Bell Pty Limited ("Bell") commenced business on 1 January 2010. Bell currently does not prepare its financial statements in accordance with International Financial Reporting Standards (IFRS). The following items have been extracted from Bell's Final Accounts for the year ended 31 December 2016:

Expenses

Natural disaster expense $30 000

Research and development expense $ 125 000

Net income before income tax $500 000

Distributions

Dividend proposed $50 000

Statement of Financial Position at 31 December 2016:

Assets

Share investment (25 000 shares in Eddy Ltd) $30 000

Inventories 265 000

Liabilities

Dividend payable $50 000

Provision for natural disaster $30 000

Net assets $625 750

Equity

Share capital $100 000

Retained earnings 525 750

$625 750

Bell must now translate some of its accounts into IFRS. Adjustments relating to this

question are summarised below:

1. Bell's management is conservative in its accounting values and decided to make a provision of $30 000 for any future natural disaster that may occur. However, at 31 December 2016 there was no contractual obligation to incur any expenditure due to natural disasters. Hence, this provision for natural disaster cannot be recognised.

2. At year-end 2016, the cost of inventories of Bell are assigned by using the last-in, first- out (LIFO) cost formula. The cost of inventories using LIFO is $265 000. To apply IFRS, in accordance with IAS 2, Bell have to use the first-in, first-out (FIFO) cost formula to value its inventories. The cost of inventories using FIFO is $205 000.

3. Of the $125 000 research and development expense, $50 000 satisfies the IFRS criteria to carry forward (i.e. can be recognised as an intangible asset).

4. IFRS requires financial assets such as short-term investments to be measured at market value. The share investment is held for short-term profit-making purposes. As at the reporting date, shares in Eddy Limited were trading on the local securities exchange at $1.50 each.

5. The directors of Bell have recommended that a dividend of $50 000 be paid in respect of the 2016 financial year. The dividend is required to be approved by the company's shareholders. As of the reporting date the shareholders had not met to approve this dividend, but the directors have recorded $50 000 as dividend to be paid anyway.

Required:

a) Prepare the necessary General Journal entries (Dr/Cr) to adjust the books of Bell Ltd to reflect the requirements of IFRS as at 31 December 2016. Narrations are not required. (10 marks)

b) Calculate the revised net profit before income tax for the year ended 31 December 2016. (5 marks)