Below is the trial balance for Leroza Ltd, a pharmaceuticals manufacturing company: Leroza Ltd Trial balance as at March 31, 2022 $ $ Premises 864,000,000 Machinery 209,000,000 Fixtures and fittings 40,800,000 Motor vehicles 91,000,000 Equipment 52,400,000 Accumulated depreciation: Premises 69,000,000 Accumulated depreciation: Machinery 44,700,000 Accumulated depreciation: Fixtures and fittings 9,300,000 Accumulated depreciation: Motor vehicles 24,200,000 Accumulated depreciation: Equipment 10,900,000 Trade receivables 23,300,000 Trade payables 4,600,000 Provision for bad debt 6,900,000 Bank 6,800,000 Cash 1,100,000 Investment income 2,200,000 Contingent liability 19,700,000 Revenues 2,274,000,000 6% Redeemable preference share capital 36,000,000 9% Irredeemable preference share capital 18,100,000 Retained earnings 7,200,000 Revaluation reserves 37,200,000 Ordinary share capital 84,000,000 Share premium 32,100,000 Goodwill 36,000,000 Cost of sales 1,089,000,000 Administrative expenses 306,500,000 Distribution costs 52,300,000 Other operating expenses 215,100,000 Miscellaneous expenses 37,700,000 Patent 128,000,000 Accumulated amortisation: Patent 17,600,000 Research and development costs 184,400,000 12% Mortgage 582,000,000 8% Bank loan 109,700,000 Mortgage interest payment 33,600,000 4 Closing inventory 14,900,000 Deferred tax asset 3,300,000 Overprovision of tax 600,000 3,389,600,000 3,389,600,000

The following details are deemed relevant to the preparation of the draft financial statements which are to be presented to the entitys auditors:

Property, plant and equipment

Premises is inclusive of both land and building, with the land accounting for 20% of the total value. Subsequent to a revaluation which took place on March 31, 2022, the land had a fair value of $236 million, while the building had a fair value of $855 million. The building is depreciated evenly over forty years to a nil residual value, with the charges allocated in a 3:1 ratio between administrative expenses and cost of sales. There have been no adjustments made for the revaluation relating to premises in the current period, and its effect has not been included in the accumulated temporary differences noted below. The capital allowances granted on the building to date are equivalent to the accumulated depreciation charged against it. Four months into the financial year, the entity bought a motor vehicle for $13.7 million, but included the amount in miscellaneous expenses. Motor vehicles are depreciated on a straight line basis over eight years to a nil residual value. All depreciation charges on motor vehicles are to be allocated to distribution costs. Fixtures and fittings and machinery are to be depreciated 12% on the reducing balance and 9% on cost respectively, while equipment is to be depreciated over eight years on a straight line basis down to a residual value of 10% of cost. The depreciation on fixtures and fittings is charged to other operating expenses, while for machinery as well as equipment, depreciation charges are allocated equally between cost of sales and administrative expenses. During the year, management commenced processes to sell all of its existing machinery to facilitate a major upgrade project. The sale was deemed highly probable effective July 1, 2021 when a buyer was identified. The items have a combined fair value of $93 million, with disposal costs amounting to $5.1 million. Any impairment or gain on the transaction should be recognised in other operating expenses. Included in miscellaneous expenses is a lease payment which relates to the rental of manufacturing equipment with a useful life of four years. The agreement commenced on April 1, 2021, and requires that a total of five annual payments of $8.2 million are made an eighth of which relates to maintenance expenses, and another 5% of which is attributable to insurance expenses. Maintenance and insurance expenses are ordinarily classified as other operating 5 expenses. The lease agreement also speaks to a guaranteed residual value of $1.4 million, and permits the extension of the lease by an additional two years. Management is confident that the company should receive the intended benefits from the leased asset within the agreed period, which would negate the need to extend the contract. The incremental borrowing rate is 6%, while the interest rate implicit in the lease is 200 basis points higher. The $8.2 million payment captured in miscellaneous expenses is the only record of the lease transaction that has been made to date. Also included in miscellaneous expenses is $1.1 million for legal fees incurred to draft the lease agreement on April 1, 2021, while a lease incentive of $750,000 which was received by cheque has yet to be recorded. Depreciation on the right of use asset is to be shared equally between cost of sales, administrative expenses, and other operating expenses. The entity prefers to show the leased asset separately within its property, plant and equipment for presentation purposes.

Intangible assets

The patent is to be amortised over 18 years to a nil residual value, charged to other operating expenses. On February 28, 2022, the entity acquired a brand for $94 million, but the transaction has not yet been recorded or otherwise accounted for in the books. The brand should be fully amortised over a 22-year period, with charges going to cost of sales and time-apportioned as necessary. Of the total R&D cost on record, 70% relates to research cost, while the balance relates to development. Three-eighths of the amount recognised as development cost was incurred between September 1, 2021 to November 30, 2021. The product achieved commercial feasibility as at December 1, 2021. Any capitalised development cost is to be amortised over twelve years and charged to cost of sales, with time apportionment where necessary. Any non-capitalised research and development cost should be charged to other operating expenses. Goodwill is to be impaired by 18%, with the impairment charged to other operating expenses.

Contingent liability

This amount has been recognised in other operating expenses. It relates to a lawsuit for which the chance of payout has been deemed as possible by the entitys attorneys. The treatment of the contingent liability will have no effect on the accumulated temporary differences noted below.

Debt instruments

On April 1, 2021, the company issued a 6% convertible debenture as well as a 0% loan note, with effective interest rates of 8% and 3% respectively. 6 The convertible debenture has a nominal value of $245 million and is redeemable at the end of the fourth year, while the loan note has a nominal value of $330 million, was issued at a 7.5% discount with issue costs of $3.509 million, and is redeemable after five years at a 6% premium. Only the coupon payment relating to the convertible debt instrument has been recorded so far, included in miscellaneous expenses. Additionally, there are interest sums for the existing debt obligations presently on the books that remain unaccounted for at the year end.

Equity and reserves

The par value of each ordinary share is $0.60. On the first day of the financial year, the entity decided to make a bonus issue of three new shares for every five existing shares held. Subsequently, there was a three for eight rights issue on October 31, 2021 at $1.40 per share. The market price per share at that date was $2.15. The bonus and rights issues have not yet been recorded. In the case of the bonus issue, managements preference is to preserve the retained earnings balance insofar as is possible. Dividends on the preference shares are currently unpaid and remain unaccounted for at the year end. An interim ordinary dividend amounting to $5.1 million was paid on January 1, 2022, but this is yet to be recorded. A further final ordinary dividend was declared on March 31, 2022 for $0.04 per share held as at that date; this too is yet to be accounted for. The declared dividends are expected to be paid on August 1, 2022.

Trade receivables

Of the trade receivables figure currently reported, $4.3 million relates to a receivables balance that was already paid by the customer during the prior period, but the payment was never accounted for as the monies were stolen by an accounting clerk who has gone into hiding since. Ignore the tax effect on any adjustment to be made. The provision for bad debt is to be revised to 12% of the adjusted trade receivables balance. Adjustments relating to receivables are ordinarily recorded in administrative expenses.

Discontinued operations

Included in administrative expenses is the net result of a discontinued operation. An entire division with assets costing $503 million and accumulated depreciation of $335 million was sold for $129 million. In addition to the sale, the entity also incurred redundancy costs of $66 million. The now discontinued operation made profits of $137 million before accounting for the cost of redundancies and the sale of its assets as outlined above. The appropriate taxes on the profits for this segment were already accounted for.

Inventory

A final inventory count on March 31, 2022 revealed that $123 million worth of inventory at cost had not yet been recorded. Of that amount, 7% was found to be obsolete and should be written off. Inventory purchases are ordinarily recorded in cost of sales, but any write-offs are charged to other operating expenses.

Taxation

Taxable profits reported for the current year of assessment amounted to $448 million. The overprovision on the trial balance above relates to prior year taxes which have since been paid. The entity has accumulated taxable temporary difference of $384 million, which does not include the effect of the revaluation above or unused tax credits and tax losses carried forward from previous years. These unused tax losses and credits amount to $375 million and $101 million respectively. The deferred tax asset currently reflected in the trial balance arose solely from transactions charged to the statement of profit or loss. The current corporation tax rate is 30%. REQUIRED:

a) Prepare the statement of profit or loss and other comprehensive income for the year ended March 31, 2022

b) Prepare the statement of changes in equity for the year ended March 31, 2022

c) Prepare the statement of financial position as at March 31, 2022

d) Calculate the basic earnings per share for the year ended March 31, 2022

e) Prepare all relevant workings and explanations, including, but not limited to: comprehensive listing of ALL journal entries a fixed assets schedule an intangible assets schedule an expense schedule all other appropriate supporting calculations