Question 1 (a) You are required to draw up a statement of cash flows for K. Rock for the year ending 30 June 2020 from the following information using the IAS 7 format. K. Rock Statement of Profit or Loss for the year ending 30 June 2020 $ Gross profit Add: Reduction in allowance for doubtful debts 155,030 200 155,230 Less: Expenses Wages and salaries General trading expenses Equipment running costs Motor vehicle expenses Depreciation: Motor vehicles Equipment Loss on sale of equipment Net profit 61,400 15,200 8,140 6,390 5,200 6,300 1,600 (104,230) 51,000 Statement of Financial Position as at 30 June 2019 2020 $ S $ $ Non-current assets Equipment at cost 40,400 30,800 (24,600) 15,800 (20,600) 10,200 28,300 28,300 Less: Depreciation Motor vehicle at cost Less: Depreciation (9,200) 19,100 (14,400) 13,900 34,900 24,100 Current assets Inventory 41,700 44,600 Accounts 21,200 19,800 receivable less allowance Bank 12,600 75,500 28,100 92,500 Total assets 110,400 116,600 Current liabilities Accounts payable 14,300 17,500 Non-current liabilities Loan from T Pine 20,000 10,000 (34,300) (27,500) Net assets 76,100 89,100 Capital Opening balance 65,600 76,100 Add: Net Profit 42,500 51,000 108,100 127,100 Less: Drawings (32,000) (38,000) Total capital 76,100 89,100 (20 marks) (b) International Financial Reporting Standard (IFRS) 16 - Leases - was issued in January 2016 and, in comparison to its predecessor International Accounting Standard (IAS) 17 makes significant changes to the way in which leasing transactions are reported in the financial statements of lessees (although not in the financial statements of lessors). The purpose of this article is to summarise the key changes introduced by IFRS 16 from the perspective of the lessee and how these impact on their financial reporting. Required: (1) Discuss and explain with examples the meaning of lease, focusing on the area of "identified asset". (5 marks) (ii) Explain with examples on accounting for lease. (5 marks) (Total: 30 marks) Question 1 (a) You are required to draw up a statement of cash flows for K. Rock for the year ending 30 June 2020 from the following information using the IAS 7 format. K. Rock Statement of Profit or Loss for the year ending 30 June 2020 $ Gross profit Add: Reduction in allowance for doubtful debts 155,030 200 155,230 Less: Expenses Wages and salaries General trading expenses Equipment running costs Motor vehicle expenses Depreciation: Motor vehicles Equipment Loss on sale of equipment Net profit 61,400 15,200 8,140 6,390 5,200 6,300 1,600 (104,230) 51,000 Statement of Financial Position as at 30 June 2019 2020 $ S $ $ Non-current assets Equipment at cost 40,400 30,800 (24,600) 15,800 (20,600) 10,200 28,300 28,300 Less: Depreciation Motor vehicle at cost Less: Depreciation (9,200) 19,100 (14,400) 13,900 34,900 24,100 Current assets Inventory 41,700 44,600 Accounts 21,200 19,800 receivable less allowance Bank 12,600 75,500 28,100 92,500 Total assets 110,400 116,600 Current liabilities Accounts payable 14,300 17,500 Non-current liabilities Loan from T Pine 20,000 10,000 (34,300) (27,500) Net assets 76,100 89,100 Capital Opening balance 65,600 76,100 Add: Net Profit 42,500 51,000 108,100 127,100 Less: Drawings (32,000) (38,000) Total capital 76,100 89,100 (20 marks) (b) International Financial Reporting Standard (IFRS) 16 - Leases - was issued in January 2016 and, in comparison to its predecessor International Accounting Standard (IAS) 17 makes significant changes to the way in which leasing transactions are reported in the financial statements of lessees (although not in the financial statements of lessors). The purpose of this article is to summarise the key changes introduced by IFRS 16 from the perspective of the lessee and how these impact on their financial reporting. Required: (1) Discuss and explain with examples the meaning of lease, focusing on the area of "identified asset". (5 marks) (ii) Explain with examples on accounting for lease. (5 marks) (Total: 30 marks)
