From the information below:
- List all double entries to record the above adjustments to the financial statements
- Prepare the statement of comprehensive income for ACRYLO for the year ended 31 March 2020
- Prepare the statement of changes in equity
- Prepare the statement of financial position for ACRYLO as at 31 March 2020
- Prepare Notes and explanations to the statement of comprehensive income and statement of financial position.
- Reference should be made to applicable IASs and IFRSs, the treatment necessary according to that standard, conditions & disclosure requirements.
The following trial balance related to ACRYLO at 31 March 2020:
Revenue 1,634,000
Purchases 800,000
Opening Inventory 43,000
Distribution costs 8,000
Administrative expenses 26,000
Investment property (NBV) 240,000
Interest paid on loan 3,000
Dividends paid on equity shares 8,240
Land 500,000
Labour costs 96,000
Property, plant and equipment at cost 31/03/2019 55,000
Accumulated depreciation at 31/03/2019 25,850
Machinery 125,000
Accumulated depreciation at 31/03/2019 12,500
Trade receivables 553,000
Cash and cash equivalents 20,000
Trade payables 418,500
Long term interest bearing borrowings 50,000
Lease rentals 20,000
Issued equity capital 377,390
Facility 50,000
Retained earnings at 31 March 2019 29,000
2,547,240 2,547,240
Note 1 Inventory for the year end amounted to 30,000. Due to a lack of space in the warehouse some inventory was stored in a secure yard. Included in the year end figure is inventory valued at cost of 855. However, due to bad weather before Christmas, this inventory of 855 has deteriorated. It could be sold for 1,300 if 270 was spent to make it suitable for sale. Note 2 ACRYLO prepared accounts for the year ended, however, a trade receivable that owed Acrylo 2,500 at 31 March 2020 went into liquidation on 2 April 2020. The directors do not expect to Recover any of this debt. A new factory costing 100,000 was also purchased in April 2020. The directors believe all these amounts are material. Note 3 Under new health and safety legislation, ACRYLO is required to install a new air-conditioning system at a cost of 100,000 to disperse fumes from the machines it uses. The final deadline for installation was 30 November 2019. Non-compliance will result in a fine of 60,000. The air-conditioning system had not been installed by the reporting date. Note 4 ACRYLO's main supplier is laminate Ltd. An agreement between the companies entitles Acrylo to a 5% rebate on purchases over 250,000 from laminate Ltd. In the year ended 31 March 2020, Acrylo purchased 360,000 of material from Laminate Ltd.. Acrylo has an excellent relationship with Laminate Ltd over a period of years and the rebate has been paid in full in the past. Note 5 - Long term interest bearing borrowings On 1 April 2019 Delta borrowed 50,000 for five years. The market interest rate on loans at this time was 8%. Note 6 - Tax The final estimated income tax on the profits for the year to 31 March 2020 is 20,000. Note 7 The company has an item of land carried in its books at 500,000. Two years ago a slump in land values led the company to reduce the carrying value from 600,000. This was taken as an expense in profit or loss. There has been a surge in land prices in the current year, however, and the land is now worth 700,000. Note 8 During the accounting year, ACRYLO embarked on a significant expansion programme that involved the employment of an additional 40 staff. The government is providing grants towards the cost of employing additional staff at a rate of 5,000 for each new employee in the year that the employment commences to try to get the economy moving again due to difficulties facing companies due to Covid Note 9 - property, plant and equipment Details are as follows: Plant & Buildings equipment 28,000 27,000 Cost of Asset Estimate of useful economic life at purchase date Accumulated depreciation at 31/03/2019 50 years 4 years 5,600 20,250 On 1 April 2020 the open market value of the property was 32 million relating to the building. The directors wish to reflect this revaluation in the financial statements, but no entries regarding the revaluation have yet been made. The original estimate of the useful economic life of the building is still considered valid. No depreciation has been charged. All depreciation is to be charged to cost of sales. Note 10 The fair value of the leased machine at the 31 March 2020 was 140,000. The machine has an expected useful life of 5 years. The lease term is 4 years, with four annual payments of 37,664, payable in arrears. The effective rate of interest is 3%. No entries were made in respect of this lease. Note 11 An investment property measured using the fair value model was sold for cash on 31 December 2019 for 217,500. The property had originally cost 300,000 and had accumulated depreciation at the disposal date of 64,000. The disposal has not been recognised in the books to date. Note 12 ACRYLO is developing a new production process. During the accounting year, expenditure incurred was 60,000 (included in administrative expenses) of which 40,000 was incurred before 31 December 2019 and 20,000 between 1 January 2020 and 31 March 2020. ACRYLO can demonstrate that at 1 January 2020, the production process met the criteria for recognition as an intangible asset. Note 13 Employee benefits At 1 April 2019: Fair value of the assets of a defined benefit plan were valued at 600,000 and the present value of the defined benefit obligation was 660,000. (Opening balance is included in trade payables). On 31 March 2020: Plan received contributions from the employer of 120,000 and paid out benefits of 60,000. The current service cost for the year was 50,000 Discount rate of 5% is to be applied to the asset and liability. At 31 March 2020 the fair value of the plan's assets was 570,000. The present value of the defined benefit obligation was 445,000. No record of these transactions have been made for the year Note 1 Inventory for the year end amounted to 30,000. Due to a lack of space in the warehouse some inventory was stored in a secure yard. Included in the year end figure is inventory valued at cost of 855. However, due to bad weather before Christmas, this inventory of 855 has deteriorated. It could be sold for 1,300 if 270 was spent to make it suitable for sale. Note 2 ACRYLO prepared accounts for the year ended, however, a trade receivable that owed Acrylo 2,500 at 31 March 2020 went into liquidation on 2 April 2020. The directors do not expect to Recover any of this debt. A new factory costing 100,000 was also purchased in April 2020. The directors believe all these amounts are material. Note 3 Under new health and safety legislation, ACRYLO is required to install a new air-conditioning system at a cost of 100,000 to disperse fumes from the machines it uses. The final deadline for installation was 30 November 2019. Non-compliance will result in a fine of 60,000. The air-conditioning system had not been installed by the reporting date. Note 4 ACRYLO's main supplier is laminate Ltd. An agreement between the companies entitles Acrylo to a 5% rebate on purchases over 250,000 from laminate Ltd. In the year ended 31 March 2020, Acrylo purchased 360,000 of material from Laminate Ltd.. Acrylo has an excellent relationship with Laminate Ltd over a period of years and the rebate has been paid in full in the past. Note 5 - Long term interest bearing borrowings On 1 April 2019 Delta borrowed 50,000 for five years. The market interest rate on loans at this time was 8%. Note 6 - Tax The final estimated income tax on the profits for the year to 31 March 2020 is 20,000. Note 7 The company has an item of land carried in its books at 500,000. Two years ago a slump in land values led the company to reduce the carrying value from 600,000. This was taken as an expense in profit or loss. There has been a surge in land prices in the current year, however, and the land is now worth 700,000. Note 8 During the accounting year, ACRYLO embarked on a significant expansion programme that involved the employment of an additional 40 staff. The government is providing grants towards the cost of employing additional staff at a rate of 5,000 for each new employee in the year that the employment commences to try to get the economy moving again due to difficulties facing companies due to Covid Note 9 - property, plant and equipment Details are as follows: Plant & Buildings equipment 28,000 27,000 Cost of Asset Estimate of useful economic life at purchase date Accumulated depreciation at 31/03/2019 50 years 4 years 5,600 20,250 On 1 April 2020 the open market value of the property was 32 million relating to the building. The directors wish to reflect this revaluation in the financial statements, but no entries regarding the revaluation have yet been made. The original estimate of the useful economic life of the building is still considered valid. No depreciation has been charged. All depreciation is to be charged to cost of sales. Note 10 The fair value of the leased machine at the 31 March 2020 was 140,000. The machine has an expected useful life of 5 years. The lease term is 4 years, with four annual payments of 37,664, payable in arrears. The effective rate of interest is 3%. No entries were made in respect of this lease. Note 11 An investment property measured using the fair value model was sold for cash on 31 December 2019 for 217,500. The property had originally cost 300,000 and had accumulated depreciation at the disposal date of 64,000. The disposal has not been recognised in the books to date. Note 12 ACRYLO is developing a new production process. During the accounting year, expenditure incurred was 60,000 (included in administrative expenses) of which 40,000 was incurred before 31 December 2019 and 20,000 between 1 January 2020 and 31 March 2020. ACRYLO can demonstrate that at 1 January 2020, the production process met the criteria for recognition as an intangible asset. Note 13 Employee benefits At 1 April 2019: Fair value of the assets of a defined benefit plan were valued at 600,000 and the present value of the defined benefit obligation was 660,000. (Opening balance is included in trade payables). On 31 March 2020: Plan received contributions from the employer of 120,000 and paid out benefits of 60,000. The current service cost for the year was 50,000 Discount rate of 5% is to be applied to the asset and liability. At 31 March 2020 the fair value of the plan's assets was 570,000. The present value of the defined benefit obligation was 445,000. No record of these transactions have been made for the year
