Question 1 During the year to 31 December 2013, Acacia Mining Ltd built a new mining...

Question 1

During the year to 31 December 2013, Acacia Mining Ltd built a new mining facility to take advantage of new laws regarding on-shore gas extraction. The construction of the facility cost K10 million, and to fund this, Acacia Mining Ltd took out a K10 million 6% loan on 1 January 2013, which will not be repaid until 2016. The 6% interest was paid on 31 December 2013. Construction work begun on 1st January 2013, and the work was completed on 30 November 2013. As not all funds were required immediately, Acacia Mining Ltd invested K3 million of the loan in 4% bonds from 1 January 2013 until 30 April 2013. Mining commenced on 1 December 2013 and is expected to continue for 10 years. As a condition of being allowed to construct the facility, Acacia Mining Ltd is required by law to dismantle it on 1 January 2024. Acacia Mining Ltd estimated that this would cost a further K3 million. As the equipment is extremely specialized, Acacia Mining Ltd invested significant resources in recruiting and training employees. Acacia Mining Ltd spent K600,000 on thus process in the year to 31 December 2013, believing it to be worthwhile as it anticipates that most employees will remain on the project for the entire 10 year duration. Acacia Mining Ltd has a cost of capital of 6%.

Required: Show, using extracts, the correct financial reporting treatment for the above items in financial statements for Acacia Mining Ltd for the year ended 31 December 2013.

Expert Solution

Acacia Mining Limited
Loan taken in totla	10000000	@ 6% as on 01.01.2013
invested in Other Instruments	3000000	@ 4% as on 01.01.2013 to 30.04.2013


Construction Period	01.01.2013 - 30.11.2013
Interest paid on 31.12.2013

Interest Cost	10000000X 6% X11/12	550000	Capitalised
Interest Cost	10000000X 6% X1/12	50000	Charged to Income Statement
Interest Earned	3000000 X 4% X 4/12	40000	Net off From Intterest
Mining Emplyee Cost	600000	Charged to Income Statement
Dismantling Cost		3000000	Payable on 2024

Calculation on Dismantling Cost to be paid off and Charged during the year
PV factor is 6% for 11 years
0.5268	3000000	1580363
Hence , Provision is required for the above and Interest shall be payable to that extent which will become 3000000 at the end of 11th Year.


Extracts of Income Statement

*Finance Cost*
Interest Cost - Interest Earned	50000-40000	10000
*Employee Cost*
Minning Employee Cost		600000

Extracts of Financial Statements
Non Current Assets
Minning Cost ( Capitalised Interest )		550000
Dismatling PV Cost			1580363

ekkarill92 answered 1 year ago

The following information relates to Walnut Ltd. for the year ended December 31, 2013: Sales &nbsp

The following information relates to Walnut Ltd. for the year ended December 31, 2013: Sales $3,500,000 Purchases: Direct materials $700,000 Indirect materials $50,000 Office supplies $20,000 Salaries $500,000 * Direct labour $800,000 Rent $100,000 * Utilities $80,000 * Advertising and promotional $30,000 Inventories: Dec. 31, 2012 Dec. 31, 2013 Direct materials $45,000 $62,000 Indirect materials ----- $ 9,000 Office supplies $1,000 ----- Work-in-process $4,100 $3,300 Finished goods $90,000 $81,700 *Of these costs, 80 % are assigned to manufacturing activities and the remainder pertain to selling and administrative functions. (Assume that there is no "over-or-under" applied overhead.) Instructions: Prepare in good form...

An analyst compiled the following information Parker Ltd for the year ended December 31 2013: Net...

An analyst compiled the following information Parker Ltd for the year ended December 31 2013: Net Income was $1,600,000 Depreciation expense was $270,000 Amortization expense for a patent was $30,000 Interest paid was $250,000 Income taxes paid were $100,000 Ordinary shares were sold for $200,000 Preference shares (8% annual dividend) were sold at Par value of $250,000 Dividends of $50,000 were paid on ordinary shares Preference dividends of $20,000 were paid Equipment with a book value of $75,000 was sold...

Question 2 (25 marks) In the year ending 31 December 2018, Happy Ltd bought a new...

Question 2 In the year ending 31 December 2018, Happy Ltd bought a new machine and made the following payments in relation to it: $ Cost as per supplier’s list 48,000 Discount received from the supplier 4,000 Delivery charge 400 Installation charge 800 Maintenance charge 1,200 Additional component to increase capacity 1,600 Replacement parts 1,000 Required: a Determine and justify the cost which should be used as the basis for depreciation. b What is depreciation? Why is it necessary? c...

Yahoo! reported the following in its 2013 financial statements (in thousands): December 31, 2013 December 31,...

Yahoo! reported the following in its 2013 financial statements (in thousands): December 31, 2013 December 31, 2012 December 31, 2011 Revenues $4,680,380 $4,986,566 $4,984,199 Product development expenditure $1,008,487 $885,824 $919,368 Assume that Yahoo! expensed 90% of its product development expenditure. Required: List three types of costs that Yahoo likely includes in the product development line item on the income statement. Used FSET to record the product development expenditure of 2013. What type of product development expenditure might Yahoo! capitalize?

QUESTION TWO The following are financial statements of Buchi Ltd for the year ended 31 December...

QUESTION TWO The following are financial statements of Buchi Ltd for the year ended 31 December 2019 Statement of comprehensive income for the year ended 31 December 2019 K K Revenue 900 000 Cost of sales 475 000 Gross profit 425 000 Operating expenses 220 000 Interest 13 000 Loss on sale of equipment 2 000 (235 000) Net profit before tax 190 000 Tax 65 000 Net profit after tax 125 000 Statement of financial position as at 31...

In a new business during the year ended 31 December 2019 the following debts are found...

In a new business during the year ended 31 December 2019 the following debts are found to be bad and are written-off on the dates shown below: 31 Jan S. Seal & Son $800 31 July H. Halt Ltd $500 31 Oct A.Alice $300 On 31 December 2019 the schedule of remaining accounts receivable totaling $20,000 is examined and it is decided to make an allowance for doubtful debts of $700. Required: Bad Debts Account for the year ended...

The following independent events for Repertory Theatre Ltd. during the year ended December 31 2018, require...

The following independent events for Repertory Theatre Ltd. during the year ended December 31 2018, require a transaction journal entry or an adjusting journal entry, or both. The company adjusts its accounts annually. 1. Supplies on hand amounted to $1,500 at the beginning of the year. On March 1, additional supplies were purchased for $4,250 cash. At the end of the year, a physical count showed that supplies on hand amounted to $1,000. 2. The theatre owns a vehicle that...

The following independent events for Repertory Theatre Ltd. during the year ended December 31, 2017, require...

The following independent events for Repertory Theatre Ltd. during the year ended December 31, 2017, require a transaction journal entry or an adjusting journal entry, or both. The company adjusts its accounts annually. 1. The total biweekly payroll is $9,000, paid every other Friday for employee salaries earned during the prior 12-day workweek (Saturday to Thursday). This year, December 31 falls on a Friday. Salaries were last paid (and recorded) on Friday, December 24, and will be paid next on...

Boatwig, Corp. Balance Sheet December 31, 2013 and December 31, 2014 2013 Dr. Cr. 2014 Assets...

Boatwig, Corp. Balance Sheet December 31, 2013 and December 31, 2014 2013 Dr. Cr. 2014 Assets Cash $19,000 $71,000 Accounts Receivable 66,000 84,000 Inventory 185,000 184,000 Land 113,000 67,000 Equipment 195,000 256,000 Accummulated Depreciation (42,000) (69,000) Total $536,000 $593,000 Liabilities and Stockholders' Equity Accounts Payable $44,000 $36,000 Bonds Payable 198,000 143,000 Common Stock 167,000 222,000 Retained Earnings 127,000 192,000 Total $536,000 - ...

Problem #1 Facts: (Question 1 - Question 5) On December 31, 2019, of the current year...

Problem #1 Facts: (Question 1 - Question 5) On December 31, 2019, of the current year Smith Enterprises physically counted $1,500,000 of inventory. The following additional information is also available: Smith Enterprises sold goods for $250,000 to Julia Corp. Smith Enterprises had originally purchased the goods for $175,000. The order was shipped to Julia FOB shipping point on December 28, 2019 and arrived at Julia's facility on January 2, 2020. Smith purchased goods costing $40,000 from vendor Lemon Drop Company....

Question