Gellibrand Ltd. is a business in a local suburb that makes and sells a range of equipment and accessories for recreational fishing across Australia. The company has approached you for some help in preparing its year-end financial reports. To you assist you, it has provided the following information:

The company also provides some additional information. Some of that provided below has been recorded in the above trial balance, while some has not. Also, be aware that there is some reason to doubt the quality of the bookkeeper the company uses to prepare the trial balance. Buildings are depreciated on a straight-line basis over a period of 45 years; Equipment is depreciated at 25% annually using the reducing balance method over a period of 10 years. The company has deemed the depreciable value of buildings was 90% of the cost. Three months interest on the (5%) note has been incurred and remains unrecorded at year-end; Year-end count reveals that supplies on hand were valued at $36,411; The company tax rate is 30% of profit; The company estimates that a further $42,450 revenue has been earned but has not yet been recorded and has not been billed; A count of inventory on hand revealed an amount of $41,975 at year-end; The business declared a final dividend of $32,000, but has not recorded this amount as it will not be paid until March 2020 - in the form of additional shares; The notes payable are to be repaid in full at the end of the term of the loan (6 years); A current debtor who owes the company $8,950 has gone into liquidation and the company concludes this amount will not be recovered. Further, the company advises that they have completed an aged debtors analysis and based on this analysis, they conclude that the year end balance of the provision for doubtful debts should be 7 per cent of the final balance of accounts receivable. The company has also spent $30,000 in researching and developing new products during the year which it has recorded as a debit to other expenses. As yet none of these products or the associated techniques used have been registered or commercialized by the company in any way, although the CEO, Molly, believes this money is well spent and has created significant possibilities for the companys future.

REQUIRED: (a) Use the above information and prepare properly labeled journal entries to record ALL adjustments required in preparing the financial statements. In performing any calculations, where appropriate round to the nearest dollar. Include brief narrations. (10 marks)

(b) Explain briefly your treatment of the research and development expenditure. In doing so, support your treatment with reference to relevant accounting guidance/concepts covered in the subject to date. If you feel that classifying this item is difficult, identify any additional information you feel would assist you to be absolutely certain about how to classify the expenditure in the financial reports. (3 marks)

(c) Prepare an appropriately formatted Income Statement for the year ending December 31 for Gellibrand Ltd. In doing so, include all information and elements of formatting (including subheadings) you would typically see on the face of such reports (no note disclosures are required). (10 marks)

(d) Prepare an appropriately formatted Balance Sheet as at December 31 for Gellibrand Ltd. In doing so, include all information and elements of formatting (including subheadings) you would typically see on the face of such reports (no note disclosures are required). (12 marks) Cont. over

(e) In recent years the financial reporting function has come under challenge with many arguing that the major financial reports do not contain some of the key information that users require in order to make more informed decisions about a business. Discuss the above statement. Your answer could include a critical evaluation of the form and content of current financial reports and consideration of any additional information that could be included in financial reports to enhance decision making. (15 marks)

Gellibrand Ltd Trial Balance for the period ending 31 December 2019 DR Account 136,560 3,600 594,600 11,600 1,377,440 845,342 112,400 553,200 12,900 35,000 39,500 Accounts payable GST payable Accum. Depreciation: Building (bal 30/6/2019) Cash and Cash equivalents Building (cost) Wages and Salaries Dividends (paid during the year) Equipment (cost) Sales retums Supplies on hand Interest on loan (incurred & paid during the year) Inventory Land Cost of Goods Sold Notes payable Accum. Depreciation: Equipment (bal 31/12/2018) Prepayments (current) Contributed equity ($1 per share) Rent expense Accounts receivable Retained earnings (bal 31/12/2018) Sales Other expenses Depreciation expense Building Provision for Doubtful debts 44,200 726,600 2,110,400 940,000 184,484 79,610 900,000 46,800 198,200 96,360 3,615,330 281,426 13,774 7,480,655 17,458 5,496,132