ACCT 201 Saudi Electronic University Capitalization of Interests Questions


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College of Administrative and Financial Sciences
Assignment 3
Deadline: 30 /04/ 2022 @ 23:59
Course Name: Financial Accounting
Course Code: ACCT 201
Semester: 2
Academic Year: 2020 – 21
For Instructor’s Use only
Student’s Name:
Student’s ID Number:
Instructor’s Name:
Students’ Grade: …… /10
Level of Marks: High/Middle/Low
• The Assignment must be submitted on Blackboard (WORD format only) via
allocated folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students
or other resources without proper referencing will result in ZERO marks. No
• All answered must be typed using Times New Roman (size 12, double-spaced)
font. No pictures containing text will be accepted and will be considered

Submissions without this cover page will NOT be accepted.
College of Administrative and Financial Sciences
Assignment Question(s): Marks 10
Chapters covered 11, 12, 13 & 14
Q1. Presented below are the components related to an office building that ABC Company is
considering purchasing for SAR10, 000,000.
Useful Life
Building structure
60-year life
Building engineering
30-year life
Building external works
30-year life
Instructions: ( 2 marks)
(a) Compute depreciation expense for 2010, assuming that ABC uses component
(b) Assume that the building engineering was replaced in 20 years at a cost of SAR
2,600,000 cash. Prepare the entry to record the replacement of the old component with
the new component.
Q2. a. Explain impairment of long-lived tangible.
b. The accountant of X. Ltd conducted an impairment test on a machinery. The carrying amount
of machinery was SAR 195,000, its fair value less costs to sell is SAR 170,000, and its value-inuse is SAR 165,000. Is there impairment or no impairment on machinery? If impairment exists
what would be the journal entry. (2 Mark)
College of Administrative and Financial Sciences
Q3. List the classified Intangible Assets with examples. (2 Marks)
Q4. a. Explain provisions and its types with IFRS requirements.
b. On January 1, 2020, an Oil Company erected an oil platform in the Gulf of KSA. Oil
Company is legally required to dismantle and remove the platform at the end of its useful life,
estimated to be five years. Oil Company estimates that dismantling and removal will cost SAR
3,000,000. Based on a 10 percent discount rate, the fair value of the environmental liability
estimated to be SAR 1,862,760 (3,000,000 x .62092).
Pass entry in books of Oil Company to records this liability on Jan. 1, 2021. Using the straightline method, record entry to be expensed. (2 Marks)
Q5. Assume that a Financial Corporation issued SAR 500,000 of 8% term bonds on January 1,
2021, due on January 1, 2026, with interest payable each July 1 and January 1. Investors require
an effective-interest rate of 6%. Is, the bond issued at a premium or discount? Calculate the bond
College of Administrative and Financial Sciences
proceeds and pass journal entry to on date of issue, Jan. 1, 2021 and to record first payment and
amortization of the premium on July 1, 2021. (2 Marks)
Note: PV of principal amount at 6% is 0.74409 and PV of interest amount at 6% is 8.53020

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