DR Question 2 [30 Marks] a. Metsi Ltd has prepared an initial trial balance for the year ended 31 March 2019 as follows: CR Revenue 1 403 000 Purchases 637 500 Distribution costs 286 100 Administration expenses 280 600 Land-cost 600 000 Buildings-cost 700 000 Plant and equipment-cost 545 000 Accumulated depreciation 31/03/18: Buildings 280 000 Plant and equipment 326 700 Inventory at 31/03/18 452 900 Trade receivables 419 200 Cash 15 900 Ordinary shares 500 000 Preference shares 100 000 Retained earnings at 31/03/18 978 6000 Trade payables 348 900 3937 200 3937 200 The following additional information is available: 1. On 31 January 2019 Metsi Ltd purchased goods from a South African company for an agreed price of R140 000. This was correctly recorded at the prevailing exchange rate. The invoice is due for payment on 30 April 2019. BWPIZAR exchange rates have been as follows: BWP ZAR 31 January 2019 1 2.5 31 March 2019 1 2.0 2. Inventory on hand at 31 March 2019 was valued at P525 000. Goods with a selling price of P5 000, which had cost P4 000, were dispatched to a customer on 15 March 2019. These goods were rejected by the customer on 30 March 2019 and returned to Metsi Ltd which received them on 2 April 2019 and accepted them as a valid return. 3. On 1 April 2018 Metsi Ltd entered into a 25-year lease of land and buildings. The building has a useful life of 25 years and is to be used for additional office space. The lease agreement provided for annual payments of P20 000, which commenced on the first day of the lease. The fair value of the leasehold interest has been estimated at P425 000. The present value of the minimum lease payments for the land and buildings is also P425 000. Metsi Ltd has charged the whole of the P20 000 paid on 1 April 2018 to administrative expenses and has made no other entries in respect of this lease. The interest rate implicit in the lease is 2% 4. Metsi Ltd carried out a revaluation exercise on its owned land and buildings on 1 April 2018. The land was valued at P800 000 and the buildings at P900 000. The remaining useful life of the buildings at the revaluation date was 30 years. No adjustment has been made to the ledger accounts for the revaluation. Metsi Ltd does not plan to make annual transfers between the revaluation surplus and retained earnings 5. Depreciation on buildings, plant and equipment has yet to be charged. Metsi Ltd charges depreciation on a straight-line basis as follows: Owned buildings over 50 years (presented in administrative expenses) Plant and equipment - at a rate of 20% p.a. on cost (presented in cost of sales) 6. The 5% dividend for the year on the irredeemable preference shares was declared on 31 March 2019. Preference dividends are non-mandatory. No ordinary dividend is to be paid. 7. The income tax charge for the year has been estimated at P26 500 cequired repare a statement of profit or loss for Metsi Ltd for the year ended 31 March 2019 and statement of financial position as at that date in a form suitable for publication. [20 Marks]
