ACCT-2010 Lecture Notes - Lecture 9: Asset, Accelerated Depreciation, Intangible Asset

52 views6 pages

carminelizard185

20 Oct 2017

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Chapter 9 study guide: tangible- physical substance, examples are land, buildings, machinery, and vehicles. Many are: intangible- special rights, but no physical substance, existence mostly indicated only by legal. Long lived assets- acquired for use over one or more years fixed assets- fixed in place. documents. Examples include things such as brand names, trademarks, and licensing rights. Tangible assets- less common include land improves, which could be sidewalks, pavement, landscaping, etc land improvements differ from land in that they deteriorate over time. Accountants say costs have been capitalized when they are recorded as assets. Other costs that are expensed when incurred include insurance for fixed assets in use, interest on loans to purchase fixed assets, and ordinary repairs and maintenance. Acquisition of tangible assets- general rule is that all reasonable and necessary costs to acquire. Basket purchases must be split up based on % Extraordinary repairs, replacements, and additions occur infrequently, involve large.

Related Questions

You have obtained the following information:

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR TO 31 DECEMBER

		20X8	20X7
	Note	Draft ($m)	Actual ($m)
Revenue	(1)	645.5	606.5

Other income	(2)	15.6	14.4

Changes in inventories		3.8	(16.4)

Cost of materials		(334.1)	(286.8)

Employee benefits expense		(91.0)	(83.9)

Depreciation	(3)	(29.8)	(23.6)

Other expenses	(4)	(116.3)	(100.6)

Interest income, net	(5)	12.3	(20.9)

Profit before tax		106.0	130.5

Income tax expense		(44.4)	(47.7)

Profit for the year		61.6	82.8

STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER

		20X8	20X7
	Note	Draft ($m)	Actual ($m)
Assets
Non-current assets
Intangible assets	(6)	47.8	40.5
Property, plant and equipment	(7)	124.5	102.5
		172.3	143.0
Current assets
Inventories	(8)	30.3	27.9
Trade receivables		73.1	50.3
Cash and cash equivalents		111.4	86.0
Total assets		387.1	307.2
Equity and liabilities
Equity		5.8	5.8
Share capital		15.3	15.3
Share premium		112.1	80.1
Retained earnings		133.2	101.2
Non-current liabilities
Provisions	(9)	160.1	121.4
Current liabilities
Trade payables		33.5	31.8
Tax		50.4	44.3
Other liabilities		9.9	8.5
Total equity and liabilities		387.1	307.2

Notes

(1) Revenue from business activities:

Revenue from business activities
	20X8 ($M)	20X7 ($M)
Vehicles	588.0	526.0
Parts and accessories	39.6	36.8
Other	17.9	43.7
	645.5	606.5

Other income includes gains on the disposals of tangible assets and income from the reversal of provisions.

Average number of employees:


	20X8 (Draft)	20X7 (Actual)
Wage earners	484	499
Salaried employees	483	477
Apprentices and trainees	36	37
	1,003	1,013

Other expenses include costs for warranties, administration and distribution, maintenance and insurance.

Interest income, net:

	20X8 (Draft ($m)	20X7 (Actual $m)
Interest and similar income	16.8	25.1
Interest and similar expenses	(4.5)	(4.2)
	12.3	20.9

Intangible assets include development costs, also franchises and industrial rights and licenses. During the year, $12.7 million (20X7 - $6.3 million) was spent on developing a new sports model, the Fox.

Property, plant and equipment:

	Land and Buildings	Equipment	Assets under construction	Total
	$m	$m	$m	$m
Cost
1 January 20X8	61.8	212.1	19.0	292.9
Additions	5.0	28.9	9.4	43.3
Disposals	0.0	(4.5)	0.0	(4.5)
Reclassification	3.0	8.9	(11.9)	0.0
31 December 20X8	69.8	245.4	16.5	331.7

Depreciation
Current year	1.9	18.4	0.0	20.3
Accumulated	28.7	178.5	0.0	207.2

Net book value
31 December 20X8	41.1	66.9	16.5	124.5
31 December 20X7	34.9	48.6	19.0	102.5

(8) Inventories comprise:


	20X8 (Draft $m)	20X7 (Draft $m)
Raw materials, consumables and supplies	8.3	7.3
Work-in-progress	6.8	4.8
Finished goods	15.2	15.8
	30.3	27.9

(9) Provisions mainly cover manufacturing warranty, product liability and litigation risks. Also, provisions have been established for deferred maintenance and IT reorganization.

The following additional information is available:

(i) Pavia has achieved record sales in 20X8 with the delivery of 10,153 vehicles (20X7 â 7,642 vehicles).

(ii) Although some sales are direct to individual customers the majority are ordered through dealers who take new vehicles on consignment.

(iii) Since 1 January 20X8 Pavia has offered 0% finance for three years on new vehicle sales in its most competitive markets.

(iv) The launch of the Fox has been postponed from late 20X8 to early 20X9 as internal trials have revealed that the doors are not sufficiently secure at high speeds.

(v) A car part required for the Cipeta model is bought-in exclusively from an overseas manufacturer. Deliveries of supplies have been unpredictable in 20X7 causing disruption to the Cipeta model assembly schedules.

1. Evaluate how you might use analytical procedures to provide audit evidence and reduce the level of detailed substantive procedures.

N.B these are pointers are for this question:

Analytical Procedures - Examples: o Receivables - Receivables - Compare gross margin % with previous years (by product line). (Possible misstatement â Over/understatement of sales and accounts receivable). This analytics will reduce the detailed substantive procedure because we have identified that there may be a possible over/understatement of sales so now we need to perform additional audit procedures on sales/revenue. For example by selecting a sample of invoices generated throughout the year and comparing to the General Ledger to ensure completeness and accuracy. Note: Use the information in the case to calculate the analytical procedures you have identified. Also, explain how the analytical procedures will provide audit evidence and help to reduce the level of detailed substantive procedures.

ACCT-2010 Lecture Notes - Lecture 9: Asset, Accelerated Depreciation, Intangible Asset

Document Summary

Get access

Related Documents

ACCT-2010 Lecture Notes - Lecture 9: Accelerated Depreciation, Title Search, Income Statement

ACCT-2010 Lecture Notes - Lecture 9: Intangible Asset, Sales Tax, Income Statement

ACCT-2010 Lecture Notes - Lecture 4: Retained Earnings, Trial Balance, Financial Statement

Related Questions