- This topic has 0 replies, 1 voice, and was last updated 6 years ago by apoapala.
September 29, 2016 at 3:12 am #341310apoapala
- Topics: 3
- Replies: 4
D is a large paper manufacturing company. the companys finance director is working on the published account for the year ended march 20×3. the chief account has prepared the ff list of problems which will have to be resolved before statements can be finalised.
1. possible investment property (IAS 40)
the company decided to take advantage of depressed property prices and purchased a new office building in the centre westville. this was purchased with the intention of the building being resold at a profit within 5years. in the meantime, the company is using the property to house the administrative staff from westown factory until such time as their own offices can be repaired. it is anticiparted that this will take atleast 9months. the managing director has suggested that the building should not be depreciated?
2. possible development expenditure (IAS 38)
the company paid an engineering department at Northtown University a large sum of money to design a new pulping process which will enable the use of cheaper raw materials. this process has been successfully tested in the universitys laboratoryand almost certain to be introduced at D’s pulping plant within the next few months.
the company paid a substaintial amount to the universitys biology department to develop a new species of tress which could grow more quickly and therefore enable the companys forest to generate more wood for paper manufacturing. the project met with some success in that a new tree was developed. unfortunately it was prone to disease and the cost of the chemical sprays needed to keep the wood healthy rendered the tree uneconomic.
explain how each of these matters should be dealt with in the published accounts for the year ended 31st march 20X3 in light of the accounting standards referred to above. assume the amounts involved are material in every case?
- You must be logged in to reply to this topic.