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Statement of financial position as at 31 December 20X5
$
$
Non-current assets
Property, plant and equipment (W5)
355,832
–––––––
355,832
Current assets
Inventory 25,680
Trade receivables (W6)
16,684
Prepayments 1,000
Cash at bank
3,312
–––––––
46,676
–––––––
402,508
–––––––
Chapter 17
KAPLAN PUBLISHING
303
Equity
Ordinary share capital
100,000
Revaluation surplus ($250,000 – $100,000)
150,000
Retained earnings ($104,800 + $16,944)
121,744
––––––
371,744
Current liabilities
Income tax liability (W3)
7,300
Trade payables)
23,004
Accrued expenses
460
––––––
30,764
–––––––
402,508
–––––––
Workings:
(W1) Cost of sales
$
Opening Inventory
23,340
Purchases
266,800
Purchase returns
(1,600)
–––––––
288,540
Closing inventory
(25,680)
–––––––
262,860
–––––––
(W2) Administrative expenses
$
Wages
46,160
Rent ($13,000 – $1,000)
12,000
Motor expenses
3,720
Insurance
760
Irrecoverable debts ($984 + $130)
1,114
Decrease in allowance for receivables (W6)
(72)
Light and heat ($3,074 + $460)
3,534
Bank interest
74
Depreciation (W4)
11,128
–––––––
78,418
–––––––
Preparing basic financial statements
304
KAPLAN PUBLISHING
(W3) Income tax
$
Under provision re previous year per trial balance
100
Income tax on profit for year (and year-end liability)
7,300
––––––
7,400
––––––
(W4) Depreciation charge for year
P&L
charge
Prov'n
b/fwd
Prov'n
c/fwd
$
$
$
Buildings ($100,000 × 2%)
2,000
6,000
8,000
Fixtures and fittings ($28,000 × 20%)
5,600 16,800
22,400
Motor vehicles (($24,000–$12,240) ×30%)
3,528 12,240
15,768
––––––
11,128
––––––
(W5) Non-current assets
Cost or
val'n
Acc
dep'n
CA
$ $ $
Land (valuation in year)
250,000
–
250,000
Buildings 100,000
8,000
(W4)
92,000
Fixtures and fittings
28,000
22,400 (W4)
5,600
Motor vehicles
24,000
15,768 (W4)
8,232
––––––
––––––
––––––
402,000
46,168
355,832
––––––
––––––
––––––
(W6) Trade receivables
$
Receivables ($17,330 – $130 w/off)
17,200
Allowance for receivables c/fwd
(516)
––––––
16,684
––––––
Movement in allowance for receivables:
Balance b/fwd
588
Balance c/fwd (as per above)
516
––––––
Decrease in allowance to P&L
(72)
––––––
Chapter 17
KAPLAN PUBLISHING
305
Test your understanding 1
The trial balance of Penguin Co, a limited liability entity, as at
31 December 20X5 was as follows:
Dr Cr
$
$
Sales and purchases
20,000
50,000
Inventory 8,000
Distribution costs
8,000
Administration expenses
15,550
Receivables and payables
10,000
20,000
Fundamental reorganisation costs
2,400
Cash at bank
7,250
Ordinary shares 50c
8,000
10% irredeemable preference shares $1
9,000
10% loan notes
8,000
Non-current assets at carrying amount
35,000
Share premium
3,000
Accumulated profits at 1 January 20X5
3,000
Loan note Interest paid
800
Preference dividend paid
900
Interim ordinary dividend paid
1,600
Tax
500
Suspense
8,000
–––––––
–––––––
109,500
109,500
The following is to be taken into account.
1
A building whose carrying amount is currently $5,000 is to be
revalued to $11,000.
2
A final ordinary dividend of 10c per share is to be proposed.
3
The balance on the income tax account represents an overprovision
of tax for the previous year. Tax for the current year is estimated at
$3,000.
4
Closing inventory is $12,000.
5
The balance on the suspense account represents the proceeds from
the issue of 4,000 ordinary shares.
Prepare the following financial statements of Penguin Co for the
year ended 31 December 20X5:
1
statement of profit or loss and other comprehensive income
2
statement of financial position
3
statement of changes in equity.
Preparing basic financial statements
306
KAPLAN PUBLISHING
Test your understanding 2
Phillipa Page prints and publishes study materials. She prepared the
following trial balance as at 30 June 20X7:
Dr
Cr
$
$
Purchases
60,000
Inventory at 1 July 20X6
10,000
Sales
120,000
Distribution costs
13,200
Administrative and selling expenses
5,600
Trade receivables
12,200
Irrecoverable debts
1,550
Bank balance
4,150
Capital account at 1 July 20X6
73,100
Discount received
2,500
6% Bank loan
10,000
Non-current assets at carrying amount
102,500
Capital introduced in the year
5,000
Loan interest paid
300
Drawings
8,000
Trade payables
5,600
Wages
15,000
Suspense
8,000
–––––––
–––––––
228,350
228,350
–––––––
–––––––
Chapter 17
KAPLAN PUBLISHING
307
The following is to be taken into account.
1
Inventory valuation at 30 June 20X7 was $12,000.
2
Phillipa decided to write off an irrecoverable debt of $1,000. This
should be accounted for as an administrative and selling expense.
3
The wages cost should be split equally between cost of sales and
administrative and selling expenses.
4
The bank loan was taken out on 1 July 20X6.
5
The depreciation charge for the year of $5,000 on property, plant
and equipment has not yet been accounted for. It should be
classified as a cost of sale.
6
The balance on the suspense account represents the proceeds from
the disposal of an item of property, plant and equipment. At the date
of disposal, that item had a net carrying amount of $10,000. The
gain or loss on disposal should be accounted for as a cost of sale.
Prepare the statement of profit or loss for the year ended 30 June
20X7, together with the statement of financial position as at 30 June
20X7 on behalf of Phillipa Page.
11 Events after the reporting period (IAS 10)
IAS 10 Events After the Reporting Period defines events after the reporting
period as
'those events, favourable and unfavourable, that occur between
the end of the reporting period and the date when the financial statements
are authorised for issue'
(IAS 10, para 3).
Preparing basic financial statements
308
KAPLAN PUBLISHING
Adjusting and non-adjusting events
According to IAS 10, Events After the Reporting Period, adjusting and non-
adjusting events are classified and treated as follows:
Adjusting and non-adjusting events
Adjusting events
These events provide additional evidence of conditions existing at the
reporting date. For example, any receivables at the reporting date which
are subsequently regarded as possibly not being collectable may help to
quantify the allowance for receivables required as at the reporting date. If
a material adjusting event is identified, the financial statements must be
amended to reflect the relevant condition.
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