Semester 1 Week 10 Tutorial 8

Question 1

1. What is the difference between revenue and gains? Why do you feel they are accounted for differently?

Answer 1

Question 2

Answer 2

Question 3

3. Define what a performance obligation is. Give an example

Answer 3

Question 4

4. Glen Plc. are a computer services company. In July 20X8 they enter into a contract with Dale Ltd. Glen will supply Dale with a new computer server, and also provide IT support to Dale.

Outline and explain how many performance obligation are in this contract.

Answer 4

Question 5

5. Hunter Plc. are a large construction company they have undertaken to build a new warehouse and office block for Peat Ltd.

The price of the contract is £1,000,000. For every week that Hunter are early in completing they will receive a performance bonus of £50,000, but for every week they are late they will have to pay a penalty of £50,000. The site manager is confident they will finish two weeks early.

An independent surveyor has determined that the construction is 55% complete by the year end date. No amount has yet been invoiced.

Calculate the revenue to be recognised in the year and prepare the appropriate journals.

Answer 5

Question 6

6. Fender Plc. have a property with a NBV of £400,000 (cost £600,000, accumulated depreciation £200,000). Their profit after tax for the year ended 31 March is £1,300,000.

On 31 March 20X2 the property is to be revalued to its fair value of £850,000.

Prepare the journal to account for this revaluation.

Prepare the Statement of Other Comprehensive Income for the year ended 31 March 20X2 and state the total comprehensive income for the year.

Answer 6

Question 7

7. Outline some of the problems with writing a standard on revenue recognition.

Answer 7