Brian Fraser has spent many years of his life panning for gold, with little success. His company Fraser Gold Prospecting Pty, Ltd makes very little money. On several occasions, he has found small traces of gold along the usual river banks that he is licensed to pan. However, on his last trip to the Ballarat River, on 27 June, almost by accident he managed to find a very promising piece of rock which he placed in his satchel. On 3 July, he took the rock into town to be examined and valued by experts, who assured him that the rock was a valuable gold nugget and that it was worth at least $30 000. Brian was elated and opened a bottle of champagne to celebrate with his friends. On 17 July, he sold the nugget to a jeweller for $50 000 in cash. Required: (a) Based on the Conceptual Framework and AASB 15 Revenue from Contracts with Customers, decide whether and when revenue exists, and decide on the appropriate time for this revenue to be recognised in the accounts of Fraser Gold Prospecting Pty. Ltd. (b) Consider whether the nugget is classified as inventory and how it might be valued at 30 June.

Brian Fraser has spent many years of his life panning for gold, with little success. His company Fraser Gold Prospecting Pty, Ltd makes very little money. On several occasions, he has found small traces of gold along the usual river banks that he is licensed to pan. However, on his last trip to the Ballarat River, on 27 June, almost by accident he managed to find a very promising piece of rock which he placed in his satchel. On 3 July, he took the rock into town to be examined and valued by experts, who assured him that the rock was a valuable gold nugget and that it was worth at least $30 000. Brian was elated and opened a bottle of champagne to celebrate with his friends. On 17 July, he sold the nugget to a jeweller for $50 000 in cash. Required: (a) Based on the Conceptual Framework and AASB 15 Revenue from Contracts with Customers, decide whether and when revenue exists, and decide on the appropriate time for this revenue to be recognised in the accounts of Fraser Gold Prospecting Pty. Ltd. (b) Consider whether the nugget is classified as inventory and how it might be valued at 30 June.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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