Reference no: EM133168205
Question - PART A: DELMONTE LTD - Delmonte Ltd specialises in bridge construction and has one contract in progress from local council since 1 Jan 2019 and it is expected to be completed in three year's time.
The contract price was agreed at £15,000,000 and total contract costs were estimated to be £9,000,000.
Contract details extracted from the company's costing records for the year ending 31 Dec 2019 as follows:
2019
£'000
Cost Incurred to date 3,600
Estimated cost to completion 5,400
Value of Work Certified to date 6,300
Progress payment raised to date 3,800
Progress payments received to date 3,500
Required - Show how this contract should appear in income statement and the statement of financial position for the year ended 31 Dec 2019 using Output Method.
PART B - 1. During 2020, the the total training cost to improve the employees' skills were £500,000. In addition, a focus group of other retail banking providers was invited to a conference of the introduction of the new software in 2016. Cost of the conference was £600,000.
2. In 2020, XYZ Ltd acquired another rival Magic Ltd for a total sum of £300 mln. A this date a brand valuation expert valued "Magic" brand at £70 mln on the basis of useful life of 10 years. Other net assets were deemed to have a fair value of £165 mln.
Required - Explain, with reasons, how the costs given above should be treated in the financial statements of XYZ Ltd for year ending 31 Dec 2020 in relation to intangible assets per IAS 38. (12 marks)
PART C: YUMMY LTD - To stimulate the sales of its popcorn product, Yummy Company places 1 coupon in each box. 15 coupons are redeemable for a premium consisting of a cinema ticket which will cost £3 per ticket.
In 2021, the company sells 6,000,000 boxes of at £6.20 per box. From its experience with other similar premium offers, the company estimates that 70% of the coupons issued will be mailed back for redemption. During 2021, 3,100,000 coupons are presented for redemption.
Required - Explain how this transaction should be accounted for in financial statements for year ending 31 Dec 2021.
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