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Assignment Question(s): Total Marks 15
Q1. M Corp. makes a loan to N Co. and receives in exchange a three-year, SR 15,000 note bearing interest at 10 percent annually. The market rate of interest for a note of similar risk is 12 percent.
Required: (4 Marks)
a. How does M Corp record the receipt of the note using present value?
b. Imagine the same note at zero bearing and pass journal entries using present value.
(Note: PV of Interest at 12% is 2.40183 and PV of Principal at 12% is .71178)
Answer:
Q2. XYZ Company’s record of transactions for the month of September was as follows.
Purchase Sales
Date Quantity Unit Price Date Units
Sep 1 (Balance on hand) 100 $4.00 Sep 5 200
Sep 4 300 4.50 Sep 12 150
Sep 11 200 5.00 Sep 27 600
Sep 18 200 5.25 Sep 28 200
Sep 26 500 5.50
Sep 30 200 5.75
Total 1,5001,150
Total units (ending inventory) 350
Required: (4 Marks)
Compute the ending inventory and COGS at September 30 on each of the following on periodic bases.
1. FIFO
2. WA
Answer:
Q3 IFRS requires capitalizing actual interest (with modification) Consistent with historical cost. Capitalization considers three items:
1. Qualifying assets.
2. Capitalization period.
3. Amount to capitalize.
Explain the above with numerical examples. (4 Marks)
Answer:
Q4 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. (3 Mark)
Answer: