Question

Zanadriana Ltd is a start-up pharmaceuticals company with 50 per cent of its operations in research and development. The following transactions and events occurred in year 1. Record them in the company's accounts in accordance with IFRS. If needed, an appropriate rate of interest is 8 per cent p.a

1. Zanadriana Ltd spent $250 000 on researching and developing a new product. The research shows high promise of becoming commercially viable. 2. In December, Zanadriana Ltd acquired all the common shares of Austin Power Ltd to ensure a supply of electricity to its remote research facilities. The acquisition was paid for with cash, $2 000 000. Austin Power Ltd will be absorbed into Zanadriana Ltd as a division rather than retaining a separate legal identity. The carrying amounts and market values of the assets on the acquisition date are: Carrying amount Market value Current assets $ 140 000 $ 140 000 Land and buildings 1500 000 1700 000 Liabilities 150 000 150 000 3. In December, Zanadriana Ltd purchased all the ordinary shares of Bazza's Hickory Ltd in order to acquire the land and buildings of the organisation. The acquisition was paid for with cash, $1 900 000. Bazza's Hickory Ltd will be absorbed into Zanadriana Ltd as a division rather than retaining a separate legal identity. The carrying amounts and market values of the assets on the acquisition date are: Carrying amount Market value Current assets $ 240 000 $ 240 000 Land and buildings 1700 000 1900 000 Liabilities 150000 150 000 4. Three years ago, Zanadriana Ltd scientists developed a formula that has not yet been patented, but which is deemed to be worth at least $5 000 000. 5. On 30 November, Zanadriana Ltd entered into a non-cancellable lease of machinery for three years at $50 000 per month, payable at the start of the month, with an option to renew for five years at $3000 per month or to purchase the machines for $40 000 after the three-year lease term. Record whatever entry would be made on 30 November. 6. Zanadriana Ltd has good key staff with ten top-ranking executives who earn combined salaries of $4 000 000 p.a. Each of the executives has contracted to remain in the employ of Zanadriana Ltd for two years, following which a new contract will be negotiated. Confidentiality clauses, forbidding them to disclose information to competitors, have been signed by all of the top executives.

Answer 1

S No	Particulars	Dr/Cr.	Dr ($)	Cr ($)
1	Profit and Loss A/c	Dr	250,000
	To Bank A/c	Cr		250,000
	(Being Research and Development expenditure charged to Profit and Loss in the year of expenditure)
2	Current Assets A/c	Dr	140,000
	Land and Buildings A/c	Dr	1,700,000
	Goodwill A/c	Dr	310,000
	To Liabilities A/c	Cr		150,000
	To Cash A/c	Cr		2,000,000
	(Being assets and liabilities of Austin Power bought and goodwill created for excess of liabilties and purchase consideration over assets bought)
3	Current Assets A/c	Dr	240,000
	Land and Buildings A/c	Dr	1,900,000
	To Capital Reserve A/c	Dr		90,000
	To Liabilities A/c	Cr		150,000
	To Cash A/c	Cr		1,900,000
	(Being assets and liabilities of Austin Power bought and Capital Reserve created for excess of assets over liabilties and purchase consideration)
4	No entry as there is patents are not purchased
5	Right of Use A/c	Dr	1,637,718
	To Lease Liability A/c	Cr		1,637,718
	(Being Right to use created for the present value of all the lease payments along with purchase amount of $40,000 at Year 3 end)
6	No entry except for salaries whenever payable

Working for PV in Point 5

Month	Payment	Rate @ 8% p.a	PV
0	50,000	1.006667	50,000
1	50,000	1.006667	49,669
2	50,000	1.006667	49,340
3	50,000	1.006667	49,013
4	50,000	1.006667	48,689
5	50,000	1.006667	48,366
6	50,000	1.006667	48,046
7	50,000	1.006667	47,728
8	50,000	1.006667	47,412
9	50,000	1.006667	47,098
10	50,000	1.006667	46,786
11	50,000	1.006667	46,476
12	50,000	1.006667	46,168
13	50,000	1.006667	45,862
14	50,000	1.006667	45,559
15	50,000	1.006667	45,257
16	50,000	1.006667	44,957
17	50,000	1.006667	44,659
18	50,000	1.006667	44,364
19	50,000	1.006667	44,070
20	50,000	1.006667	43,778
21	50,000	1.006667	43,488
22	50,000	1.006667	43,200
23	50,000	1.006667	42,914
24	50,000	1.006667	42,630
25	50,000	1.006667	42,348
26	50,000	1.006667	42,067
27	50,000	1.006667	41,788
28	50,000	1.006667	41,512
29	50,000	1.006667	41,237
30	50,000	1.006667	40,964
31	50,000	1.006667	40,692
32	50,000	1.006667	40,423
33	50,000	1.006667	40,155
34	50,000	1.006667	39,889
35	50,000	1.006667	39,625
36	40,000	1.006667	31,490
			1,637,718