16. The balances below have been extracted from the accounting records of Ings Ltd at 31 December 2020: You are given the following information: i. Dr Cr 3,000,000 The land was purchased in 2010 for 3,000,000. It was externally valued at 4,500,000 on 31 December 2020. The directors wish to include this figure in the accounts ii 120,000 400,500 Inventory at 31 December 2020 cost 400,000. This includes some slow-moving items which cost 18,000 which would normally sell for 25,000 but which the directors have decided to sell at 13,000 to clear them. 3,087,000 ill. 3,000,000 12,000,000 The company's depreciation policy is to provide a full year's depreciation in the year of acquisition and no depreciation in the year of disposal with the following rates applicable to the non-current assets: 3,000,000 a. Freehold land - no depreciation required. b. Buildings - 2% per year on a straight-line basis. C. Plant and machinery - 10% on a reducing balance method. 5,625,000 3,510,000 iv. A bad debt of 40,000 is to be written off. The company has decided to maintain the provision for doubtful debts at 5% of remaining trade receivables. 780,000 8% Debenture loan: repayable in 2026 Prepayment on building insurance Bank account Retained profits at 1 January 2020 Freehold land Buildings: cost Buildings: accumulated depreciation at 1 January 2020 Plant & machinery: cost Plant & machinery: accumulated depreciation at 1 January 2020 Trade payables Trade receivables Return outwards Inventory at 1 January 2020 Revenue Purchases Debenture interest Return inwards Provision for doubtful debts Distribution costs Administrative expenses Ordinary shares of 1 each Share premium V. The prepayment on building insurance on 31 December 2020 was 100,000. 675,000 57,000 vi. 357,000 7,500,000 vii. Corporation Tax of 120,000 on the current year's profits is to be provided. An audit fee for 30,000 would also need to be provided. The company issued 20,000 additional shares at 2.50 each on 30 December 2020. The proceeds were paid as year-end bonuses to employees. No entries have been made in the company's accounting records in respect of this transaction. 4,800,000 120,000 96,000 97,500 vill. There was no movement on the debenture account in 2020. Any unpaid interest has yet to be accrued for. 570,000 768,000 Required: 6,750,000 750,000 (a) Prepare the Statement of Financial Position and the Income Statement for the year ended 31 December 2020 for the directors. 28,531,500 28,531,500 (b) "Accounting rules give financial institutions flexibility about when they choose to recognize profits." Discuss the statement above illustrating your discussion with the use of two examples