Question
Harry Bhd, a public listed company based in Klang Valley, manufactures a wide variety of cooking utensils for household use. The following is the trail
Harry Bhd, a public listed company based in Klang Valley, manufactures a wide variety of cooking utensils for household use. The following is the trail balance of Harry Bhd as at 31 December 2020:
Debit | Credit | |
'000 | '000 | |
Sales revenue | 60,100 | |
Investment income | 1,400 | |
Cost of sales | 25,112 | |
Administrative expenses | 5,600 | |
Selling and distribution expenses | 8,680 | |
Ordinary dividends paid | 1,420 | |
Interest paid (Note iv) | 2,400 | |
Ordinary share capital | 10,380 | |
Retained earnings (1/1/2020) | 15,980 | |
Account payable | 4,308 | |
Allowance for doubtful debts | 512 | |
Bank | 6,900 | |
Account receivable | 23,200 | |
Inventory (31/12/20) | 17,768 | |
Property, plant and equipment (carrying value at 01/01/20)(Note i) | 36,800 | |
Investment property (01/01/20) (Note iii) | 12,000 | |
6% Loan note (Note iv) | 40,000 | |
Deferred taxation (at 01/01/20) (Note v) | 6,300 | |
Income Tax paid | 900 | |
Total | 139,880 | 139,880 |
The following notes are relevant:
(i) Included within property, plant and equipment is a building with carrying value of $4.5 million. On 1 January 2020, it was revalued at $6 million. The building had an estimated life of 25 years when it was purchased 10 years prior to the revaluation date. This has not changed as a result of the revaluation. The building is to be depreciated using straight line method. The directors of Harry Bhd wish to incorporated this value in the financial statements for the year ended 31 December 2020.
(ii) All other property, plant and equipment are to be depreciated at 20% per annum on the reducing balance basic. All depreciation is to be charged to administrative expenses.
(iii) The investment property owned by Harry Bhd has risen in value during the year by 3%. This rise is to be incorporated into the financial statements. Harry Bhd uses the fair value model to value investment property.
(iv) On 1 January 2020, Harry Bhd issued a loan note at a fixed annual interest rate at 6%. The principle sum of $40 million is repayable in 5 years' time and interest is payable annually in arrears. The loan note was issued at a discount of $1 million and the issue costs on the loan was $250,000. The effective annual interest paid of $2.4 million is shown as finance costs in the draft accounts.
(v) The provision for income tax for the year ended 31 December 2020 has been estimated at $11.7 million. For the deferred tax provision, the only taxable temporary difference is accelerated capital allowances and as at 31 December 2020, these were $10.8 million. Income tax is changed at 25%
Required:
In accordance with the relevant MFRS, prepare the following financial statements for the year ended 31 December 2020 for Harry Bhd:
(a) Statement of Profit or Loss and Other Comprehensive Income
(b) Statement of Finance Position
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