Question 1 (30 marks)

Gobabis Trading is a company that sells various consumer goods. The companys financial year ends at 31 December of each year. The following information relates to the 2020 financial year.

Gobabis Trading Trial balance as at 31 December 2020
	N$000	N$000
Revenue		59 200
Purchases	33 120
Inventory 1 January 2020	5 560
Distribution costs	4 320
Administration costs	5 840
Land at valuation (note (iv))	42 000
Property at cost (note (iii))	32 000
Property accumulated depreciation as at 1 January 2020		8 520
Plant and equipment at cost (note (iii))	51 200
Plant and equipment accumulated depreciation as at 01/01/2020		9 920
Trade receivables	16 480
Trade payables		8 960
Bank	640
Ordinary issued shares		72 000
Revaluation reserve as at 1 January 2020		12 000
Retained earnings as at 1 January 2020		12 560
8% loan redeemable 2030 (note (ii))		8 000
	191 160	191 160

Note that figures in the above table are in N$000s - thousands)

Additional notes:

i) Inventory as at 31 December 2020 amounted to N$6 240 000 at cost. A review of inventory revealed the following:

a) Items costing N$320 000 that had been included in the inventory at 31 December 2020 were found to have deteriorated. Their normal selling price was N$480 000, but now be sold for N$280 000. Inventory is valued at the lower of cost price or market value.

b) Items sold on a sale or return basis had been omitted from the inventory as at 31 December 2020 and included in sales in December 2020. The cost of these items was N$64 000 and their sale price was N$96 000. All these items were returned in good condition to Gobabis Trading in January 2021.

ii) The interest on the loan has not been paid for the year ended 31 December 2020 and must be accrued.

iii) Depreciation is to be calculated for the year ended 31 December 2020 as follows:

a) Property 2% per annum on cost

b) Plant and equipment 15% per annum on cost

c) Depreciation calculated for the year is to be charged 80% cost of sales, 10% distribution costs and 10% administration costs.

iv) Land is to be revalued to N$48 000 000 as at 31 December 2020.

v) Tax for the year ended 31 December 2020 is chargeable at 25% of profits for the year before receiving or paying dividends.

vi) Adjustments for accruals and prepayments are required as follows:

	Accruals	Prepayments
	N$	N$
Distribution costs	76 000	48 000
Administration costs	28 000	24 000

Required	Marks
	Sub-total	Total
Prepare the Statement of profit or loss, Statement of changes in equity for the year ended 31 December 2020 and the Statement of financial position as at that date for Gobabis Trading.	30	30