Question 1
(a)The definition of an asset and a liability
forms an important element of the Conceptual Framework for Financial Reporting 2010, which in turn, forms the basis of various accounting standards.
Required:
Define an asset and a liability and critically evaluate the circumstances under which they should
be recognised in the financial statements as required by the conceptual framework. Give a critical explanation of how the definition of assets and liabilities may enhance the reliability of financial statements

(b) On 1 January 2015 Rogers acq
uired a plan under the following terms:

Hours
£000
Manufacturer’s list price –1,200
Trade discount (applying to list price only)–20%
Freight charges –26
In-transit insurance–4
Staff training in use of machine –40
Electrical installation cost –17
Site preparation –34
Pre-production testing–33
Purchase of a three -year maintenance contract–15
Estimated residual value–100
Estimated life in machine hours–5,000
Hours used:
Years ended 31 December 2015–1500
Years ended 31 December 2016–1900

Required:
Prepare extracts from the statements of comprehensive income and
statement of financial position for the plant for each of the two years to 31 December 2016 .

Question 2
–
IAS 17 Leases
(i)
By using the regulatory discussions and relevant international accounting standards (IASs) which are taught in the module APC311, you are required to provide a critical evaluation of IAS 17 Leases.
(ii)
Pamela Ltd entered a five-year lease on 1 January 2010 for a machine
with a fair value of £20,000. Rentals are £5,200 per annum payable in advance. The residual value of the machine at the end of the lease is estimated to be £4,200. Pamela Ltd will be reimbursed with this £4,200 on returning the machine to the lessor in reasonable condition. Peter Ltd is responsible for insurance and maintenance costs. The rate of interest implicit in the lease is 15.15%

Required:
Calculate the annual finance charges on a sum of the digits basis and on an actuarial basis. Comment on the results