Repsola is a drilling company that operates an offshore Oilfield in Feeland. Five years ago, Feeland had a major oil discovery and granted licenses to drill oil to reputable,experienced drilling companies. The licensing agreement requires the company to remove the oil rig at the end of production and restore the seabed. Ninety percent of the eventual costs of undertaking the work relate to the removal of the oil rig and restoration of damage caused by building it and ten percent arise through the extraction of the oil. At the Statement of Financial Position (SOFP) date (December 31 2025), the rig has been constructed but no oil has been extractedOn January 1st 2023, Repsola obtained the license to construct an oil rig at a cost of $500 million. Two years later the oil rig was completed. The rig is expected to be removed in 20 years from the date of acquisition. The estimated eventual cost is 100million. The company’s cost of capital is 10% and its year end is December 31st. Repsola…

(a) A property lease includes a requirement that the premises are to be repainted every five years and the future cost is estimated at $100,000. The lessee prefers to spread the cost over the five years by charging $$20,000 against profits each year. Thereby creating a provision of $100,000 in five years’ time and affecting profits equally each year. Requirement: Was it correct for the lessee to provide for this cost? Explain your decision (5 marks) (b) A retail store has a policy of refunding purchases by dissatisfied customers, even though it is under no legal obligation. Its policy of making refunds is generally known. Requirements: Should a provision be made at year end (9 marks

Part A Unique Schools Supplies & Uniforms (USSU) designs and manufactures knapsack bags for students. After production, the bags are placed into individual cases, before being transferred into Finished Goods. The accounting records of the business reflect the following data at June 30, 2024, for the manufacturing of bags for Debe High School. Inventory Raw Materials 1/7/2023 30/6/2024 $230,000 $260,000 Work in Progress $348,300 $203,300 Finished Goods $632,900 $485,000 Other information: Sales Revenue Factory Supplies Used Direct Factory Labor Raw Materials Purchased Plant janitorial service Depreciation: Plant & Equipment $5,731,000 75,000 792,000 560,000 37,000 186,000 Total Utilities 481,250 Production Supervisor's Salary 450,000 School Logo (for bags) Design Costs 26,000 Packaging Cases Cost 42,000 Total Insurance 168,000 Delivery Vehicle Drivers' Wages 181,500 Depreciation: Delivery Vehicle 53,290 Property Taxes 240,000 Administrative Wages & Salaries 801,250 1% of Sales Revenue…

Repsola is a drilling company that operates an offshore Oilfield in Feeland. Five yearsago, Feeland had a major oil discovery and granted licenses to drill oil to reputable,experienced drilling companies. The licensing agreement requires the company toremove the oil rig at the end of production and restore the seabed. Ninety percent ofthe eventual costs of undertaking the work relate to the removal of the oil rig andrestoration of damage caused by building it and ten percent arise through theextraction of the oil. At the Statement of Financial Position (SOFP) date (December 312025), the rig has been constructed but no oil has been extractedOn January 1st 2023, Repsola obtained the license to construct an oil rig at a cost of$500 million. Two years later the oil rig was completed. The rig is expected to beremoved in 20 years from the date of acquisition. The estimated eventual cost is 100million. The company’s cost of capital is 10% and its year end is December 31st. Repsolauses…

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1 Of the total utilities, 80% relates to manufacturing and 20% relates to general and administrative costs. 2 Of the total insurance, 66% relates to the Factory Plant & Equipment & 33% relates to general & administrative costs. 3 The property taxes should be shared: 75% manufacturing & 25% general & administrative costs. Required: i) Calculate the raw material used in production by Unique School Supplies & Uniforms. ii) What is the total factory overhead costs incurred by Unique School Supplies & Uniforms during the period? iii) Determine the prime cost & conversion cost of the knapsacks manufactured. iv) Prepare a schedule of cost of goods manufactured for the year ended June 30, 2024, clearly showing total manufacturing cost & total manufacturing costs to account for. v) What is the selling price per knapsack if Unique School Supplies & Uniforms manufactured 925 knapsacks for the Debe High School and uses a mark-up of 25% on cost? vi) How does the format of the income statement for a…

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