- 13 Marks
FR – May 2021 – L2 – Q3b – Impairment of Assets (IAS 36)
Prepare a statement of profit or loss for Wizkid Bottling Company Plc showing continuing and discontinued operations.
Question
Wizkid Bottling Company Plc specializes in the production of alcoholic wine known as Blue Bull and a soft drink called “Wiz-Cola,” operating two divisions: Blue Bull and Wiz-Cola. Due to high labor costs and raw material shortages for wine production, the Blue Bull division has incurred significant operating losses. Management decided to close down the Blue Bull division and drew up a plan to discontinue its operations.
On February 1, 2019, the Board of Directors of Wizkid Bottling Company Plc approved and immediately announced the formal plan.
The following figures are available for the current and prior year ending March 31:
| 2019 | 2018 | |||
|---|---|---|---|---|
| Blue Bull | Wiz-Cola | Blue Bull | Wiz-Cola | |
| Revenue | 235,000 | 1,570,000 | 250,000 | 1,250,000 |
| Cost of sales | 175,000 | 505,000 | 200,000 | 450,000 |
| Admin. expenses | 35,000 | 311,000 | 25,000 | 255,000 |
| Distribution costs | 20,000 | 186,500 | 10,000 | 157,500 |
| Other operating | 15,000 | 124,500 | 10,000 | 102,500 |
| expenditure | ||||
| Taxation expense | (3,000) | 130,500 | 1,500 | 85,000 |
Additional Information:
- Severance pay of N42.5 million was incurred between February 1, 2019, and March 31, 2019.
- An evaluation of the recoverability of assets in the Blue Bull Division in terms of IAS 36 led to recognizing an impairment loss of N9.5 million, which is included in other operating expenses above.
Required:
i. Draft the statement of profit or loss for Wizkid Bottling Company Plc for the years ended March 31, 2019, and 2018, in compliance with IFRS 5, showing continuing and discontinuing operations.
(10 Marks)
ii. List additional disclosures required by IFRS 5 for the discontinued operations in the financial statements for the year ended March 31, 2019.
(3 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Additional Disclosures, Discontinued Operations, IFRS 5, Profit or Loss
- Level: Level 2
- Topic: Impairment of Assets (IAS 36)
- Series: MAY 2021