Question 8: Preparation and Presentation of the Income Statement Dodgy Limited h

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Question 8: Preparation and Presentation of the Income Statement Dodgy Limited has just employed you as the new finance director. The first task you have been assigned to complete is to prepare the income statement for the 12-month period ended March 31, 2018 On your desk on your first day, the previous finance director left valuable information to complete the task 1. During the year Dodgy Limited - a company that sells dishwashers- sold a total of 13,187.,000 units at an average sales price of $41.25 2. The old finance director also indicated that direct labour, direct material and applied overhead were 3. Following is a list of other expenses incurred by the company equal to 20%, 12% and 25% of total sales revenue. Expense Account Advertising and Marketing Costs Sales Entertainment Selling Insurance Office Repairs and Maintenance Office Depreciation Wages of General Operations Staff Salaries Sales Staff Administrative Travel Costs Total Incurred $5,512,000.00 $2,561,000.00 $690,000.00 $1.590,000.00 $14,457,000.00 $12,801,000.00 $11,036,000.00 $1,260,000.00 4. On January 1, 2018, the company sold a piece of equipment held for investment and recognized a loss an the sals of $4,221,000. 5. The company also enjoyed revenue from other sources noted as: Other Income totalling $9,050,000 6. On April 1, 2017, the company sold land that resulted in a loss of $4,891,000 7. If the company reports a profit during the year, the effective corporate tax rate is 25%. If a loss is 8. The company incurred finance interest charges during the accounting period of $22,890,000 9. The company is involved in joint venture operations. As a result of goof financial conditions, the 10. From the operations of its associate firms, the company expects to record a net gain of $42,287,000 and Interest Revenue totalling $8,661,000. reported the effective tax rate is zero. company recorded a net gain of S6,079,000 from its share of the joint venture operations. for the financial period ended March 31, 2019. Required: Using the information supplied, prepare an income statement for Dodgy Limited for the accounting period that conforms with IFRS IAS I requirements and recommendation. (Hint: Expenses should be classified by function (e.g., cost of goods sold) not by nature.

Explanation / Answer

Gain from Associate and Joint Venture shall be taken into account in the consolidated financial statements as per Equity method of accounting, In that case the income statement shall be presented as follows:

Particulars Refer Note Amount in $ Revenue from Operations       543,963,750 Revenue from other sources 1           8,661,000 Total Revenue(I)     552,624,750 Less Expenses Cost of Goods Sold 2       310,059,338 Finance Cost       228,900,000 Other Expenses 3         49,907,000 Loss on Sale of Invesment           4,221,000 Loss on Sale of Land           4,891,000 Total Expenses(II)     597,978,338 Profit for the year (I) - (II) before tax        (45,353,588) Tax                     -   Profit after tax        (45,353,588) Note 1 Revenue from Other Sources Other Income           9,050,000 Interest Revenue           8,661,000 Note 2 Cost of Goods Sold Direct Labour       108,792,750 Direct Material         65,275,650 Applied Overheads       135,990,938 Total     310,059,338 Note 3 Other Expenses Advertising and Marketing Costs           5,512,000 Sales Entertainment           2,561,000 Selling Insurance             690,000 Office Repairs and Maintenance           1,590,000 Office Depreciation         14,457,000 Wages of General Operation Staff         12,801,000 Salaries of Sales Staff         11,036,000 Administrative Travel Costs           1,260,000 Total Other Expenses       49,907,000

Gain from Associate and Joint Venture shall be taken into account in the consolidated financial statements as per Equity method of accounting, In that case the income statement shall be presented as follows:

Particulars Refer Note Amount in $ Revenue from Operations       543,963,750 Revenue from other sources 1           8,661,000 Gain from Joint Venture           6,079,000 Gain from associates         42,287,000 Total Revenue(I)     600,990,750 Less Expenses Cost of Goods Sold 2       310,059,338 Finance Cost       228,900,000 Other Expenses 3         49,907,000 Loss on Sale of Invesment           4,221,000 Loss on Sale of Land           4,891,000 Total Expenses(II)     597,978,338 Profit for the year (I) - (II) before tax           3,012,413 Tax         753,103.13 Profit after tax           2,259,309 Note 1 Revenue from Other Sources Other Income           9,050,000 Interest Revenue           8,661,000 Note 2 Cost of Goods Sold Direct Labour       108,792,750 Direct Material         65,275,650 Applied Overheads       135,990,938 Total     310,059,338 Note 3 Other Expenses Advertising and Marketing Costs           5,512,000 Sales Entertainment           2,561,000 Selling Insurance             690,000 Office Repairs and Maintenance           1,590,000 Office Depreciation         14,457,000 Wages of General Operation Staff         12,801,000 Salaries of Sales Staff         11,036,000 Administrative Travel Costs           1,260,000 Total Other Expenses       49,907,000

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