the FV of the buildings cannot be measured reliably. The company is of the view that
once the law-and-order situation are under control, the FV of the building will again become determinable. TH FV of
the building prior to the date of gang wars was Rs.950,000
5. The building in North Karachi was acquired for the purpose of earning rental income. However, the company has not
found any suitable tenant. The building in Golimar was rented immediately
6. The rental income earned during the year amounted to Rs.3,000,000
7. The company paid taxes and duties of Rs.300,000
8. The air conditioning system of the building in FB Area was changed on the demand of tenants which costed
Rs.100,000 on 1 Oct 2020. the new airducts have a useful life of 10 years
Following policies and estimates are relevant:
a) Depreciation on all buildings is charged @ 5% on straight line Method.
b) Residual value for every building is estimated at 10% of cost
c) Owner occupied properties are accounted for using cost model while that of investment properties are accounted for
using FV model
Required
a) Prepare Journal entries for the year ended December 31, 2020
b) Prepare disclosure notes as per IAS 40 and relevant extracts of Profit and loss account for the year ended December
31, 2020
From The Desk Of Syed Huzaifa Sami
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