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ACCA FR Chapter 5 IAS20 Questions

VIVA

Reader Interactions

Comments

  1. Ranjan879 says

    August 19, 2022 at 11:52 am

    All options in q1 seem to be correct, in absence of any specifications relating to the nature of the grant, as is the case with the question.

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  2. Rubyta says

    September 21, 2021 at 10:46 am

    Hi Sir, I think question 4 should be :

    Debit carrying amount of asset 49.000

    Debit depreciation expense : 21.000

    Credit liability : 70.000

    This would be a change in accounting estimate (IAS 8) and so we do not change past periods just the current one.

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    • Vamshisai says

      November 19, 2023 at 12:09 pm

      Exactly dude, can u just tell me is that the answer

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  3. mumuaz says

    May 27, 2019 at 2:33 pm

    would u please explain question no. 3 ..

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  4. MikeLittle says

    August 7, 2018 at 11:52 am

    Because the grant $70,000 has been credited to the asset account $150,000, depreciation for 3 years has been calculated on that net figure of $80,000

    So depreciation for 3 years has been charged against the retained earnings in the aggregate sum of 3 years @ $8,000 = $24,000

    If no grant had been received, depreciation for 3 years calculated at 10% on $150,000 would have been 3 * $15,000 = $45,000

    But now it seems that the grant is repayable 馃檨

    So what would the situation have been if we had never received that grant?

    Asset account would show $150,000
    Accumulated Depreciation account would show $45,000, and
    Retained Earnings would have been reduced by an additional $21,000 (ie $45,000 – $24,000)

    To arrive at the position where we should have been where no grant had been received, we need to:

    Dr Asset account $70,000
    Cr Accumulated Depreciation account $21,000
    Dr Retained Earnings $21,000 and
    Cr Cash $70,000

    Does that make it any clearer?

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    • farahdania says

      April 16, 2019 at 3:54 am

      Very helpful, thanks!

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    • lphuonga says

      April 3, 2022 at 5:30 pm

      Hi MikeLittle,
      According to [IAS 20.32], “If a grant becomes repayable, it should be treated as a change in estimate.” and “Where the original grant related to an asset, the repayment should be treated as increasing the carrying amount of the asset”. If you Dr Asset account $70,000, it means you increase the cost (the historical cost) of the asset?? I think it should be: Debit carrying amount of asset 49.000 and no RE adjustments cuz this is a change in estimate?
      Thank you so much and look forward to receiving reply from you!

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  5. enroluniabroad says

    August 7, 2018 at 9:14 am

    Good Day Sir
    could you please explain the Question no 4 of the test above .
    I don’t understand the depreciation and Retained Earnings part.
    please explain ASAP….

    many thanks
    Mehreen

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