Gigabyte Ltd. bought an item of inventory on 1 October 2018 for £4,000. On 30September 2019, the same piece of inventory would have cost the company £6,000.The company sells the piece of inventory for £8,000 on 30 September 2020. On 1October 2020, the same piece of inventory would have cost the company £7,000.Under replacement cost accounting, which of the following would be recognised asincome by the company?O a. Income of £2,000 at 30 September 2019; Income of £2,000 at 30 September2020O b. No income at 30 September 2019; Income of £4,000 at 30 September 2020O c. Income of £4,000 at 30 September 2019; No income at 30 September 2020O d. Income of £2,000 at 30 September 2019; Income of £2,000 at 30 September2020Time left 1:14:19Bearsden Ltd. has a provision of £1.0 brought forward on 1 April 201claim for breach of contract. During the year to 31 March 2020, Bearsden Ltd. wonthis court action and therefore the provision is no longer needed. However, anotherlegal claim for the same amount was filed against the company in February 2020 inrespect of the supply of defective products. Bearsden Ltd. has been notified by thecompany lawyers that there is a 70% chance that this cost will have to be paid. TheDirectors of the company have therefore decided that the provision of £1.0mbrought forward at 1 April 2019 be carried forward against the ongoing legal claim.How should this situation be dealt with in the books of Bearsden Ltd. at 31 March2020?O a. Carry forward the previous provision of £1.0m in respect of the ongoinglegal claim and disclose this fact in the notes to the accounts.O b. Carry forward the previous provision of £1.0m in respect of the ongoinglegal claim since both claims are similar in substance and amount.O c. Carry forward the previous provision of £1.0m after determining whether aprovision should be made in respect of the ongoing legal claim.O d. Disclose the release the £1.0m provision brought forward to the incomestatement and recognise a new provision of £1.0m in respect of the ongoinglegal claim. Electrolux Group. has decided to close its oil and gas operations in Aberdeen on 1March 2020 but retain the warehouse from which the operations were carried out asan investment property. The warehouse had a net book value at 30 September 2019of £6.8m and a fair value of £7.2m at 1 March 2020. At the company's year end of 30September 2020, the fair value of the warehouse was £8.0m. Assuming Electroluxgroup policy is to value investment property at fair value, the amount that thecompany would include in in the income statement for the year ended 30 September2020 would be:O a.Debit £0.5mO b. Debit £0.4mO c.Credit £1.2mO d. Credit £0.8m

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Gigabyte Ltd. bought an item of inventory on 1 October 2018 for £4,000. On 30 September 2019, the same piece of inventory would have cost the company £6,000. The company sells the piece of inventory for £8,000 on 30 September 2020. On 1 October 2020, the same piece of inventory would have cost the company £7,000. Under replacement cost accounting, which of the following would be recognised as income by the company? Income of £2,000 at 30 September 2019; Income of £2,000 at 30 September 2020 O b. No income at 30 September 2019; Income of £4,000 at 30 September 2020 Income of £4,000 at 30 September 2019; No income at 30 September 2020 O d. Income of £2,000 at 30 September 2019; Income of £2,000 at 30 September 2020

Gigabyte Ltd. bought an item of inventory on 1 October 2018 for £4,000. On 30 September 2019, the same piece of inventory would have cost the company £6,000. The company sells the piece of inventory for £8,000 on 30 September 2020. On 1 October 2020, the same piece of inventory would have cost the company £7,000. Under replacement cost accounting, which of the following would be recognised as income by the company? Income of £2,000 at 30 September 2019; Income of £2,000 at 30 September 2020 O b. No income at 30 September 2019; Income of £4,000 at 30 September 2020 Income of £4,000 at 30 September 2019; No income at 30 September 2020 O d. Income of £2,000 at 30 September 2019; Income of £2,000 at 30 September 2020

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

Gigabyte Ltd. bought an item of inventory on 1 October 2018 for £4,000. On 30
September 2019, the same piece of inventory would have cost the company £6,000.
The company sells the piece of inventory for £8,000 on 30 September 2020. On 1
October 2020, the same piece of inventory would have cost the company £7,000.
Under replacement cost accounting, which of the following would be recognised as
income by the company?
O a. Income of £2,000 at 30 September 2019; Income of £2,000 at 30 September
2020
O b. No income at 30 September 2019; Income of £4,000 at 30 September 2020
O c. Income of £4,000 at 30 September 2019; No income at 30 September 2020
O d. Income of £2,000 at 30 September 2019; Income of £2,000 at 30 September
2020
Time left 1:14:19
Bearsden Ltd. has a provision of £1.0 brought forward on 1 April 201
claim for breach of contract. During the year to 31 March 2020, Bearsden Ltd. won
this court action and therefore the provision is no longer needed. However, another
legal claim for the same amount was filed against the company in February 2020 in
respect of the supply of defective products. Bearsden Ltd. has been notified by the
company lawyers that there is a 70% chance that this cost will have to be paid. The
Directors of the company have therefore decided that the provision of £1.0m
brought forward at 1 April 2019 be carried forward against the ongoing legal claim.
How should this situation be dealt with in the books of Bearsden Ltd. at 31 March
2020?
O a. Carry forward the previous provision of £1.0m in respect of the ongoing
legal claim and disclose this fact in the notes to the accounts.
O b. Carry forward the previous provision of £1.0m in respect of the ongoing
legal claim since both claims are similar in substance and amount.
O c. Carry forward the previous provision of £1.0m after determining whether a
provision should be made in respect of the ongoing legal claim.
O d. Disclose the release the £1.0m provision brought forward to the income
statement and recognise a new provision of £1.0m in respect of the ongoing
legal claim.

Electrolux Group. has decided to close its oil and gas operations in Aberdeen on 1
March 2020 but retain the warehouse from which the operations were carried out as
an investment property. The warehouse had a net book value at 30 September 2019
of £6.8m and a fair value of £7.2m at 1 March 2020. At the company's year end of 30
September 2020, the fair value of the warehouse was £8.0m. Assuming Electrolux
group policy is to value investment property at fair value, the amount that the
company would include in in the income statement for the year ended 30 September
2020 would be:
O a.
Debit £0.5m
O b. Debit £0.4m
O c.
Credit £1.2m
O d. Credit £0.8m

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