ExpertThis question is part of a case study — click to read the full scenario(Case 16)
Section B - Case 1: NovaGrid (Question 1 of 5)
Scenario: NovaGrid, a telecom infrastructure company, entered into a contract on 1 January 20X5 to build a specialized network for a client and maintain it for 2 years. The total contract price is $1,200,000. If sold separately, the network build would cost $1,000,000 and the 2-year maintenance would cost $400,000. The network was completed and handed over on 31 December 20X5.
Additionally, NovaGrid leased a specialized crane on 1 January 20X5 for 3 years. Payments are $50,000 annually in arrears. The implicit interest rate is 5%. (PV of $1 annuity for 3 yrs at 5% = 2.723).
Question: Under IFRS 15, how much of the total transaction price should be allocated to the network build performance obligation?
ACCA · Question 18 · Leases
Section B - Case 1: NovaGrid (Question 3 of 5)
Scenario: NovaGrid, a telecom infrastructure company, entered into a contract on 1 January 20X5 to build a specialized network for a client and maintain it for 2 years. The total contract price is $1,200,000. If sold separately, the network build would cost $1,000,000 and the 2-year maintenance would cost $400,000. The network was completed and handed over on 31 December 20X5.
Additionally, NovaGrid leased a specialized crane on 1 January 20X5 for 3 years. Payments are $50,000 annually in arrears. The implicit interest rate is 5%. (PV of $1 annuity for 3 yrs at 5% = 2.723).
Question: What is the initial value of the Right-of-Use (ROU) asset recognized for the crane on 1 January 20X5? (Assume no initial direct costs or advance payments).
Section B - Case 1: NovaGrid (Question 3 of 5)
Scenario: NovaGrid, a telecom infrastructure company, entered into a contract on 1 January 20X5 to build a specialized network for a client and maintain it for 2 years. The total contract price is $1,200,000. If sold separately, the network build would cost $1,000,000 and the 2-year maintenance would cost $400,000. The network was completed and handed over on 31 December 20X5.
Additionally, NovaGrid leased a specialized crane on 1 January 20X5 for 3 years. Payments are $50,000 annually in arrears. The implicit interest rate is 5%. (PV of $1 annuity for 3 yrs at 5% = 2.723).
Question: What is the initial value of the Right-of-Use (ROU) asset recognized for the crane on 1 January 20X5? (Assume no initial direct costs or advance payments).
Answer options:
$150,000
$136,150
$142,857
$50,000
How to approach this question
Full Answer
Common mistakes
Practice the full ACCA FR — Financial Reporting Practice Exam 2
32 questions · hints · full answers · grading