CASE EXERCISE Financial Statements of a Limited Company (adapted from FIA FFA/ ACCA Paper F3 Financial Accounting materials) Leagrave Ltd is a wholesaler of bags and accessories that has been operating for a number of years. The ledger of Leagrave Ltd. contains the following account balances as at 31 December 2020, the end of the financial year. LEAGRAVE Ltd TRIAL BALANCE AS AT 31 DECEMBER 2020 Credit Debit 150,000 120,000 80,000 20,000 38,000 235,000 402,200 Land, at cost Property, at cost Equipment, at cost Accumulated depreciation (as at 1 January 2020) on property on equipment Purchases Sales Inventory, as at 1 January 2020 Wages and salaries Selling expenses Loan interest Other operating expenses Trade payables Trade receivables Cash in hand and at bank Dividends paid 5% long-term loan Ordinary shares 1 Share premium Retained profits, as at 1 January 2020 50,000 58,800 22,600 1,500 21,300 36,000 38,000 1,600 24,000 30,000 100,000 130,000 46.600 802.800 802,800 The following additional information as at 31 December 2020 is available: a) Closing inventory has been valued at cost at 42,000. b) Depreciation for the year ended 31 December 2020 has still to be charged as follows: Property: 1.5% per annum using the straight-line method Equipment: 25% per annum using the reducing balance method c) Leagrave Ltd has decided to start using the revaluation model for land and its land is revalued to 180,000 on 31 December 2020. d) Taxation due is 8,500. It will be paid early 2021. e) Leagrave Ltd did not issue any new shares in 2020. Required: 1) Prepare Leagrave Ltd.'s a. Statement of profit or loss and the statement comprehensive income for the year ended 31 December 2020 (you may choose to prepare two separate statements or one statement that combines the two). b. Statement of changes in equity for the year ended 31 December 2020 c. Statement of financial position as at 31 December 2020 Provide all the financial statements with proper headings. Show all your workings. 2) Explain why Leagrave Ltd. might have chosen to revalue their land rather than continuing to show it at cost. Why should they carry out subsequent revaluations on a regular basis (at least at the end of each financial year) from now on