Q1 and Q2

Space Lad prepares it financial statements for the year ended 31 December 2020 and the trial balance is a below. 000 2000 4,280 378 1.720 860 4,182 5,850 9,930 Freehold Land and Buildings, at Cost Accumulated Depreciation for Buildings Plant and Equipment, at Cost Accumulated Depreciation for Plant and Equipment Bank Inventory Trade Receivables Provision for doubtful debts - 6% Debenture (payable in 2025) 8% Preference shares at 1 each Trade Payables Equity Shares, 0.2 each Equity Share Premium Retained Earnings Sales Proceeds from Issue of Equity Shares Proceeds of Insurance Claim Purchases Administrative Expenses Corporate Tax Interest paid on 6% Debenture Equity Dividend Paid 400 5,000 1,000 3,120 9,000 400 3,500 106,000 1,500 56 94,160 8,162 20 150 2.800 131.234 131,234 The following further information is available: 1) The proceeds of the insurance claim of 56,000 relate to a machine which had been irreparably damaged on 26 September 2020. No entry has been made to reflect the retirement of the damaged machine other than to record the receipt of the insurance proceeds. The machine had been acquired for 150,000 on 1 January 2019. Plant and equipment are depreciated at 20% per annum using reducing balance method. A full year of depreciation is charged in both the year of acquisition and year of disposal. Page 1 of 2 2) The cost of freehold buildings of 2,500,000 is written off over 20 years on straight line basis. Provision for depreciation for the year ended 31 December 2020 is required for all tangible fixed assets other than 3) The closing inventory at 31 December 2020 was 5,180,000 However, the auditors have pointed out that this valuation of inventory requires adjustments for the following: A manager of a newly introduced product line has mistakenly used the last-in first-out method of stock Valuation. The company policy is to adopt the first in first-out method. The manager's valuation is included in 5,180,000 inventory. The transactions for the year ended 31 December 2020 for the relevant product line are: Purchases Sales October 2020 10 units (@1,400 each 2 units November 2020 20 units @ 1,500 each 18 units December 2020 10 units @ 1,700 each 6 units Assume all purchases and receipt of goods took place on 1" of the month and all sales and goods dispatched on 15th of the month Another product line was discovered to have a safety fault. There are 10 units of this product included in the inventory at a cost of 1,500 per unit. The cost of repair for all 10 units will be 2,000 in total and expected selling price after repair will be at 1,000 per unit. 4) Subsequent to drawing up the trial balance, the company has been informed that a major customer owing Bad 348,000 has gone into liquidation. After negotiation, Space Ltd agrees to accept 25% of the amount as full settlement of the outstanding amount Space Ltd has also decided to change its provision for doubtful debts to 5% of the remainder of the receivables balances. 5) On1 June 2020, Space Ltd issued 5,000,000 equity shares at 0.3 each. The proceeds were credited to the "Proceeds from the issue of share capital account. On 30 November 2020, the company made a 1- for-10 bonus issue, to be funded as much as possible by share premium. 6) The final equity dividend for the year ended 31 December 2019 of 0.04 per share was paid in April 2020 and an interim equity dividend for the year ended 31 December 2020 of 0.02 per share was paid in October 2020. The 2020 final equity dividend has been proposed at 0.05 per share. 7) Administrative expenses for the year include payments in advance of 58,000. Accrued administrative expenses at the year end are estimated at 32,000 8) Provision is required for the preference share dividend, outstanding debenture interest and estimation of tax expense for the year of 100,000 Required: (a) Prepare the income statement for the year ended 31 December 2020 (b) Prepare the Statement of Changes in Equity for the year ended 31 December 2020 (c) Prepare the Statement of Financial Position as at 31 December 2020 Page 2 of 2