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Test 8

The document outlines an examination for a Certificate in Accounting and Finance, focusing on financial accounting and reporting for Oranges Ltd. It includes draft extracts from the company's statement of comprehensive income and financial position, along with additional information regarding changes in accounting estimates and errors. The examination requires candidates to prepare financial statements, journal entries, and notes related to the changes and corrections.

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26 views2 pages

Test 8

The document outlines an examination for a Certificate in Accounting and Finance, focusing on financial accounting and reporting for Oranges Ltd. It includes draft extracts from the company's statement of comprehensive income and financial position, along with additional information regarding changes in accounting estimates and errors. The examination requires candidates to prepare financial statements, journal entries, and notes related to the changes and corrections.

Uploaded by

hiddenseceret7
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Certificate in Accounting and Finance Stage Examinations

(Test 8) December 30, 2022


40 minutes – 23 marks
Additional reading time – 5 minutes

Financial Accounting and Reporting 1

Q.1 Oranges Ltd. is a company operating in the entertainment industry. The following draft
extracts of the statement of comprehensive income and statement of financial position have
been presented to you together with additional information that has not yet been taken into
account in the preparation thereof:
Oranges Ltd.
Draft extracts from statement of comprehensive income
For the year ended 31 December 20X3
20X3 20X2
Rs. Rs.
Profit for the year 300,000 250,000
Oranges Ltd.
Draft extracts from statement of financial position
As at 31 December 20X3
20X3 20X2 20X1
Rs. Rs. Rs.
Property, plant and equipment
- Machinery carrying amount 152,000 176,500 201,000
- Equipment carrying amount 1,065,000 1,215,000 1,365,000
1,217,000 1,391,500 1,566,000

Retained earnings ? ? 1,000,000


Additional information
Machinery:
During 20X3, the company changed the estimated residual value of its machinery from Rs.
5,000 to Rs.10,000 and changed the total expected useful life of machinery form 10 years to
15 years. The machinery had all been purchased on 1 January 20X0 at a cost of Rs.250,000.
Depreciation is provided on the straight line method.
Equipment:
i. During 20X3, it was discovered that the cost of an item of inventory sold on 1 July 20X1
(cost: Rs.300,000), had been incorrectly debited to equipment.
ii. The cost of equipment was otherwise Rs.1,200,000, all having been purchased on 1
January 20X1.
iii. The company depreciates equipment at 10% per annum to nil residual values
(apportioned for part of a year where appropriate) using the straight-line basis.
Other general information
i. The opening retained earnings as at 1 January 20X2 was Rs. 1,000,000. There was no
dividend declarations or transfers to or from retained earnings during 20X2 and 20X3.
ii. There was no other movement in property plant and equipment other than that which is
evident from the information provided. Other than the incorrect debit, all movements in
the carrying amount of property, plant and equipment since date of purchase relate to
depreciation.
iii. All amounts are considered to be material.

1 (FAR-I Test-8: 30 December 2022)


Required:
a) Prepare the following for the year ended December 31, 20X3:
i. the statement of comprehensive income; (03)
ii. the retained earnings column in the statement of changes in equity (04)
iii. the statement of financial position (05)
(Comparatives are required).
b) Show all the journal entries that would need to be processed (03)
c) Notes:
i) Change in accounting estimate note and (03)
ii) Error correction note. (05)

Good Luck

2 (FAR-I Test-8: 30 December 2022)

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