Emerald Ltd, a manufacturing company, commenced operations on 1 July 2016 by iss
ID: 2394178 • Letter: E
Question
Emerald Ltd, a manufacturing company, commenced operations on 1 July 2016 by issuing 350 000 $5.00 shares, payable in full on application on a first-come, first-served basis. By 31 July 2016 the shares were fully subscribed and duly allotted. There were share issue costs of $10 000. No additional shares were issued during the year ending 30 June 2017.
For the year ending 30 June 2018, the company recorded the following aggregate transactions:
$
Sales
5 120 000
Interest income
34 000
Sundry income
25 000
Cost of Sales
2 465 000
Employee benefit expenses
856 000
Depreciation expense
244 000
Amortisation - franchise
25 000
Rental expense
120 000
Advertising expense
147 000
Insurance expense
48 000
Freight out expense
110 000
Doubtful debts expense
16 000
Interest expense
36 000
Borrowing Costs
9 000
Other expenses
8 000
Income tax expense
320 000
The following additional information was noted during the preparation of financial statements for the year ended 30 June 2018:
75 000 fully paid ordinary shares have been issued on 1 October 2017 at the price of $4.00.
$135 000 dividends (31.76 cents per share) were declared and paid during the 2018 financial year. A final dividend for 2018 of $51 850 was proposed but not recognised in the financial statements.
There was a gain of $20 000 from the cash flow hedge arrangement during the 2018 financial year. Any gain or loss associated with the cash flow hedge is directly recognised in equity. There was no previously recognised cash flow hedge reserve before the 2018 financial year.
$25 000 of bank loans is repayable within 1 year.
$90 000 of other loans is repayable within 1 year.
The employee benefits of $32 000 are expected to be settled wholly within 12 months.
Emerald Ltd measures inventory at the lower of cost and net realizable value and property, plant and equipment using a cost model.
The summarised balances are provided below:
Year-end balances, 30 June 2018
$
Cash on hand
960 000
Cash on deposit, at call
82 000
Accounts Receivables
665 000
Allowance for doubtful debts/ Impairments
24 000
Other debtors
27 000
Finished goods inventories, 30 June 2018
600 000
Work in Progress inventories 30 June 2018
105 000
Land
94 000
Buildings
230 000
Accumulated depreciation – buildings
60 000
Plant and equipment
1 385 000
Accumulated depreciation – plant and equipment
330 000
Franchises
140 000
Accumulated amortisation of franchise
50 000
Goodwill
620 000
Bank loans
92 000
Other loans
440 000
Accounts payable
696 000
Provision for employee benefits
116 000
Income tax payable
35 000
Deferred tax liability
140 000
Retained earnings, 30 June 2017
225 000
Dividends paid
135 000
Cash flow hedge reserve (equity)
20 000
Prepare a statement of changes in equity for Emerald Ltd in accordance with the requirements of AASB 101; (15 marks)
$
Sales
5 120 000
Interest income
34 000
Sundry income
25 000
Cost of Sales
2 465 000
Employee benefit expenses
856 000
Depreciation expense
244 000
Amortisation - franchise
25 000
Rental expense
120 000
Advertising expense
147 000
Insurance expense
48 000
Freight out expense
110 000
Doubtful debts expense
16 000
Interest expense
36 000
Borrowing Costs
9 000
Other expenses
8 000
Income tax expense
320 000
Explanation / Answer
Statement of changes in equity of Emerald as on 30th June, 2018.
Amount ($)
Amount ($)
Equity share capital as on 30th June, 2017(350000 shares @5.00 each)
1,750,000.00
Retained earnings as on 30th June, 2017
225,000.00
Equity as on 30th June, 2017
1,975,000.00
Add:
75000 shares issued (75000 shares @4.00 per share)
300,000.00
Profit after tax (As calculated in note 1)
775,000.00
Gain from cash flow hedging
20,000.00
1,095,000.00
3,070,000.00
Less:
dividend paid
135,000.00
Final proposed dividend
51,850.00
Employee benefits to be settled within a year
32,000.00
Bank loans repayable within 1 year
25,000.00
Bank loans repayable within 1 year
90,000.00
333,850.00
Equity as on June 30, 2017
2,736,150.00
Note 1:
Income statement of Emerald Ltd.
Particulars
Amount ($)
Amount ($)
Income:
Sales
5,120,000.00
Interest income
34,000.00
Sundry income
25,000.00
(A): Total income
5,179,000.00
Expenditures:
Cost of sales
2,465,000.00
Employee benefits expenses
856,000.00
Depreciation expenses
244,000.00
Amortization- franchise
25,000.00
Rental expense
120,000.00
Advertising expenses
147,000.00
Insurance expense
48,000.00
Freight out expense
110,000.00
Doubtful debt expense
16,000.00
Interest expense
36,000.00
Borrowing costs
9,000.00
Other expense
8,000.00
(B): total expenditures
4,084,000.00
Profit before tax (A-B)
1,095,000.00
Less: Income tax expense
320,000.00
Profit after tax
775,000.00
Amount ($)
Amount ($)
Equity share capital as on 30th June, 2017(350000 shares @5.00 each)
1,750,000.00
Retained earnings as on 30th June, 2017
225,000.00
Equity as on 30th June, 2017
1,975,000.00
Add:
75000 shares issued (75000 shares @4.00 per share)
300,000.00
Profit after tax (As calculated in note 1)
775,000.00
Gain from cash flow hedging
20,000.00
1,095,000.00
3,070,000.00
Less:
dividend paid
135,000.00
Final proposed dividend
51,850.00
Employee benefits to be settled within a year
32,000.00
Bank loans repayable within 1 year
25,000.00
Bank loans repayable within 1 year
90,000.00
333,850.00
Equity as on June 30, 2017
2,736,150.00
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