Section 1 – Presentation of financial statements (10 MARKS) The adjusted trial b
ID: 2533858 • Letter: S
Question
Section 1 – Presentation of financial statements (10 MARKS)
The adjusted trial balance of Timber Ltd as at 30 June 2017 is as follows:
Timber Ltd
Debit
Credit
$
$
Account names
5% debentures – due 30/11/2017(secured over inventories)
60,000
Accounts payable
447,000
Accounts receivable
850,000
Accumulated amortisation – patents & trademarks
45,000
Accumulated depreciation -
Accumulated impairment loss – goodwill
210,000
Administrative staff salaries expense
590,000
Advertising expense
70,000
Allowance for doubtful debts
71,500
Asset Revaluation Reserve - Held to maturity investment (revaluation increment on 30/06/2017 after tax deduction)
21,000
Asset Revaluation Reserve - Land (revaluation increment on 30 June 2017 - after tax deduction)
168,000
Bank loan (unsecured –long-term repayable amount)
210,000
Bank loan (unsecured –short-term repayable due)
90,000
Buildings
90,000
Buildings
1,100,000
Carrying amount of plant and machinery sold
24,000
Cash at bank
800,000
Cost of sales
2,924,000
Current tax liabilities
141,000
Debentures held in Rome Ltd (mature on 30/4/2018)
714,000
Deferred tax asset
190,000
Deferred tax liability
103,000
Deposits at call
100,000
Dividends receivable
8,000
Dividends revenue
68,000
Final dividend declared – ord
145,360
Final dividend declared - pref
45,300
Final dividend payable
190,660
Fixtures & fittings
97,000
Fixtures & fittings - at cost
243,520
Freight inwards
90,000
Freight outwards
115,000
General reserve
780,000
Goodwill
832,000
Held to maturity investment (at fair value)
145,000
Income tax expense
401,000
Interest expense
74,000
Interest payable
19,000
Interest revenue
30,000
Interim dividend paid - ord
109,020
Inventories
1,850,000
Land (at fair value)
1,476,000
Loan to Jets Ltd (due on 30/6/2025)
420,000
Mortgage loan (secured over land and buildings – due 30/9/2022)
504,000
Ordinary shares, fully paid
3,634,000
Other administrative expense
360,000
Other expenses
137,000
Other selling expense
220,000
Patents and trademarks
145,000
Plant & machinery
226,000
Plant & machinery - at cost
884,000
Preference shares, fully paid
226,500
Prepayments
50,000
Proceeds on sale of plant and machinery
50,000
Provision for annual leave
62,000
Provision for long service leave - long term liable
134,000
Provision for long service leave -short term liable
85,000
Retained earnings as at 1/7/2016
850,000
Sales returns
32,000
Sales revenue
6,968,340
Sales staff salaries and commission expense
750,000
Sundry revenue
46,200
Total Asset revaluation reserve as at 1/7/2016
364,000
Transfer to general reserve
60,000
Underwriting commission and other share issue costs
37,000
Total
15,991,200
15,991,200
Prepare a statement of profit or loss and other comprehensive income for Timber Ltd for the year ended 30 June 2017 (classify expenses by functions). Cross reference all workings
The adjusted trial balance of Timber Ltd as at 30 June 2017 is as follows:
Timber Ltd
Debit
Credit
$
$
Account names
5% debentures – due 30/11/2017(secured over inventories)
60,000
Accounts payable
447,000
Accounts receivable
850,000
Accumulated amortisation – patents & trademarks
45,000
Accumulated depreciation -
Accumulated impairment loss – goodwill
210,000
Administrative staff salaries expense
590,000
Advertising expense
70,000
Allowance for doubtful debts
71,500
Asset Revaluation Reserve - Held to maturity investment (revaluation increment on 30/06/2017 after tax deduction)
21,000
Asset Revaluation Reserve - Land (revaluation increment on 30 June 2017 - after tax deduction)
168,000
Bank loan (unsecured –long-term repayable amount)
210,000
Bank loan (unsecured –short-term repayable due)
90,000
Buildings
90,000
Buildings
1,100,000
Carrying amount of plant and machinery sold
24,000
Cash at bank
800,000
Cost of sales
2,924,000
Current tax liabilities
141,000
Debentures held in Rome Ltd (mature on 30/4/2018)
714,000
Deferred tax asset
190,000
Deferred tax liability
103,000
Deposits at call
100,000
Dividends receivable
8,000
Dividends revenue
68,000
Final dividend declared – ord
145,360
Final dividend declared - pref
45,300
Final dividend payable
190,660
Fixtures & fittings
97,000
Fixtures & fittings - at cost
243,520
Freight inwards
90,000
Freight outwards
115,000
General reserve
780,000
Goodwill
832,000
Held to maturity investment (at fair value)
145,000
Income tax expense
401,000
Interest expense
74,000
Interest payable
19,000
Interest revenue
30,000
Interim dividend paid - ord
109,020
Inventories
1,850,000
Land (at fair value)
1,476,000
Loan to Jets Ltd (due on 30/6/2025)
420,000
Mortgage loan (secured over land and buildings – due 30/9/2022)
504,000
Ordinary shares, fully paid
3,634,000
Other administrative expense
360,000
Other expenses
137,000
Other selling expense
220,000
Patents and trademarks
145,000
Plant & machinery
226,000
Plant & machinery - at cost
884,000
Preference shares, fully paid
226,500
Prepayments
50,000
Proceeds on sale of plant and machinery
50,000
Provision for annual leave
62,000
Provision for long service leave - long term liable
134,000
Provision for long service leave -short term liable
85,000
Retained earnings as at 1/7/2016
850,000
Sales returns
32,000
Sales revenue
6,968,340
Sales staff salaries and commission expense
750,000
Sundry revenue
46,200
Total Asset revaluation reserve as at 1/7/2016
364,000
Transfer to general reserve
60,000
Underwriting commission and other share issue costs
37,000
Total
15,991,200
15,991,200
Explanation / Answer
Timber Ltd Statement of Profit and Loss and Other Comprehensive Income for the year ended 30/06/2017 Account names Ref # $ $ Revenue A 69,36,340 Cost of sales -29,24,000 Gross profit 40,12,340 Other revenue B 144200 Other income (loss) C 50000 42,06,540 Selling expenses D -1040000 Administrative expenses E -1065000 Other expenses F -288000 Finance costs -74000 -2467000 Profit before income tax 17,39,540 Income tax expense -4,01,000 Profit for the period 13,38,540 Other comprehensive income: Items that will not be reclassified to profit or loss Final dividend declared – ord -1,45,360 Final dividend declared - pref -45,300 Interim Dividend paid - ordinary -1,09,020 -2,99,680 Gain arising during the year on revaluation of land Gain arising during the year on investments in equity instruments Income tax relating to items not reclassified Other comprehensive income during the year, net of tax Total comprehensive income for the year 10,38,860 Timber Ltd Balance Sheet as on 30th June, 2017 Account names Ref # $ $ SOURCES OF FUNDS 1) Owned Funds Share Capital 3634000 Preference Shares fully paid 226500 General Reserve 780000 Less: Transfer -60000 720000 Retained earnings as at 1/7/2016 850000 Add: Profits during the year 10,38,860 18,88,860 Total Asset revaluation reserve as at 1/7/2016 364000 Asset Revaluation Reserve 21000 385000 2) Borrowed Funds 5% Debentures 60000 Bank loan (unsecured –long-term) 210000 Bank loan (unsecured –short-term) 90000 Mortage Loan 504000 864000 Total Capital Employed 7718360 APPLICATION OF FUNDS Fixed Assets Land 1476000 Asset Revaluation Reserve - Land -168000 1308000 Buidings 1100000 Less: Accumulated depreciation -90000 1010000 Fixtures & fittings - at cost 2,43,520 Less: Accumulated depreciation -97000 146520 Plant & machinery - at cost 884000 Less: Accumulated depreciation -226000 658000 Patents & Trade Marks 145000 Less: Accumulated amortisation -45000 100000 Goodwill 832000 Accumulated impairment loss – goodwill -210000 622000 Investments Debentures held in Rome Ltd 714000 Deposits at call 100000 Held to maturity investment (at fair value) 145000 Accounts Receivable 850000 Allowance for doubtful debts -71500 Net Accounts Receivables 778500 Cash at Bank 800000 Inventories 1850000 Deferred Tax Asset 190000 Dividends receivable 8000 Loan to Jets Ltd 420000 Prepayments 50000 Total Current Assets G 4096500 Less: Current Liabilities Accounts Payable 447000 Current Tax Liabilities 141000 Deferred tax liability 103000 Final dividend payable 1,90,660 Interest Payable 19000 Provision for annual leave 62000 Provision for long service leave - long term liable 1,34,000 Provision for long service leave -short term liable 85,000 H 11,81,660 Net Current Assets G-H 29,14,840 TOTAL NET ASSETS 7718360 Workings Selling expenses D $ Advertising expense 70000 Other selling expense 220000 Sales staff salaries and commission expense 750000 1040000 Administrative expenses E $ Administrative staff salaries expense 590000 Freight Outwards 115000 Other Admin expenses 360000 1065000 Other expenses F Freight inwards 90000 Other expenses 137000 Underwriting commission and other share issue costs 37000 Carrying amount of plant and machinery sold 24000 288000 Revenue A Sales Less: Returns 69,68,340 -32000 69,36,340 Other revenue B Dividends Revenue Sundry Revenue 68000 Interest Revenue 46200 144200 30000 Other income (loss) C Proceeds on sale of plant and machinery 50000
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