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Hi Sir,
Past Exam Paper Mar/Jun 2019- Q16-30
24. Why Option B:” 0.2m should be expensed in Diaz Co’s statement of P/L for YE 2018″ is not True?
What’s the correct double entry for this Factoring agreement?
25. Why Option 3:” Acquisition to a competer finalised on 10JanX9, being the date J Co obtained control over the competitor. Negotiation inspect of the acquisition commenced in 2018″ is not Adjusting event?
I think it’s an Adjusting event because the Q mentions ” Negotiation inspect of the acquisition commenced in 2018″ therefore it fits the Adjusting event criteria: information related to the condition existed.
29. Why don’t we choose B: Disclose as a contingent liability?
In the last line of the scenario, it mentions “legal advice states that it’s “Possible”, but not likely, that this action will succeed.” Therefore I think we should Disclose it as a Contingent Liability?
Thank you very much.
Hi Sun,
It is very difficult to answer your post as you include far too many questions in one post. This makes it very difficult to respond to the post, so it might be better to post each questions one at a time.
24. The factoring agreement is with recourse and so the arrangement is a secured loan. The receivable stays on the SFP at $6.2 million and the cash received is treated as a loan of $6 million. Therefore there is not expense of $0.2 million recognised.
28. The standard states that this is a non-adjusting event. At the reporting date the acquisition had not taken place, it was just in negotiation, and the event that leads to the acquisition taking place is after the reporting date, hence non-adjusting.
29. It says that this is not likely to succeed, so it isn’t probable but possible/remote, so it is not shown in the financial statements.
I’ll get on to you other forum posts when I get the chance, as they are incredibly long and time consuming!
Thanks
Chris
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