Tag (SQ): Non-current Assets

Search 500 + past questions and counting.
Sort & Filter

Reset filters

Search

Filter by Professional Bodies

Filter by Subject

Filter by Topics

Filter by Levels

  • 4 Marks

FA – L1 – Q17 – Non-current assets and depreciation

Calculate depreciation for a non-current asset and a building using the straight-line method.

(a) The financial year of a company is 1st January to 31st December. A non-current asset was purchased on 1st May for GH₵60,000. Its expected useful life is five years and its expected residual value is zero. It is depreciated by the straight-line method.

Required
Calculate the charge for depreciation in the year of acquisition if a proportion of a full year’s depreciation is charged, according to the period for which the asset has been held. (2 marks)

(b) An office property cost GH₵5 million, of which the land value is GH₵2 million and the cost of the building is GH₵3 million. The building has an estimated life of 50 years.

Required
Calculate the annual depreciation charge on the property, using the straight-line method.

Login or create a free account to see answers

Login | Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – L1 – Q17 – Non-current assets and depreciation"

  • 10 Marks

FA – L1 – Q13 – Preparing financial statements of a sole trader

Prepare a statement of profit or loss and financial position for Worthe's business for the year ended 30 June 20X9 using the given trial balance and inventory data.

The following is a trial balance for Worthe after his first year’s trading. You are required to prepare a statement of profit or loss for the year ended 30 June 20X9 and a statement of financial position as at that date.

Worthe – Trial balance as at 30 June 20X9

DR GH₵(000) CR GH₵(000)
Sales 28,794
Purchases 23,803
Rent 854
Lighting and heating expenses 422
Salaries and wages 3,164
Insurance 105
Land and buildings 50,000
Fixtures and fittings 1,000
Receivables 3,166
Sundry expenses 506
Payables 1,206
Cash at bank 3,847
Drawings 2,400
Motor vans 5,500
Motor running expenses 1,133
Capital 65,900
Total 95,900 95,900

Inventory at 30 June 20X9 was GH₵4,166,000.

Login or create a free account to see answers

Login | Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – L1 – Q13 – Preparing financial statements of a sole trader"

  • 15 Marks

FA – L1 – Q12 – Double entry bookkeeping

Record Leah's March 20X9 transactions in main ledger T accounts and prepare a trial balance as at 31 March 20X9.

Enter the following transactions in the main ledger accounts of Leah, and extract a trial balance as at 31 March 20X9.
Assume that all receipts and payments are by cheque unless told otherwise.

March 20X9

Date Transaction
1 Started business with GH₵80,000 in the bank
2 Bought goods on credit from: K&H Supplies GH₵7,600; Hatton Traders GH₵2,700; Tobias Traders GH₵5,600
5 Cash sales GH₵8,700. The cash was kept in a safe in Leah’s office.
6 Paid wages GH₵1,400 by cheque.
7 Sold goods on credit to: Elliott Enterprises GH₵3,500; L. Lang GH₵4,200; Carter Leisure GH₵7,200
9 Bought goods for cash GH₵4,600 using cash from Leah’s safe.
10 Bought goods on credit from: K&H Supplies GH₵5,700; Tobias Traders GH₵9,800
12 Paid wages GH₵1,400 by cheque.
13 Sold goods on credit to: L. Lang GH₵3,200; Carter Leisure GH₵2,300
15 Bought shop fixtures on credit from Betta Fittings GH₵5,000
17 Paid K&H Supplies GH₵8,400
18 Goods returned to Tobias Traders GH₵2,000
21 Paid Betta Fittings GH₵5,000
24 Payment received from Carter Leisure GH₵9,500
27 Goods returned to K&H Supplies GH₵2,400
30 Royal Bank provides a loan of GH₵6,000
31 Bought a motor van, paying by cheque GH₵40,000

Login or create a free account to see answers

Login | Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – L1 – Q12 – Double entry bookkeeping"

  • 30 Marks

AA – L2 – Q70 – Audit Reports

List six elements of an unmodified auditor's report and explain their inclusion.

(A)  ISA 700 Forming an Opinion and Reporting on Financial Statements indicates the main elements that will ordinarily be included in an unmodified auditor’s report.

Required:
List SIX basic elements of an unmodified auditor’s report. Briefly explain why each element is included in the report.

(B). You are the audit manager in charge of the audit of Seaside Ventures Co for the year ended 28 February 20X7. Seaside Ventures Co is based in a seaside town and hires motor boats and yachts to individuals for amounts of time between one day and one week. The majority of receipts are in cash, with a few customers paying by debit card. Consequently, there are no trade receivables in the statement of financial position. The main non-current assets are the motor boats and yachts. The company is run by four directors who are also the major shareholders. Total income for the year was about $50 million.

The following issues have been identified during the audit:

Issue 1
Audit tests on revenue indicate a deficiency in the system of internal control, with a potential understatement of revenue in the region of $2.5 million. The weakness occurred because sales invoices are not sequentially numbered, allowing one of the directors to remove cash sales prior to recording in the sales day book. This was identified during analytical procedures of revenue, when the audit senior noted that on the days when this director was working, revenue was always lower than on the days when the director was not working.

Issue 2
During testing of non-current assets, one yacht was found to be located at the property of one of the directors. This yacht has not been hired out during the year and enquiries indicate that the director makes personal use of it. The yacht is included in the non-current assets balance in the financial statements.

Required:
For each of the issues above:
(i) List the audit procedures you should conduct to reach a conclusion on these issues. (8 marks for Issue 1, 6 marks for Issue 2)

For each of the issues above:

(ii) Assuming that you have performed all the audit procedures that you can, but the issues are still unresolved, explain the potential effect (if any) on the audit report. (8 marks for Issue 1, 6 marks for Issue 2)

Login or create a free account to see answers

Login | Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – L2 – Q70 – Audit Reports"

  • 24 Marks

AA – L2 – Q61 – Audit Evidence

Verify ownership, assess depreciation, list asset register contents, and explain revaluation for Prime Rentals' non-current assets.

You are an employee of Brighton & Co, a firm of Chartered Accountants. One of the firm’s clients is Prime Rentals, a car rental company whose shares are not traded on a stock exchange. The company has a large fleet of vehicles which it hires out on a contract basis.
The duration of a contract varies from one day to three months. Anybody wishing to hire a car must possess a valid driving licence. In addition, they must take out insurance with Prime Rentals.
You are involved in the audit of non-current assets for the year ended 31 December 20X8.
The company’s main non-current assets are:

  • Freehold buildings
  • Office equipment (mainly computers for office staff)
  • Motor vehicles
    The company was formed ten years ago and all non-current assets (except for buildings) are maintained on a non-current asset register. The company depreciates non-current assets at the following rates:
  • Freehold buildings – 2% on cost
  • Office equipment – 20% on cost
  • Motor vehicles – 50% on cost
    The company has recently revalued its buildings upwards by €2 million. The directors believe that they have fallen victim to a fraudster who has disappeared with a number of the company’s vehicles.
    Required:
    (a) Describe how you would verify the ownership of:
    (i) Freehold buildings
    (ii) Computers
    (iii) Motor vehicles.

    (b) Comment on the appropriateness of the depreciation rates of the non-current assets and their respective effect on the income statement.

    (c) List the contents of a non-current asset register and describe its usefulness for Prime Rentals.

    (d) Explain the accounting effect of the revaluation of the buildings to the financial statements and the audit work you would perform in this matter.

Login or create a free account to see answers

Login | Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – L2 – Q61 – Audit Evidence"

  • 20 Marks

AA – L2 – Q56 – Audit Evidence

Explain advantages of perpetual inventory systems for Nsiah Co, a crime fiction supplier with high inventory turnover.

56 Nsoah

You are an audit manager in David & Co. One of your audit clients, Nsoah, is a specialist supplier of crime fiction with over 120,000 customers. The company owns one large warehouse, which contains at any one time about 1 million books of up to 80,000 different titles. Customers place orders for books either over the Internet or by mail order. Books are despatched on the day of receipt of the order. Returns are allowed up to 30 days from the despatch date provided the books look new and unread.

Due to the high inventory turnover, Nsoah maintains a perpetual inventory system using standard ‘off the shelf software. David & Co has audited the system for the last five years and has found no errors within the software.

Continuous inventory checking is carried out by Nsoah’s internal audit function.

You are currently reviewing the continuous inventory checking system with an audit junior. The junior needs experience in auditing continuous inventory checking systems and some basic knowledge on IESBA’s International Code of Ethics for Professional Accountants.

Required

(a) Explain the advantages of using a perpetual inventory system. (4 marks)

(b) List the audit procedures you should perform to confirm the accuracy of the continuous inventory checking at Nsoah. For each procedure, explain the reason for carrying out that procedure. (6 marks)

(c) Explain the fundamental principles set out in IESBA’s International Code of Ethics for Professional Accountants of integrity, objectivity and independence to accountants. (6 marks)

(d) During your preliminary audit planning you note that the engagement letter has been returned un-signed by the directors of Nsoah. When asked to explain their action, the directors indicate that they cannot allow you access to information on the company’s new website development as this contains various trade secrets. You will not, therefore, be able to perform audit procedures on the research and development expenditure incurred on the website and included in non-current assets.

Briefly explain the actions you should take as a result of the directors not signing the engagement letter. (4 marks)

Login or create a free account to see answers

Login | Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – L2 – Q56 – Audit Evidence"

  • 20 Marks

AA – L2 – Q53 – Audit Procedures for Non-Current Assets

Audit procedures for verifying property, plant, and equipment schedules, additions, revaluation, and depreciation correction for Oakwood Enterprises.

As a staff member of Reed and Spencer Chartered Accountants, you are assigned the audit of tangible non-current assets of Oakwood Enterprises for the year ended 31 March 20X8. Reed and Spencer have been the auditors of Oakwood Enterprises for many years. You obtain the following schedule of movements on property, plant, and equipment and analysis of additions from the company’s accountant.

Property Plant and machinery Total
Cost or valuation C’000 C’000 C’000
1 April 20X7 340 275 615
Additions – 123 123
Disposals – (72) (72)
Revaluations 120 – 120
31 March 20X8 460 326 786
Accumulated depreciation
1 April 20X7 24 213 237
Provision 5 30 35
Written back on disposal – (65) (65)
Adjustment on revaluation (24) – (24)
31 March 20X8 5 178 183
Carrying amount
31 March 20X7 455 148 603
31 March 20X8 316 62 378

Schedule of additions (plant and machinery)

Supplier Description Cost
New Models Milling machine Model 38 55,000
Drill Suppliers Power drill Type 45C 34,000
Hoist Co Electric hoist no 722 18,000
Sundry below $1000 16,000
Total 123,000

The company’s accountant also advises you that the property was revalued following a valuation by the company’s property manager who is a professionally qualified valuer.
During your verification of depreciation, you discover that most plant and machinery is fully depreciated. Moreover, you discover that, due to oversight, depreciation has continued to be provided on fully depreciated items. As at the beginning of the year, the amount of overstatement was $43,000. The accountant suggests the correction be made by reducing the current year’s charge for depreciation.

Required:
(a) State, with reasons, the initial audit procedures you would perform on the schedules provided by the company’s accountant. (3 marks)
(b) Outline the substantive audit procedures you would apply in verifying additions to plant and machinery. Your answer should identify procedures applicable to each of the financial statement assertions. (8 marks)
(c) Describe the audit procedures applicable to verifying the revaluation of property. (5 marks)
(d) With respect to the correction to accumulated depreciation, and assuming the amount to be material, discuss the accountant’s proposed treatment. If you disagree with the accountant’s proposal, state, with reasons, the correct accounting treatment. (4 marks)

Login or create a free account to see answers

Login | Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – L2 – Q53 – Audit Procedures for Non-Current Assets"

  • 20 Marks

AA – L2 – Q44 – Audit Evidence

List and explain audit tests to verify completeness and accuracy of revenue in Tandem Logistics' financial statements. List and describe audit work to verify the statement of financial position figure for vehicles in Tandem Logistics' financial statements.

You are the external auditor of Tandem Logistics, a public limited company (TL). The company’s year-end is 31 March. You have been the auditor since the company was formed 19 years ago to take advantage of the increase in goods being transported by road. Many companies needed to transport their products but did not always have sufficient vehicles to move them. TL therefore purchased ten vehicles and hired these to haulage companies for amounts of time ranging from three days to six months.

The business has grown in size and profitability and now has over 550 vehicles on hire to many different companies. At any one time, between five and 20 vehicles are located at the company premises where they are being repaired; the rest could be anywhere on the extensive road network of the country it operates in. Full details of all vehicles are maintained in a non-current asset register.

Bookings for hire of vehicles are received either over the telephone or via e-mail in TL’s offices. A booking clerk checks the customer’s credit status on the receivables ledger and then the availability of vehicles using the Transport Management System (TMS) software on TL’s computer network. E-mails are filed electronically by customer name in the e-mail program used by TL. If the customer’s credit rating is acceptable and a vehicle is available, the booking is entered into the TMS and confirmed to the customer using the telephone or e-mail. Booking information is then transferred within the network from the TMS to the receivables ledger programme, where a sales invoice is raised. Standard rental amounts are allocated to each booking depending on the amount of time the vehicle is being hired for. Hard copy invoices are sent in the post for telephone orders or via e-mail for e-mail orders.

The main class of asset on TL’s statement of financial position is the vehicles. The net book value of the vehicles is $6 million out of total shareholders’ funds of $15 million as at 30 June 20X8.

Required:
(a) List and explain the reason for the audit tests you should perform to check the completeness and accuracy of the revenue figure in Tandem Logistics’ financial statements.

(b) List and describe the audit work you should perform on the statement of financial position figure for vehicles in Tandem Logistics’ financial statements for the year ended 30 June 20X8.

Login or create a free account to see answers

Login | Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – L2 – Q44 – Audit Evidence"

Oops!

This feature is only available in selected plans.

Click here to view all plans

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

Login
Upgrade Plan

If you’re not subscribed to a plan, click on the button below to choose a plan

Subscribe to a plan

Pick a Form

Professional Tutor Application Form
Academic Tutor Application Form
Student Tutor Application Form