On 1 January 20X5, Blocks Co entered into new lease agreements as follows:

Agreement one This finance lease relates to a new piece of machinery. The fair value of the machine is $220,000. The agreement requires Blocks Co to pay a deposit of $20,000 on 1 January 20X5 followed by five equal annual instalments of $55,000, starting on 31 December 20X5. The implicit rate of interest is 11·65%.

Agreement two This three-year operating lease relates to a fleet of vans. The fair value of the vans is $120,000 and they have an estimated useful life of five years. The agreement requires Blocks Co to make no payment in year one and $48,000 in years two and three.

Agreement three This sale and leaseback relates to a cutting machine purchased by Blocks Co on 1 January 20X4 for $300,000. The carrying amount of the machine as at 31 December 20X4 was $250,000. On 1 January 20X5, it was sold to Cogs Co for $370,000 and Blocks Co will lease the machine back for five years, the remainder of its useful life, at $80,000 per annum.

According to IAS 17 Leases, which of the following is generally considered to be a characteristic of an operating, rather than a finance, lease?

A.Ownership of the assets is passed to the lessee by the end of the lease term

B.The lessor is responsible for the general maintenance and repair of the assets

C.The present value of the lease payments is approximately equal to the fair value of the asset

D.The lease term is for a major part of the useful life of the asset

For agreement one, what is the finance cost charged to profit or loss for the year ended 31 December 20X6?

A.$23,300

B.$12,451

C.$19,607

D.$16,891

The following calculations have been prepared for agreement one: How will the finance lease obligation be shown in the statement of financial position as at 31 December 20X7?

A.$44,120 as a non-current liability and $49,271 as a current liability

B.$49,271 as a non-current liability and $44,120 as a current liability

C.$93,391 as a non-current liability

D.$93,391 as a current liability

For agreement three, what profit should be recognised for the year ended 31 December 20X5 as a result of the sale and leaseback?A.$24,000

B.$120,000

C.$70,000

D.$20,000

For agreement two, what would be the correct statement of profit or loss entries for the year ended 31 December 20X5?A.Depreciation of $24,000 and no lease rental expense

B.No depreciation and lease rental expense of $32,000

C.Depreciation of $24,000 and lease rental expense of $32,000

D.No depreciation and lease rental expense of $48,000

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Mighty IT Co provides hardware, software and IT services to small business customers.

Mighty IT Co has developed an accounting software package. The company offers a supply and installation service for $1,000 and a separate two-year technical support service for $500. Alternatively, it also offers a combined goods and services contract which includes both of these elements for $1,200. Payment for the combined contract is due one month after the date of installation.

In December 20X5, Mighty IT Co revalued its corporate headquarters. Prior to the revaluation, the carrying amount of the building was $2m and it was revalued to $2·5m.

Mighty IT Co also revalued a sales office on the same date. The office had been purchased for $500,000 earlier in the year, but subsequent discovery of defects reduced its value to $400,000. No depreciation had been charged on the sales office and any impairment loss is allowable for tax purposes.

Mighty It Co’s income tax rate is 30%.

In accordance with IFRS 15 Revenue from Contracts with Customers, when should Mighty IT Co recognise revenue from the combined goods and services contract？

A.Supply and install: on installation Technical support: over two years

B.Supply and install: when payment is made Technical support: over two years

C.Supply and install: on installation Technical support: on installation

D.Supply and install: when payment is made Technical support: when payment is made

In January 20X6, the accountant at Mighty IT Co produced the company’s draft financial statements for the year ended 31 December 20X5. He then realised that he had omitted to consider deferred tax on development costs. In 20X5, development costs of $200,000 had been incurred and capitalised. Development costs are deductible in full for tax purposes in the year they are incurred. The development is still in process at 31 December 20X5.

What adjustment is required to the income tax expense in Mighty IT Co’s statement of profit or loss for the year ended 31 December 20X5 to account for deferred tax on the development costs？

A.Increase of $200,000

B.Increase of $60,000

C.Decrease of $60,000

D.Decrease of $200,000

For each combined contract sold, what is the amount of revenue which Mighty IT Co should recognise in respect of the supply and installation service in accordance with IFRS 15？A.$700

B.$800

C.$1,000

D.$1,200

In accordance with IAS 12 Income Taxes, what is the impact of the property revaluations on the income tax expense of Mighty IT Co for the year ended 31 December 20X5？

A.Income tax expense increases by $180,000

B.Income tax expense increases by $120,000

C.Income tax expense decreases by $30,000

D.No impact on income tax expense

Mighty IT Co sells a combined contract on 1 January 20X6, the first day of its financial year.

In accordance with IFRS 15, what is the total amount for deferred income which will be reported in Mighty IT Co’s statement of financial position as at 31 December 20X6？

A.$400

B.$250

C.$313

D.$200

Aphrodite Co has a year end of 31 December and operates a factory which makes computer chips for mobile phones. It purchased a machine on 1 July 20X3 for $80,000 which had a useful life of ten years and is depreciated on the straight-line basis, time apportioned in the years of acquisition and disposal. The machine was revalued to $81,000 on 1 July 20X4. There was no change to its useful life at that date.

A fire at the factory on 1 October 20X6 damaged the machine leaving it with a lower operating capacity. The accountant considers that Aphrodite Co will need to recognise an impairment loss in relation to this damage. The accountant has ascertained the following information at 1 October 20X6:

(1) The carrying amount of the machine is $60,750.

(2) An equivalent new machine would cost $90,000.

(3) The machine could be sold in its current condition for a gross amount of $45,000. Dismantling costs would amount to $2,000.

(4) In its current condition, the machine could operate for three more years which gives it a value in use figure of $38,685.

In accordance with IAS 16 Property, Plant and Equipment, what is the depreciation charged to Aphrodite Co’s profit or loss in respect of the machine for the year ended 31 December 20X4?

A.$9,000

B.$8,000

C.$8,263

D.$8,500

What is the total impairment loss associated with Aphrodite Co’s machine at 1 October 20X6?A.$nil

B.$17,750

C.$22,065

D.$15,750

The accountant has decided that it is too difficult to reliably attribute cash flows to this one machine and that it would be more accurate to calculate the impairment on the basis of the factory as a cash-generating unit.

In accordance with IAS 36, which of the following is TRUE regarding cash generating units?

A.A cash-generating unit to which goodwill has been allocated should be tested for impairment every five years

B.A cash-generating unit must be a subsidiary of the parent

C.There is no need to consistently identify cash-generating units based on the same types of asset from period to period

D.A cash-generating unit is the smallest identifiable group of assets for which independent cash flows can be identified

On 1 July 20X7, it is discovered that the damage to the machine is worse than originally thought. The machine is now considered to be worthless and the recoverable amount of the factory as a cash-generating unit is estimated to be $950,000.

At 1 July 20X7, the cash-generating unit comprises the following assets:

In accordance with IAS 36, what will be the carrying amount of Aphrodite Co’s plant and equipment when the impairment loss has been allocated to the cash-generating unit?

A.$262,500

B.$300,000

C.$237,288

D.$280,838

IAS 36 Impairment of Assets contains a number of examples of internal and external events which may indicate the impairment of an asset.

In accordance with IAS 36, which of the following would definitely NOT be an indicator of the potential impairment of an asset (or group of assets)?

A.An unexpected fall in the market value of one or more assets

B.Adverse changes in the economic performance of one or more assets

C.A significant change in the technological environment in which an asset is employed making its software effectively obsolete

D.The carrying amount of an entity’s net assets being below the entity’s market capitalisation

請幫忙給出每個問題的正確答案和分析，謝謝！

Mighty IT Co provides hardware, software and IT services to small business customers.

Mighty IT Co has developed an accounting software package. The company offers a supply and installation service for $1,000 and a separate two-year technical support service for $500. Alternatively, it also offers a combined goods and services contract which includes both of these elements for $1,200. Payment for the combined contract is due one month after the date of installation.

In December 20X5, Mighty IT Co revalued its corporate headquarters. Prior to the revaluation, the carrying amount of the building was $2m and it was revalued to $2·5m.

Mighty IT Co also revalued a sales office on the same date. The office had been purchased for $500,000 earlier in the year, but subsequent discovery of defects reduced its value to $400,000. No depreciation had been charged on the sales office and any impairment loss is allowable for tax purposes.

Mighty It Co’s income tax rate is 30%.

In accordance with IFRS 15 Revenue from Contracts with Customers, when should Mighty IT Co recognise revenue from the combined goods and services contract?

A.Supply and install: on installation Technical support: over two years

B.Supply and install: when payment is made Technical support: over two years

C.Supply and install: on installation Technical support: on installation

D.Supply and install: when payment is made Technical support: when payment is made

In January 20X6, the accountant at Mighty IT Co produced the company’s draft financial statements for the year ended 31 December 20X5. He then realised that he had omitted to consider deferred tax on development costs. In 20X5, development costs of $200,000 had been incurred and capitalised. Development costs are deductible in full for tax purposes in the year they are incurred. The development is still in process at 31 December 20X5.

What adjustment is required to the income tax expense in Mighty IT Co’s statement of profit or loss for the year ended 31 December 20X5 to account for deferred tax on the development costs?

A.Increase of $200,000

B.Increase of $60,000

C.Decrease of $60,000

D.Decrease of $200,000

For each combined contract sold, what is the amount of revenue which Mighty IT Co should recognise in respect of the supply and installation service in accordance with IFRS 15?A.$700

B.$800

C.$1,000

D.$1,200

In accordance with IAS 12 Income Taxes, what is the impact of the property revaluations on the income tax expense of Mighty IT Co for the year ended 31 December 20X5?

A.Income tax expense increases by $180,000

B.Income tax expense increases by $120,000

C.Income tax expense decreases by $30,000

D.No impact on income tax expense

Mighty IT Co sells a combined contract on 1 January 20X6, the first day of its financial year.

In accordance with IFRS 15, what is the total amount for deferred income which will be reported in Mighty IT Co’s statement of financial position as at 31 December 20X6?

A.$400

B.$250

C.$313

D.$200

請幫忙給出每個問題的正確答案和分析，謝謝！

Adana died on 17 March 2016, and inheritance tax (IHT) of ￡566,000 is payable in respect of her chargeable estate. Under the terms of her will, Adana left her entire estate to her children.

At the date of her death, Adana had the following debts and liabilities:

(1) An outstanding interest-only mortgage of ￡220,000.

(2) Income tax of ￡43,700 payable in respect of the tax year 2015–16.

(3) Legal fees of ￡4,600 incurred by Adana’s sister which Adana had verbally promised to pay.

Adana’s husband had died on 28 May 2006, and only 20% of his inheritance tax nil rate band was used on his death. The nil rate band for the tax year 2006–07 was ￡285,000.

On 22 April 2006, Adana had made a chargeable lifetime transfer of shares valued at ￡500,000 to a trust. Adana paid the lifetime IHT of ￡52,250 arising from this gift. If Adana had not made this gift, her chargeable estate at the time of her death would have been ￡650,000 higher than it otherwise was. This was because of the subsequent increase in the value of the gifted shares.

What is the maximum nil rate band which will have been available when calculating the IHT of ￡566,000 payable in respect of Adana’s chargeable estate？

A.￡325,000

B.￡553,000

C.￡390,000

D.￡585,000

What is the total amount of deductions which would have been permitted in calculating Adana’s chargeable estate for IHT purposes？A.￡263,700

B.￡268,300

C.￡43,700

D.￡220,000

Who will be responsible for paying the IHT of ￡566,000 in respect of Adana’s chargeable estate, and what is the due date for the payment of this liability？A.The beneficiaries of Adana’s estate (her children) on 30 September 2016

B.The beneficiaries of Adana’s estate (her children) on 17 September 2016

C.The personal representatives of Adana’s estate on 30 September 2016

D.The personal representatives of Adana’s estate on 17 September 2016

How much IHT did Adana save by making the chargeable lifetime transfer of ￡500,000 to a trust on 22 April 2006, rather than retaining the gifted investments until her death？A.￡260,000

B.￡207,750

C.￡147,750

D.￡200,000

How much of the IHT payable in respect of Adana’s estate would have been saved if, under the terms of her will, Adana had made specific gifts of ￡400,000 to a trust and ￡200,000 to her grandchildren, instead of leaving her entire estate to her children？A.￡240,000

B.￡160,000

C.￡0

D.￡80,000

KLE Co The following scenario relates to questions 16 – 20. You are an audit manager in the internal audit department of KLE Co, a listed retail company. The internal audit department is auditing the company's procurement system. KLE’s ordering department consists of six members of staff: one chief buyer and five purchasing clerks. All orders are raised on pre-numbered purchase requisition forms, and are sent to the ordering department. In the ordering department, each requisition form is approved and signed by the chief buyer. A purchasing clerk transfers the order information onto an order form and identifies the appropriate supplier for the goods. Part one of the two part order form is sent to the supplier and part two to the accounts department. The requisition is thrown away. Which of the following is NOT a likely effect of the deficiencies in the internal control system described?

A、Purchases may be made unnecessarily at unauthorised prices

B、Subsequent queries on orders cannot be traced back to the original requisition

C、The order forms may contain errors that are not identified

D、Goods could be ordered twice in error or deliberately

BJM CO The following scenario relates to questions 11 – 15. You are an audit senior of YHT & Co and have worked on the external audit of BJM Co (BJM), an unlisted company, since your firm was appointed external auditor two years ago. BJM owns a chain of nine restaurants and is a successful company. BJM has always been subject to national hygiene regulations, especially in relation to the food preparation process. Non-compliance can result in a large fine or closure of the restaurant concerned. Despite running a successful company, BJM’s Board have often needed to be reminded of some fundamental principles and you often have to explain key concepts. Which of the following statements best defines the external audit?

A、The external audit is an exercise carried out by auditors in order to give an opinion on whether the financial statements of a company are fairly presented.

B、The external audit is an exercise carried out in order to give an opinion on the effectiveness of a company's internal control system.

C、The external audit is performed by management to identify areas of deficiency within a company and to make recommendations to mitigate those deficiencies.

D、The external audit provides negative assurance on the truth and fairness of a company's financial statements.

The following information relates to questions 13 and 14. Each unit of product Zeta requires 3 kg of raw material and 4 direct labour hours. Material costs $2 per kg and the direct labour rate is $7 per hour. The production budget for Zeta for April to June is as follows. April May June Production units 7,800 8,400 8,200 Raw material opening inventories are budgeted as follows. April May June 3,800 kg 4,200 kg 4,100 kg The closing inventory budgeted for June is 3,900 kg. Material purchases are paid for in the month following purchase. What is the figure to be included in the cash budget for June in respect of payments for purchases?

A、$25,100

B、$48,800

C、$50,200

D、$50,600

The following information relates to a bank reconciliation. 1. The bank balance in the cashbook before taking the items below into account was $8,970 overdrawn. 2. Bank charges of $550 on the bank statement have not been entered in the cashbook. 3. The bank has credited the account in error with $425 which belongs to another customer. 4. Cheque payments totalling $3,275 have been entered in the cashbook but have not been presented for payment. 5. Cheques totalling $5,380 have been correctly entered on the debit side of the cashbook but have not been paid in at the bank. What was the balance as shown by the bank statement before taking the above items into account?

A、$9,520 overdrawn

B、. $11,200 overdrawn

C、$9,520 in credit

D、$11,200 in credit

The following information relates to a bank reconciliation. (i) The bank balance in the cashbook before taking the items below into account was $8,970 overdrawn. (ii) Bank charges of $550 on the bank statement have not been entered in the cashbook. (iii) The bank has credited the account in error with $425 which belongs to another customer. (iv) Cheque payments totalling $3,275 have been entered in the cashbook but have not been presented for payment. (v) Cheques totalling $5,380 have been correctly entered on the debit side of the cashbook but have not been paid in at the bank. What was the balance as shown by the bank statement before taking the items above into account?

A、$8,970 overdrawn

B、$11,200 overdrawn

C、$12,050 overdrawn

D、$17,750 overdrawn