Property Plant Equipment

FRPA – APRIL 2023 – L3 – Q2 – Property Treatment, IAS 16, and IAS 2

Explain the treatment of three identical properties in the financial statements of Black Trust real estate and identify the applicable IAS for each; define property, plant and equipment under IAS 16, explain recognition criteria for PPE, and state five disclosure requirements under IAS 2 Inventories.

Question

Black Trust real estate (in the business of building and selling properties) owns three (3) identical properties, East Legon Hills, Dansoman and Kasoø New Town.

Dansoman is used as the head office of Black Trust. East Legon Hills is let to, and occupied by, a subsidiary. Kasoø New Town is part of the buildings constructed for sale.

You are required to: a. Explain how the three properties will be treated in the financial statements of Black Trust real estate and identify the International Accounting Standard that will be applicable for each of them. b. IAS 16 Property, Plant and Equipment deals with Accounting for Property, Plant and Equipment. i. With respect to IAS 16: Property, Plant and Equipment, define property, plant and equipment? ii. Explain the criteria for recognizing an item of property, plant and equipment. iii. State 5 disclosure requirements of inventory under IAS 2 inventory.

Answer

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Tags: Disclosure Requirements, IAS 16, IAS 2, IAS 40, Inventories, Investment Property, Property Plant Equipment, Real Estate Accounting, Recognition Criteria
Level: Level 3

Series: APR 2023

AAA – Mar 2025 – L3 – Q2 – Audit of Complex Transactions

Analyze financial statement extracts for audit risks in property, plant & equipment, trade receivables, and inventory, and outline audit evidence needed.

Question

Fadila Associates has been the auditors of Aduaba LTD for the past 3 years. Aduaba LTD is into the production of cashew drinks. You have been assigned to lead the audit of Aduaba LTD and have been provided with the following extracts from the draft financial statements for 2023 before the final audit planning meeting with the Chief Accountant.

Draft statement of financial position (extracts)

	Draft 2023		Actual 2022
	GHc’000	GHc’000	GHc’000	GHc’000
Property, Plant and Equipment	42,860		41,620
Receivables
Trade	4,800		3,150
Other	380	5,180	280	3,430
Inventory
Raw materials	2,460		1,870
Work-in-progress	380		450
Finished goods	2,270	5,110	2,030	4,350
Total Assets		53,150		49,400
Current liabilities
Trade	4,116		3,470
Other	870	4,986	650	4,120

Draft income statement (extracts)

	Draft 2023	Actual 2022
	GHc’000	GHc’000
Revenue	53,250	50,750
Cost of sales	39,360	39,220
Gross profit	13,890	11,530
Depreciation of Property, Plant and Equipment	4,450	2,810
Other expenses	3,540	3,480
Profit before tax	5,900	5,240

Your Audit Manager has reviewed these extracts and has identified three financial statement headings which he believes require further investigation. These are property, plant & equipment, trade receivables and inventory. He has also calculated the following accounting ratios:

	Draft 2023	Actual 2022
Trade receivables collection period	28 days	17 days
Inventory turnover	7.6 times	8.9 times
Gross profit percentage	26%	23%

Required: a) Explain why the Audit Manager has selected these three headings for further investigation from the given financial statement extract. (9 marks) b) Outline the audit evidence the Audit Manager should request for to clarify the situation regarding these financial statement headings. (11 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Financial Statements, Inventory, Property Plant Equipment, Risk Assessment, Trade receivables
Level: Level 3

Topic: Audit of Complex Transactions
Series: MAR 2025

FRPA – APRIL 2023 – L3 – Q2 – Property Treatment, IAS 16, and IAS 2

Explain the treatment of three identical properties in the financial statements of Black Trust real estate and identify the applicable IAS for each; define property, plant and equipment under IAS 16, explain recognition criteria for PPE, and state five disclosure requirements under IAS 2 Inventories.

Question

Black Trust real estate (in the business of building and selling properties) owns three (3) identical properties, East Legon Hills, Dansoman and Kasoø New Town.

Dansoman is used as the head office of Black Trust. East Legon Hills is let to, and occupied by, a subsidiary. Kasoø New Town is part of the buildings constructed for sale.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Disclosure Requirements, IAS 16, IAS 2, IAS 40, Inventories, Investment Property, Property Plant Equipment, Real Estate Accounting, Recognition Criteria
Level: Level 3

Series: APR 2023

AAA – Mar 2025 – L3 – Q2 – Audit of Complex Transactions

Analyze financial statement extracts for audit risks in property, plant & equipment, trade receivables, and inventory, and outline audit evidence needed.

Question

Draft statement of financial position (extracts)

	Draft 2023		Actual 2022
	GHc’000	GHc’000	GHc’000	GHc’000
Property, Plant and Equipment	42,860		41,620
Receivables
Trade	4,800		3,150
Other	380	5,180	280	3,430
Inventory
Raw materials	2,460		1,870
Work-in-progress	380		450
Finished goods	2,270	5,110	2,030	4,350
Total Assets		53,150		49,400
Current liabilities
Trade	4,116		3,470
Other	870	4,986	650	4,120

Draft income statement (extracts)

	Draft 2023	Actual 2022
	GHc’000	GHc’000
Revenue	53,250	50,750
Cost of sales	39,360	39,220
Gross profit	13,890	11,530
Depreciation of Property, Plant and Equipment	4,450	2,810
Other expenses	3,540	3,480
Profit before tax	5,900	5,240

	Draft 2023	Actual 2022
Trade receivables collection period	28 days	17 days
Inventory turnover	7.6 times	8.9 times
Gross profit percentage	26%	23%

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Financial Statements, Inventory, Property Plant Equipment, Risk Assessment, Trade receivables
Level: Level 3

Topic: Audit of Complex Transactions
Series: MAR 2025

Question Tag: Property Plant Equipment

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FRPA – APRIL 2023 – L3 – Q2 – Property Treatment, IAS 16, and IAS 2

AAA – Mar 2025 – L3 – Q2 – Audit of Complex Transactions

Analyze financial statement extracts for audit risks in property, plant & equipment, trade receivables, and inventory, and outline audit evidence needed.

FRPA – APRIL 2023 – L3 – Q2 – Property Treatment, IAS 16, and IAS 2

AAA – Mar 2025 – L3 – Q2 – Audit of Complex Transactions

Analyze financial statement extracts for audit risks in property, plant & equipment, trade receivables, and inventory, and outline audit evidence needed.

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FRPA – APRIL 2023 – L3 – Q2 – Property Treatment, IAS 16, and IAS 2

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Analyze financial statement extracts for audit risks in property, plant & equipment, trade receivables, and inventory, and outline audit evidence needed.

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FRPA – APRIL 2023 – L3 – Q2 – Property Treatment, IAS 16, and IAS 2

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AAA – Mar 2025 – L3 – Q2 – Audit of Complex Transactions

Analyze financial statement extracts for audit risks in property, plant & equipment, trade receivables, and inventory, and outline audit evidence needed.

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