Hobby Time Limited $($Hobby Time$)$ is Australia$$s largest seller of hobby products such as drones, models and games. It has an Australian dollar functional currency. Hobby Time$$s customers include individuals and several large retail stores.

Your team is finalising Hobby Time$$s financial statements for the year ended $30$ June $2024.$ You have been asked to review the draft statement of profit or loss and other comprehensive income $($SPLOCI$).$ The statement and related explanations are as follows: Draft statement of profit or loss and other comprehensive income for the year ended $30$ June $2024$

Draft statement of profit or loss and other comprehensive income for the year ended $30$ June $2024$ Notes $

Revenue $135,000,000$

Cost of sales $1(16,540,000)$

Gross profit $18,460,000$

Other income $400,000$

Selling and distribution expenses $2(2,400,000)$

Administrative expenses $(3,000,000)$

Other expenses $34(960,000)$

Operating profit $12,500,000$

Finance costs $5(2,600,000)$

Profit for the period $9,900,000$

Other comprehensive income

Items that may be subsequently reclassified to profit or loss

Exchange differences on foreign currency payable $615,369$

Items that will not be reclassified to profit or loss

Loss on land revaluation $3(600,000)$

Other comprehensive income for the year $(584,631)$

Total comprehensive income for the year $9,315,369$

Notes

$1.$ To encourage larger orders, Hobby Time offers its retail store customers a two$-$month return policy for any unopened, undamaged product in original condition. The company provides a cash refund once the returned goods are received. Based on experience, Hobby Time expects $2\%$ of items sold will be returned within two months for the cash refund. Included in revenue is the sale and delivery of $1,000$ drones to a retail store on $27$ June $2024.$ The invoiced amount is $$220,000,$ which was paid for that same day. The cost of the drones sold is $$100,000.$ Hobby Time has recognised revenue of $$220,000$ and cost of sales of $$100,000.$

$2.$ Hobby Time owns a fleet of delivery vehicles that was acquired for $$400,000$ on $1$ July $2019.$ The company depreciates its vehicles using the straight$-$line depreciation method based on a useful life of eight years with no residual value. On $1$ July $2024,$ Hobby Time re$-$assessed the useful life of the delivery vehicles and determined that the fleet had a remaining useful life of five years $$ that is$,$ two years longer than the original estimate. Depreciation of $$30,000$ is included in selling and distribution expenses reflecting the extension to the useful life.

$3.$ Hobby Time owns land that is measured under the IAS $16$ Property, Plant and Equipment revaluation model. The land was purchased in $2021$ for $$2,000,000.$ The land was revalued to its fair value of $$2,600,000$ on $30$ June $2022,$ resulting in $$600,000$ being recorded in the revaluation surplus. No other revaluations relating to the land have occurred. At $30$ June $2024$ the fair value of the land was measured at $$1,500,000$ due to the detection of soil contamination. The decrease in the carrying amount because of the revaluation has been recognised in the revaluation surplus account $($$$600,000)$ and revaluation expense $($$$500,000)$ included within other expenses.

$4.$ Hobby Time is defending a lawsuit filed by a company claiming that Hobby Time has copied its logo$.$ The plaintiff alleges this amounts to a breach of copyright and is seeking $$700,000$ in damages. Hobby Time lawyers are confident that the case can be successfully defended but advises that Hobby Time might wish to settle the claim out of court for $$100,000$ to avoid adverse publicity and uncertain legal costs. Hobby Time has made no decision about settling the case at $30$ June $2024$ because it is still confident of winning. The case is due to go to court in September $2024.$ A provision for $$100,000$ has been recognised, with the expense included in other expenses.

$5.$ The $$2,600,000$ in finance costs include the following two amounts: $$113,175$ representing the interest on a lease for the company$$s head office and depreciation of $$230,970$ on the related right$-$of$-$use asset. The seven$-$year lease agreement was entered into on $1$ July $2023$ and consists of annual payments of $$300,000$ paid in arrears. There is no purchase option in the lease agreement, no initial direct costs and no option to extend the lease term. The interest rate implicit in the lease is $7\%.$

$6.$ On $26$ June $2024$ Hobby Time was invoiced EUR$200,000$ for a deposit on some furniture for the company$$s head office that it is importing from the Netherlands. A foreign exchange gain of $$15,369($measured between $26$ June $2024$ and $30$ June $2024)$ was presented in other comprehensive income.

Date AUD EUR

$26$ June $20241\mathrm{.}000\mathrm{.}61$

$30$ June $20241\mathrm{.}000\mathrm{.}64$

Required

$($a$)$ Identify six $(6)$ errors in the draft statement of profit or loss and other comprehensive