Asb1106: introduction to financial and management accounting

Question 9

According to IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations how would non-current assets held for sale be valued?

1. 
   Higher of the carrying value or the fair amount
   
2. 
   Higher of the carrying value or the fair amount minus the cost of disposal
   
3. 
   Lower of the carrying value or the fair amount minus costs of disposal
   
4. 
   Lower of the carrying value or the fair amount
   

Question 10

What is the main reason for presenting discontinued operations separately within the financial statements?

1. 
   To show an accurate and realistic valuation of the entity
   
2. 
   To enhance the predictive aspect of the financial statements
   
3. 
   To ensure the financial statements are verifiable
   
4. 
   To make the financial statements easier to understand
   

Section B continued over on the next page


Section B

Question 1

Explain the limitations of financial reporting information?
(6 marks)
Question 2
Explain why some directors of a company would consider engaging in creative accounting?
(8 marks)
Question 3

On 30 June 2019 Eva and Co closed its manufacturing division. It sold all the assets, making a loss of £230,000, and made all the staff redundant at a cost of £700,000. During the year to 30 June 2019 Eva and Co made a profit after tax of £350,000 after charging the above expenses. This also included the results of the manufacturing division, which had made a profit of £10,000.

Required
Show how the above results would appear in Eva and Co statement of profit or loss for the year ended 30 June 2019.
(8 marks)
Question 4
Raven Ltd has 7.28 million shares in issue at the start of the year and during the year ended 31 December 2019 they made no issue of shares. However, on that date, there were an outstanding option to purchase 620,000 ordinary shares £1 shares at £1.70 per share. The fair value of ordinary shares was £1.80.
Reported earnings for the year ended were £3,802,000.


Required
Calculate the diluted earnings per share for the Black Bird for the year ended 31 December 2019.
(8 marks)


End of class test questions