Reference no: EM131632243

Q1. A recent annual report of the City of Darwin Council did not include library books on the statement of financial position, notwithstanding the existence of a substantial library collection. The City of Darwin Council's accounting policy for library books is to expense them at the time of acquisition. A note in the annual report reveals that in applying this policy the council considered the following factors:

As soon as the book is purchased its fair value is minimal compared with its cost?

The acquisition costs of individual books are below the council's capitalisation policy.

The useful life of a book is variable and indeterminable, making depreciation difficult.

Required - Critically evaluate the council's accounting policy for its library collection. Suggest an alternative accounting policy or supplemental information that could be reported, if appropriate. Maximum 400 words.

Q2. MyNextProblem Ltd has acquired a new building called Next In Line Building for $2 000 000. It has incurred incidental costs of $30 000 in the acquisition process for legal fees, real estate agent's fees and stamp duties. At the quarterly Board meeting, the management believes that these costs should be expensed because they have not increased the value of the building and, if the building was immediately resold, these amounts would not be recouped. In other words, the fair value of the building is considered to still be $2 000 000.

Required: Discuss how these costs should be accounted for in the books of MyNextProblem Ltd. Maximum 200 words.