F1 Exam Dumps : Financial Reporting

BC manufactures product X and on 1 February 20X4 started a project to develop a new material for use in its production. The development project is due to be completed by 31 December 20X4 with the new material being used in production from 1 January 20X5. The development project costs have been reliably estimated at $200,000 and it is anticipated that the new material will increase the margin achieved on product X by 20%.

You are a CIMA accountant within BC and are considering how to treat the development costs of $200,000 in the financial statements for the year ended 31 December 20X4.

In accordance with the ethical principle of professional competence and due care, which of the following statements correctly explains how these costs should be accounted for?

On 1 January 20X2 an entity began work on constructing a factory. It purchased the land for $14 million, built the factory buildings for $11 million and installed plant and equipment for $7 million. The project was completed on 31 December 20X3 when the factory was deemed ready to use, however, the factory did not start operations until 1 June 20X4.

To fund the project the entity borrowed $25 million on 1 January 20X2, with interest at 10% per year.

The loan was repaid in full on 31 December 20X4.

Calculate the total amount to be added to the cost of property, plant and equipment in respect of the above development.

Give your answer to the nearest $ million.

OP holds an investment property purchased on 1 January 20X3 for $700,000 with a useful economic life of 25 years.

At 31 December 20X5 the fair value of the investment property was $750,000 with a revised useful economic life of 25 years from that date.

OP has been carrying the investment property using the cost model until 31 December 20X5.

The directors wish to change their valuation method to fair value in accordance with IAS 40 Investment Property.

Which of the following is the correct treatment of the revaluation gain and the value of the property in the statement of financial position at 31 December 20X5?