Prepare financial reports for corporate entities / FNSAX514

TAFE Ltd. has provided you with its unadjusted trial balance for the year ended 30 June from which you are required to:

(a)Prepare the profit and loss account for the year showing adjustments

(b)Prepare the retained profits account showing adjustments

(c)Prepare Trial Balance at 30 June (after adjustments.)

(Calculations for all adjustments should be shown)

Adjustments to be made to Profit and Loss

Investment assets are to be impaired by 50% of their carrying amount.

Goodwill was brought to account during the year as a result of a business combination resulting in the acquisition of the Franchise. The business combination has been valued at $225,000 with the recoverable amount of the Franchise valued at $190,000.

Company tax rate is 30%.

The loss on sale of assets are to be treated as a permanent difference for taxation purposes as are impairments in investment assets and goodwill

Temporary differences were identified in the following asset and liability amounts.

Carrying Amount Tax Base

Trade debtors $24,000 $25,000

Allowance for doubt. debts ($1,000) $0

Plant & machinery $60,000 $60,000

Accumulated depreciation - plant & machinery ($12,000) $18,000)

Employee benefits payable $18,000 $0

Adjustments to be made to Retained Profits.

Provide for a final dividend of $0.06 per share payable in the following year.

Reduce the Dividend Reserve by $15,000

Create - a General Reserve of $10,000

TAFE Ltd. Trial Balance at 30 June Before Adjustments After Adjustments

Details Debit $ Credit$ Debit $ Credit

Accrued interest on deposits 5,000

Plant & machinery 60,000

Accu. depreciation-plant & machinery 12,000

Investments (purchased for longterm gain) 40,000

Accumulated impairment - investments 10,000

Trade debtors 25,000

Allowance for doubt. debts 1,000

Cash in hand 1,000

Stock (30 June) 63,000

Deposits at call 17,500

Franchise 200,000

Goodwill 50,000

Buildings (director's valuation) 400,000

Land(at cost) 600,000

Prepaid interest expense 15,500

Trade creditors 34,500

Debenture loan (due in 5 years) 150,000

Mortgage 75,000

Employee benefits payable 18,000

Cash at bank 67,500

Income tax payable 12,500

Ordinary shares ($1 each) 605,500

Dividend reserve 100,000

Asset revaluation reserve 100,000

Service income 400,000

Credit Sales 600,000

Cost of goods sold 450,00

Advertising 10,000

Auditors fees 20,000

Depreciation expense-Plant&Machine 12,000

Directors fees 12,000

Doubtful debts 1,000

Employee benefits 18,000

Insurances 13,000

Interest on loans 25,000

Interest on deposits 2,000

Lease payments 9,000

Loss on sale of assets 41,000

Repairs 8,000

Wages 48,000

Income tax expense 50,000

Retained profits 1 July 41,000

Interim dividend 35,000 0

2,229,000 2,229,000