1 Below are the trial balance and notes of Amber Green Ltd. for the year ended 31st December 2020. Notes: DR CR '000 '000 Salaries and wages 104,500 Rent & rates 28,000 Inventory 1Jan 2020 21,200 Sales returns 3,620 Purchases returns 4,205 Interim dividend paid 9,500 Purchases 382,440 Sales 600,330 Administrative expenses 30,500 Distribution costs 28,750 General reserve 30,000 Land 125,000 Motor vehicle Cost 57,600 Accumulated deprec. 1 Jan 2020 30,820 1 Ordinary shares 114,000 Share premium 55,000 Retained earnings 47,500 Buildings Cost 160,000 Accumulated deprec. 1 Jan 2020 25,700 Bank 24,500 Trade receivables 37,045 Trade payables 22,300 Loan interest 7,200 8% Loan notes 90,000 1,019,855 1,019,855 1. Motor vehicles are to be depreciated by 20% using the reducing balance method. 2. Buildings are to be depreciated by 2.0% using the straight-line method. 3. The closing inventory was valued at 20.5m (before any adjustments for impairment losses). 4. Corporation tax on profits was estimated at 5.5m. 5. The company's rent and rates cost 14m per year (the company has paid rent and rates for two years, as stated on the trial balance). 6. 650,000 is to be transferred to the general reserve. 7. The inventories at year end have been said to be impaired, and the value of impairment losses has been ascertained and computed to be 6.8m. 8. On 30th June 2020 there was a bonus issue of 1 share for every 6 shares held, and this is to be taken out of the share premium account. This has not been recorded in the balances above by the company. REQUIRED: a) Prepare the following statements for the year ended 31 December 2020: i) Statement of profit and loss ii) Statement of changes in equity iii) Statement of financial position (14 marks) (5 marks) (16 marks) Show all of your working clearly. b) Explain the accruals convention and the implications of this convention for the preparation of the above financial statements. Why is accrual accounting preferred to accounting on a cash basis? (5 marks) [Total 40 marks]