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Revenue 3 215 000 2 750 000 Cost of sales (1 260 000) (1325 000) 1425 000 Gross Profit 1955 000 (1 270 000) expenses Profit for the period (940 000) 485 000 685 000 Other comprehensive income Total comprehensive income 685 000 485 000 Retained earnings at the beginning of 2019 amount to N$945 000 (2018 NS460 000) Ignore tax implications Required: 1.1 Calculate the profit for the years 2019 and 2018 based on the new valuation applied to inventories 2Marks 1.2 Disclose the note applicable to the reporting period 31 December 2019 relating to the change in accounting policy on SMarks inventories in order to comply with IFRS Present the statement of changes in equity for the reporting period ended 31 December 2019 5Marks List and discuss the procedure followed when a company is selecting an accounting policy 1.3 1.4 10 Marks Total 25 Marks 2 A B 1 0 III Clarisa is the auditor of Smart Ltd, and she is currently finalizing the 2019 financial statements. Due to the changes in IFRS, the company now needs to include fixed overheads in the determination of inventories as required by IAS 2 inventories. Previously fixed overheads were excluded in inventory valuations. The accountant presented you with the following figures relating to the new and old methods of inventory valuation 2019 2018 2017 NS NS NS Closing inventories, including foxed overheads 520 000 330 000 410 000 Closing inventories excluding fixed overheads 470 000 320 000 380 000 The preliminary Statement of Profit or loss and other comprehensive income for the period ended 31 December 2019 (before any of the above-mentioned facts were taken into account) is as follows: 2019 2018 NS NS Revenue 2 750 000 3 215 000 (1 260 000) Cost of sales (1 325 000) 1 425 000 Gross Profit 1955 000 (940 000) (1 270 000) 685 000 485 000 expenses Profit for the period Other comprehensive income Total comprehensive income 685 000 485 000 Retained earnings at the beginning of 2019 amount to N$945 000 (2018 NS460 000) lonore tax implications