Additional information:

1 The companys income taxation for the 2019 year is at 28%.

Note: the company made no profit in the year to 31 March 2018 and consequently no tax was payable, nor was a dividend declared. This was due to the world economic downturn.

2 Valuation of inventories is set at the lower of cost and net realisable value. Cost for finished goods and materials is determined on a FIFO basis.

3 On 10 May 2019 there was a fire in the companys storeroom, which destroyed inventory costing $50,000. Insurance company assessors have stated that only $40,000 of the resulting claim can be met.

4 Employee expenses include a total of $85,000 in redundancy payments resulting from company-wide staff reductions during the financial year ended 31 March 2019. All company operations have been maintained during the year at the reduced staff level. A decision on a further round of staff cuts is to be made before the end of the 2020 financial year. These will have an expected cost of approximately another $85,000.

5 The company provides depreciation on a straight-line basis on cost or re-valued amounts. Residual values of all depreciated assets are nil.

6 The allowance for doubtful debts is provided at 1.25% of average accounts receivable. The bad debts arose from the bankruptcy of a major customer in February 2019.

7 Goodwill, originally costing $300,000, has been written down in value due to impairment, to $250,000 as at 1 April 2018. A further impairment adjustment of $50,000 is to be made on this written down value for the year ended 31 March 2019.

8 During the current accounting year the company undertook extensive market research activities costing $25,000 on a potential new toy, included in the balances above. This market research confirmed that there is perceived market interest potential in the new product and work has already begun on its development.

9 Educational Toys Limited is being sued for an infringement of the Employment Contracts Act. It is clear that the company has infringed the law and an out of court settlement was being negotiated at 31 March 2019. Agreement was reached between the parties on 9 May 2019 and has resulted in a payment of $50,000 by Educational Toys Limited to the aggrieved employee.

10 An independent valuation of the companys land and buildings was made on 29 March 2019. Valuation details are:

Land $2,500,000

Buildings $2,500,000

Total $5,000,000

The company has requested that this revaluation be reflected in the financial statements at 31 March 2019. This revaluation excludes any effect of the current building alterations in progress and also has no effect on the depreciation charge for the year that has already been made.

The breakdown of the previous valuation for land and buildings was:

Land $2,000,000

Buildings $1,725,000

Total $3,725,000

11 The contract price for the building alterations was $2,200,000.

12 The business banks with ANZ Bank and has an overdraft limit of $75,000. Interest is charged at 10% per annum. The loan with ANZ Bank was contracted on 30 September 2018 at 6% interest per annum and is due to be repaid in full on 30 September 2031. No interest for the current period has been accounted for yet.

13 At 1 April 2018 there were the following balances:

6,000,000 Issued Ordinary Shares of $1 $6,000,000

Building revaluation reserve $ 225,000

Retained earnings $1,396,850

14 On 15 January 2019 the companys directors approved an interim dividend of 5 cents per share. No entries have been made in the companys accounts for these details. These dividends are due to be paid on 1 May 2019.

15 A final dividend of 5% on issued and paid-up capital is to be recommended to shareholders for approval at the AGM on 15 July.

Educational Toys Limited is a company operating out of Petone. They sell childrens toys to outlets all over New Zealand. The company qualifies for differential reporting.

Assume the directors (who are also shareholders) insist on appropriate compliance with the Companies Act 1993, the Financial Reporting Act 2013 and current NZ International Accounting Standards (NZIAS), where relevant.

X Educational Toys Limited Trial Balance as at 31 March 2019 Bank Overdraft 70,050 Accounts receivable Allowance for doubtful debts Inventory Shares in Timber Supplies Ltd (market value) Land & buildings (at valuation 31.3.2018) Accumulated depreciation- Buildings Building extension-progress payment Motor vehicles, at cost Accumulated depreciation- Motor vehicles Office equipment, at cost Accumulated depreciation- Office equipment Goodwill (net of previous impairment write downs) Development expenditure Accounts payable GST liability Loan Issued share capital(1.4.18) Land & Buildings revaluation reserve(1.4.18) Retained earnings (1.4.18) 1,295,200 15,500 3,284,500 1,600,000 3,725,000 362,500 2,000,000 285,000 91,300 217,500 139,500 250,000 90,000 200,200 51,750 620,000 6,000,000 225,000 1,396,850 16,589,350 80,000 Sales Dividends received Cost of goods sold Advertising Distribution expenses Audit fees Depreciation Directors' fees Employee expenses Telecommunications Research expenditure Bad debts Interest on overdraft 10,905,000 527,500 630,000 270,000 112,800 75,000 465,800 21,500 25,000 55,000 7,200 25,842,000 25,842,000 X Educational Toys Limited Trial Balance as at 31 March 2019 Bank Overdraft 70,050 Accounts receivable Allowance for doubtful debts Inventory Shares in Timber Supplies Ltd (market value) Land & buildings (at valuation 31.3.2018) Accumulated depreciation- Buildings Building extension-progress payment Motor vehicles, at cost Accumulated depreciation- Motor vehicles Office equipment, at cost Accumulated depreciation- Office equipment Goodwill (net of previous impairment write downs) Development expenditure Accounts payable GST liability Loan Issued share capital(1.4.18) Land & Buildings revaluation reserve(1.4.18) Retained earnings (1.4.18) 1,295,200 15,500 3,284,500 1,600,000 3,725,000 362,500 2,000,000 285,000 91,300 217,500 139,500 250,000 90,000 200,200 51,750 620,000 6,000,000 225,000 1,396,850 16,589,350 80,000 Sales Dividends received Cost of goods sold Advertising Distribution expenses Audit fees Depreciation Directors' fees Employee expenses Telecommunications Research expenditure Bad debts Interest on overdraft 10,905,000 527,500 630,000 270,000 112,800 75,000 465,800 21,500 25,000 55,000 7,200 25,842,000 25,842,000