After preparing a draft statement of profit or loss for the year ended 30 September 20X5 and adding the current years draft profit (before any adjustments required by notes (i) to (iii) below) to retained earnings, the summarized trial balance of Kandy Co as at 30 September 20X5 is:

The following notes are relevant: (i) The loan note was issued on 1 October 20X4 and incurred issue costs of $1 million which were charged to profit or loss. Interest of $18 million ($30 million at 6%) was paid on 30 September 20X5. The loan is redeemable on 30 September 20X9 at a substantial premium which gives an effective interest rate of 9% per annum. No other repayments are due until 30 September 20X9. (ii) Non-current assets: On 1 October 20X4, Kandy owned two investment properties. The first property had a carrying amount of $15 million and was sold on 1 December 20X4 for $17 million. The disposal proceeds have been credited to a suspense account in the trial balance above. On 31 December 20X4, the second property became owner occupied and so was transferred to land and buildings at its fair value of $6 million. Its remaining useful life on 31 December 20X4 was considered to be 20 years. Ignore any deferred tax implications of this fair value. The price of property has increased significantly in recent years and so the directors decided to revalue the land and buildings. The directors accepted the report of an independent surveyor who, on 1 October 20X4, valued the land at $8 million and the buildings at $39 million on that date. This evaluation specifically excludes the transferred investment property described above. The remaining life of these buildings at 1 October 20X4 was 15 years. Kandy does not make an annual transfer to retained profits to reflect the realization of the revaluation gain; however, the revaluation will give rise to a deferred tax liability. The income tax rate applicable to Kandy is 20%. Plant and equipment is depreciated at 12% per annum using the reducing balance method. No depreciation has yet been charged on any non-current asset for the year ended 30 September 20X5. (iii) A provision of $24 million is required for income tax on the profit for the year to 30 September 20X5. The balance on current tax in the trial balance is the under/over provision of tax for the previous year. In addition to the temporary differences relating to the information in note (ii), Kandy has further taxable temporary differences of $10 million as at 30 September 20X5. Required:

(a) Prepare a schedule of adjustments required to the retained earnings of Kandy Co as at 30 September 20X5 as a result of the information in notes (i) to (iii) above. (b) Prepare the statement of financial position of Kandy Co as at 30 September 20X5. Note: The notes to the statement of financial position are not required. (c) Prepare the extracts from Kandy Cos statement of cash flows for operating and investing activities for the year ended 30 September 20X5 which relate to property, plant and equipment.

The following mark allocation is provided as guidance for this question: (20 marks)

$'000 $'000 20,000 15,500 30,000 20,000 35,000 58,500 20,000 Equity shares of $1 each Retained earnings as at 30 September 20X5 Proceeds of 6% loan note (note (1)) Investment properties at fair value (note (ii)) Land ($5 million) and buildings at cost (note (ii)) Plant and equipment at cost (note (ii)) Accumulated depreciation at 1 October 20X4: buildings plant and equipment Current assets Current liabilities Deferred tax (notes (ii) and (iii)) Interest paid (note (i)) Current tax (note (iii)) Suspense account (note (ii)) 34,500 68,700 43,400 2,500 1,800 1,100 17,000 184,000 184,000 $'000 $'000 20,000 15,500 30,000 20,000 35,000 58,500 20,000 Equity shares of $1 each Retained earnings as at 30 September 20X5 Proceeds of 6% loan note (note (1)) Investment properties at fair value (note (ii)) Land ($5 million) and buildings at cost (note (ii)) Plant and equipment at cost (note (ii)) Accumulated depreciation at 1 October 20X4: buildings plant and equipment Current assets Current liabilities Deferred tax (notes (ii) and (iii)) Interest paid (note (i)) Current tax (note (iii)) Suspense account (note (ii)) 34,500 68,700 43,400 2,500 1,800 1,100 17,000 184,000 184,000