Financial Reporting - May 2022 RTP

Defense Innovators Limited is a public sector undertaking and is engaged in the construction of warships and submarines. XYZ Private Limited approached Defense Innovators Limited for construction of "specially designed" ships for it, which will be used by XYZ Private Limited for transportation of specific goods. The offer was accepted by the Defense Innovators Limited and both the companies entered into an agreement for the construction and delivery of 3 specially designed ships on 'Fixed Price' basis with variable component…

An entity manufactures passenger vehicles. The time between purchasing of underlying raw materials to manufacture the passenger vehicles and the date the entity completes the production and delivers to its customers is 11 months. Customers settle the dues after a period of 8 months from the date of sale. (a) Will the inventory and the trade receivables be current in nature? (b) Assuming that the production time was say 15 months and the time lag between the date of sale…

Vegetables Limited (FVL) was incorporated on 2 nd April, 20X1 under the provisions of the Companies Act, 2013 to carry on the wholesale trading business in vegetables. As per the audited accounts of the financial year ended 31 st March, 20X7 approved in its annual general meeting held on 31st August, 20X7 its net worth, for the first time since incorporation, exceeded ` 250 crore. The financial statements since inception till financial year ended 31 st March, 20X6 were prepared…

20X1, S Limited enters into a contract with Corp Limited to construct heavyduty equipment for a promised consideration of ` 20,00,000 with a bonus of ` 2,50,000 if the equipment is completed within 24 months. At the inception of the contract, S Limited correctly accounts for the promised bundle of goods and services as a single performance obligation in accordance with Ind AS 115. At the inception of the contract, the Company expects the costs to be ` 11,00,000 and…

XYZ Ltd. offers a six-month warranty on its small to medium sized equipment, which can be put to use by the customer with no installation support. The warranty comes with the equipment and the customer cannot purchase it separately. This equipment is typically sold at a gross margin of 40%. XYZ Ltd. has made a provision of ` 30,000 during the year ended 31st March, 20X2, which is approximately 1% of its gross margin on the sale of these equipment.…

2X01, Entity X issued a 10% convertible debenture with a face value of ` 1,000 maturing on 31st March, 2X11. The debenture is convertible into ordinary shares of Entity X at a conversion price of ` 50 per share. Interest is payable yearly in cash. On 1st April, 2X02, to induce the holder to convert the convertible debenture promptly, Entity X reduces the conversion price to ` 40 if the debenture is converted before 1 st June, 2X02 (ie, within…

X Ltd. commenced the construction of a plant (qualifying asset) on 1 st September, 20X1, estimated to cost ` 10 crores. For this purpose, X has not raised any specific borrowings, rather it intends to use general borrowings, which have a weighted average cost of 11%. Total borrowing costs incurred during the period, viz., 1 st September, 20X1 to 31st March, 20X2 were ` 0.5 crore. The other relevant details are as follows: Month (` in crore) Cost of construction…

1: The ‘last mile’ is a dedicated cable that connects Entity Y’s network with the end customer’s device. The use of this cable is at the discretion of the customer. Entity Y decides the location of end points and has right to replace the lines (dedicated cable), however it is not practical to replace the lines, since replacement would require additional costs to be incurred without any corresponding benefit. Whether the arrangement would be within the scope of Ind AS…