Question
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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