Acca aaa s21 Notes

September 2021 to June 2022 exams
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(3)
Non-current asset schedule:
$000
Motor vehicles
Freehold land and 
buildings
Computers
Cost b/f
260
10,000
2,000
Additions
50
–
600
Disposals
70
–
400
Cost c/f
240
10,000
2,200
Depreciation b/f
180
600
1,400
Disposals
80
–
100
Charge for year
60
200
220
c/f
160
800
1,520
Depreciation rates (all straight line): cars 25%, land and buildings 2%, computers 10%. Cars are 5 
years old when sold.
(4)
A television company has built a small village to be used in the filming of a popular and long-
running TV program. The village has been build in an area of natural beauty and permission to 
build was granted on the condition that the village is demolished and the site landscaped on 
the earlier of filming ceasing and 20 years.
(5)
The first audit of a new client is in progress. The parent imports small decorative items from 
abroad. Its subsidiary trades through 12 take-away pizza shops which are very profitable. 
Dividends are regularly paid by the subsidiary to the parent. 
During the audit, an inventory count showed that the parent had imported some modern items 
which appear to be made of ivory, which is a banned import. Invoices for these items traced 
through goods received notes described them as made from a synthetic material.
(6)
A large printing machine originally cost $5 million and its accumulated depreciation amounts to 
$3 million.The sale value of the machine to an overseas buyer in the country of Burunda, net of 
selling costs, is believed to be 10 million Burundan pounds. The exchange rate at year end was 4 
Burundan pounds to $1. The value in use, using cash flow projections and a discount rate of 5%, 
is $1.5 million.
(7)
You are the auditor of a group of companies and one of the subsidiaries has had very poor cash 
flow and it seems that the bank is unlikely to renew its borrowing facility.
The finance director of the parent has told you that it will make the required loan to the 
subsidiary to keep it solvent.
(8)
A company has changed the way in which it values inventory from the FIFO to the weighted 
average cost basis and has also changed its depreciation rate on machinery from 20% to 15%.