Reference no: EM133047359

Question - Q1. Statement 1: PFRS 17 permits the introduction of an accounting policy that involves remeasuring designated insurance liabilities consistently in each period to reflect current market interest rate. Statement 2: An insurer is not allowed to introduce the following accounting practice which includes using non-uniform accounting policies for the insurance liabilities of subsidiaries. Statement 3: PFRS 17 provides discretionary participation features in the insurance contract recognized separately from the guaranteed elements, where the issuer of such contract shall classify that feature as either a liability or a separate component of equity.

Only Statement 1 is correct

Only Statement 1 is incorrect

Only Statement 2 is correct

Only Statement 2 is incorrect

 Only Statement 3 is correct

Only Statement 3 is incorrect

All statements are correct

All statements are incorrect

Q2. On May 1,2021, Amanda and Brandy formed a joint operation to acquire and sell a special type of merchandise. The contractual arrangements provide that Amanda is to manage the joint operation for a fee and that gain and losses are to be divided equally. On May 1,2021, Brandy invests cash of $52,000, which $50,000 was used to purchase merchandise. Amanda incurs expenses amounting to $2,500. On May 20, one half of the merchandise was sold for $36,000 cash. In the books of Brandy, how much is the balance of the Investment in Joint Operation account on May 30, 2021?

Q3. On January 1, 20x6, Bad, a real estate company, entered into a contract to construct a subdivision on a piece of land it has acquired and, when construction is complete, to deliver the finished houses to their customers. The following data pertains to the said contract each customer is to sign. Each house costs $4,000,000 each (a total of 10 houses are to be constructed). Construction will take 2 years to complete. Payment terms are 50% by the end of the 1st year, 25% at the end of the 2nd year and the balance will be paid after 3 months from the final turn-over. The client can transfer the contract to another, should they not feel satisfied with the house on or before the house is 50% complete.

The company incurred the following expenses for 20x6.

Total cost of land - $2,000,000;

Estimated total cost of construction - $25,000,000, (including the costs for the common areas, streets and light posts amounting to $5,000,000);

Estimated total cost of contract for the 10 houses - $40,000,000;

In CY 20x6, total construction cost incurred amount to $13,000,000 with all common areas already fully constructed, while fair value of the land is now worth $3,500,000. The contract is considered to be a multiple contract.

How much is included as current asset in the financial statements of Bad related to the above information?