Reference no: EM133189819

Question 1 - Caerphilly purchased inventory at a cost of $10 million on 1 July 2015. The goods were sold in November 2015 for $14 million.

Caerphilly had cash flow problems during 2015 and negotiated with its supplier to exchange the goods for options on its shares. The shares had a market value of £11.5 million on 1 July 2015.

Explain how the transaction should be dealt with in the financial statements for the year ended 31 December 2015.

Question 2 - On 1 January 2014, Cheddar granted 20,000 share appreciation rights to each of its ten directors. The conditions attached to the cash-settled share-based payment scheme is that the directors must remain an employee of Cheddar for three years. The fair value of each cash-settled share-based payment on 31 December 2014 was $80 and on 31 December 2015 was $75.

On 31 December 2014, it was estimated that four directors would leave before the end of the three years.

On 31 December 2015, due to a downturn in the economy, it was estimated that two directors would leave before the end of the three years.

Prepare the extracts to be shown in the statement of profit or loss and the statement of financial position for the year ended 31 December 2014 and 31 December 2015.