Statement of profit or loss the relevant amounts

Reference no: EM131003995

On 2 January 20X0 Philippo Tist Corporation brought into use an industrial site that had been constructed at a total cost of €50m. The company has the legal right to use the site for a ten-year period, at the end of which the site has to be returned to the legal owner in its original condition. The directors of Philippo Tist estimate that the cost of restoring the site on 31 December 20X9 will be €15m (in 20X9 prices). The construction cost includes the right to use the site without further payment for the ten-year period. The rate to use in any discounting calculations is 8 per cent. The present value of €1000 receivable in ten years when the cost of capital is 8 per cent is €463.

Required

Show the amounts that will appear in the statement of financial position of Philippo Tist Corporation as at 31 December 20X0 in respect of the site and the amounts that will appear in the statement of profit or loss for the year ended 31 December 20X0. Indicate where in the statement of financial position and where in the statement of profit or loss the relevant amounts should be presented.

(ACCA adapted)

Reference no: EM131003995

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