Question

-part by me 18. Altcoins Ltd. has just begun operating under ideal conditions of uncertainty. Its cash flows will depend on the state of the economy. On January 1, 2019, the company acquired plant and equipment that will last two years, with a nil salvage value. AltCoins financed the plant and equipment purchase by issuing common shares

Answer 1

Solution (a)
It is assumed that the %rate of dividend paid by AltCoins is on par with the interest rate of the economy.

Therefore, on the basis of the same, we can determine the total value of Shares issued, which is in turn he value of the plant and equipment.

Total Dividend paid = $70
Rate of dividend = 4%
therefore, total value of shares issued = (70 / 4%) = $1750

Solution (b)

	Company Name
	Closing Balance Sheet
	31-Dec-19
	Particulars	Amount
1	Equity and Liabilities
a	Sahre Capital
i	Common Stock	1750
b	Reserves and surplus
i	Retained Earnings	-75
	(Net Cash inflows - Depreciation exp)	(800-875)
	Total	1675
2	Assets
a	Non Current Assets
i	Tangible Assets (net of Depr)
	Plant & Equipment	875
b	Current Assets
iv	Cash (As the economy is good)	800
	Total	1675

Solution (c)

IAS 16 Property Plant and Equipment, states that items of property, plant and equipment that qualify for recognition should initially be measured at cost.
The original cost (also known as historic cost) is adopted as it provides reliability to the amounts disclosed in the financial statements. Assets are normally used over the long term, and in such long periods of time, the value of the said asset may vary. And the valuation of such variation may or may not be acceptable and standardized throughout the industries. Therefore, since everyone can agree on the original purchase price of an asset, the same is adopted.