Question

Question 1 (New Zealand External Reporting Environment)

Explain ONE potential benefit and ONE potential problem that can result from the adoption of IFRSs in New Zealand.

Question 2 (Inventories)

As a part of the auditing team assigned in relation to Mandalay Ltd, you have been asked to verify the inventories at the Henderson branch at 30 June 2020. The company uses a perpetual method to account for inventories. In undertaking the task you note that there is a shipping container beside the main warehouse containing goods that Mandalay Ltd wants to sell. You ask the accountant at the Henderson branch whether he plans to include the goods in the truck in the calculation of the inventories on hand at 30 June 2020. The accountant says that the goods will not be included.

You then obtain a copy of the invoice in relation to the container of goods. The container was shipped on 24 June from Sydney, marked FOB Sydney, and the total invoice price was $200 000. The freight bill amounted to $12 000, with terms requiring payment within 30 days. The accountant says he will not pay the invoice until mid-July, and so the inventories will not be included in determining the inventories on hand at 30 June 2020.

Required:

Answer the following parts-

1. Does Mandalay Ltd have a liability that should be recorded at 30 June 2020?
2. Should the container of goods be included in the determination of the inventories balance at 30 June 2020? If so, what journal entry would be required?

Question 3 (Property, Plant and Equipment)

Trabitz Ltd has acquired a building. Which of the following items should be included in the cost of the building? If an item is excluded from the cost of the building, explain why.

1. Real estate agent’s fees
2. Cost incurred in evaluating a different building found to be unsuitable
3. Interest on the bank loan to acquire the building, and an application fee to the bank to get the loan, which is secured on the building
4. Cost of changing the name on the building
5. Cost of refurbishing the lobby to the building to attract customers and make it more user friendly

Cost of changing the parking bays

Answer 1

Question 1.	Potential Benefit is Global Acceptability
		Potential Problem is Standard Manipulation. It is required completed justification of the changes.
Question 2.	Yes, Mandalay Limited have liability to record the same as because it is based on FOB status.
		As Terms is FOB Shipping then on the date ship is embarked from the Seller shipping point.
		because it is written as FOB SYDNEY, and embarked from Sydney only.
		Hecne Goods shall be included in Inventory while determining its value nad record.
		as here Frieght expenses are prepaid by the seller shall be recovered later form Purchases ( Mandalay Limited)
	24-Jun-20	Purchases A/c Dr.	188000
		Freight Inward A/c Dr.	12000
		To Account Payable		188000
		To Account Payable - Frieght A/c		12000
		( Bieng Recording of the purchases made during the period)
Question 3.		Included / Not Included
		a.	Included	For Registration	Capitalise
		b	Not Included	Before Acquisition	Charge to P and L A/c
		c	Included	Acquisition Expenses	Capitalise
		d	Included	If Change is Material like if building bears the name of earleir owners then same is required to removed or renamed. Hence can be included or if the cost is nominal may be excluded. ( Discretio of the Owner is required. But on suggestion required to be capitalise)	Capitalise
		e	Included	Refurbrishing will improve the economic activity	Capitalise