Question 1. Alfres Company has prepared its financial statements for 2020, the first operation year, in accordance with US GAAP. Its income statement and balance sheet are as follow: Income statement for the year ended 31st Dec 2020 $ $ 412,000 280,000 132,000 Sales revenue Less: COGS Gross profit Less: Operating expense - R&D cost (1) - Depreciation expense (2) - Other expenses Net income 20,000 25,000 57,000 102,000 30,000 Balance sheet As at 31 Dec 2020 $ S I. Current asset 150,000 III. Current liabilities 105,000 Cash and cash equivalents 25,000 Bank overdraft (3) 15,000 Account receivables 50,000 Account payables 90,000 Inventory 75,000 IV. Non-current liabilities 120,000 Bank loan payable due on 15 March 2021 (4) 120,000 II. Non-current asset 475,000 V. Equities 400,000 Machinery 500,000 Common stock 370,000 Accumulated Depreciation - Machinery (2) (25,000) Retained earnings: 30,000 Total assets 625,000 Total liabilities and equities 625,000 Additional informations: (1) the above R&D costs included $10,000 development-phase costs that have been met all the criteria for recognition as an intangible asset in accordance with IFRSs. (2) the above depreciation is calculated based on the PPE average estimated useful life of 20 years. However, the PPE can be decomposed into different components with different useful lives as follow: Components Cost ($) Useful life (years) Engines 200,000 10 Inspection 50,000 5 Other components 250,000 25 (3) Overdrafts form an integral part of cash management of Alfres Company (4) At 31st Dec 2020, Alfres company has reached an agreement with the bank to refinance the note for 2 years but the refinancing has not yet been completed. The new negotiation completed on 15th January 2021 before the financial reporting issuance date. Required: 1.1 Explain how should the above 4 items be reported in financial statements in accordance with IFRSs? (1.5 marks) 1.2. Prepare the income statement of Alfres Company for the year 2020 in accordance with IFRSs? (Explain your calculation, if any) (0.75 marks) 1.3. Prepare the balance sheet of Alfres Company as at 31st Dec 2020 in accordance with IFRSs? (Explain your calculation, if any) (0.75 marks)