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HK Ltd has prepared its draft trial balance to 30 June 20X1, which is shown below. Trial balance at 30 June 20X1 000 000 Freehold

HK Ltd has prepared its draft trial balance to 30 June 20X1, which is shown below.

Trial balance at 30 June 20X1

000

000

Freehold land

2,100

Freehold buildings (cost 4,680,000)

4,126

Plant and machinery (cost 3,096,000)

1,858

Fixtures and fittings (cost 864,000)

691

Goodwill

480

Trade receivables

7,263

Trade payables

2,591

Inventory

11,794

Bank balance

11,561

Development grant received

85

Profit on sale of freehold land

536

Sales

381,600

Cost of sales

318,979

Administration expenses

900

Distribution costs

35,100

Directors' emoluments

562

Bad debts

157

Auditors' remuneration

112

Hire of plant and machinery

2400

Loan interest

605

Dividends paid during the year-preference Dividends

162

paid during the year- ordinary

426

9% loan

7,200

Share capital - preference shares (treated as equity)

3,600

Share capital-ordinary shares

5,400

Retained earnings

6,364

407,376

407,376

The following information is available:

(a) Preference shares have a nominal value of 1 and that the nominal value of the ordinary shares is 50p each. The preference share dividend is paid in equal instalments half yearly

(b) Provide for depreciation at the following rates:

(i) Plant and machinery 20% on cost

(ii) Fixtures and fittings 10% on cost

(iii) Buildings 2% on cost

Charge all depreciation to cost of sales.

(c) A provision of 5,348,000 is required for income tax.

(d) The loan was raised during the year and there is no outstanding interest accrued at the year-end.

(e) Government grants of 85,000 have been received in respect of plant purchased during the year and are shown in the trial balance. One-fifth is to be taken into profit in the current year..

(f) During the year a fire took place at one of the companys depots, involving losses of 200,000. These losses have already been written off to cost of sales shown in the trial balance. Since the end of the financial year a settlement has been agreed with the companys insurers, enabling the company to recover 150,000.

(g) Inventory with a carrying value of 500,000 in the trial balance has been identified as having a net realisable value of only 250,000.

(h) During the year freehold land which cost 720,000 was sold for 1,256,000

(i) A final ordinary dividend of 3p per share is declared and was an obligation before the year-end, together with the balance of the preference share dividend. Neither dividend was paid at the year-end

(j)The goodwill has been impaired by 41,000

(k) The land was revalued at the year-end at 2,500,000.

Required:

Prepare the following financial statements for the year ended 30 June 20X1 in accordance with International Financial Reporting Standards:

(a) A statement of profit or loss and other comprehensive income.

(b) A statement of financial position.

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