Entity A is an information technology business which is listed in Hong Kong. The employment market is keen in this year. The previous accountant resigned on 1 April 2020 suddenly and the position was kept vacant until 31 March 2021. Thus, Entity A did not keep completed accounting records for the period from 1 April 2020 to 31 March 2021. Entity A needs to prepare the financial statements for the year ended 31 March 2021 in order to fulfil the financial reporting requirements. Kat Li (Kat) is the managing director of Entity A. The new accountant, June Chan (June) was employed by kat on 1 April 2021. June worked very hard to find any useful information to facilitate the preparation for financial statements as at 31 March 2021. The information which was found by June are listed as below: (1) Statement of Financial Position as at 31 March 2020 Entity A Statements of Financial Position as at 31 March 2020 $ $ Assets Non-current assets Office equipment 10,500,000 Current assets Inventory 16,600,000 Trade receivables 5,500,000 Bank 2,860,000 Total assets 35,460,000 Equity and Liabilities Ordinary share capital Retained earnings Total equity 27,000,000 1,260,000 28,260,000 Current liabilities Trade payables Accrued rent Total liabilities 6,300,000 900,000 7,200,000 35,460,000 Total equity and liabilities (2) Cash deposit into the bank during the year: $ From customers 42,540,000 Short-term bank loan 8,300,000 Proceeds from the sale of office equipment 1,200,000 (3) Cash paid out from bank during the year: $ Supplier 32,190,000 Rental expenses 1,100,000 Office expenses 5,750,000 Kat's private use 7,000,000 Purchases of office equipment 7,800,000 (4) On 31 March 2021, the carrying amounts of: $ Trade receivables 6,500,000 Inventory 23,800,000 Trade payables 9,850,000 June also found some additional useful information. First of all, a rent of $1,200,000 was owed to the property owner on 31 March 2021. The 6-month bank loan was approved and received on 1 January 2021. The interest rate was 10% annually. In this accounting period, cash of $2,400,000 was taken out and paid for purchases of inventory and cash of $1,200,000 was also taken out for Kat's private use before banking the cash received from customers. Kat's private use will be repaid on or before 31 March 2022. All office equipment was purchased on 1 April 2019 at $15,000,000. The original cost and carrying amount of the disposed office equipment were $4,500,000 and $3,150,000 respectively. The depreciation policy of office equipment is the straight-line method of 30%. The effective profits tax rate is 16.5%. REQUIRED: If you are June, in accordance with HKAS 1 (Revised) Presentation of Financial Statements, prepare: 1. Statement of Profit or Loss and Other Comprehensive Income of Entity A for the year ended 31 March 2021; and 2. Statement of Financial Position of Entity A as at 31 March 2021. ANSWERS: Entity A Statements of Profit and Loss and Other Comprehensive Income for the period ended 31 March 2021 $ $ Revenue Cost of sales Opening inventory Add: Purchases Less: Closing inventory Gross profit Operating expenses Rent Office expenses Interest expense Depreciation Loss on disposal Profit before tax Taxation (16.5%) Profit after tax Statements of Financial Position as at 31 March 2021 $ $ Assets Non-current assets Office equipment, net Current assets Inventory Trade receivables Amount due from Kat Bank Total assets Equity and Liabilities Equity Ordinary share capital Retained earnings Profit for the year Total equity Current liabilities Accrued rent Bank loan Interest payable Trade payables Tax payable Total liabilities Total equity and liabilities