QUESTION 1 (Compulsory question)

Coastal Trading Limited deals with farm equipment and machines throughout New Zealand. It is registered under the Companies Act 1993 with contributed equity comprising of 12,000,000 ordinary shares. Set out below is a list of balances extracted from the accounts of the company as at financial year end date 31^st December 2013:

	Debit	Credit
	$	$
Sales		46,400,000
Purchases	34,600,000
Inventory as at 1st January 2013	500,000
Rental Income		480,000
Dividend Income		400,000
Salaries and Wages	3,640,000
Accounting fee	80,000
Bank service charges	20,000
Fines and penalties	22,000
Entertainment expenses	50,000
Distribution expenses	490,000
Insurance	80,000
Advertising and sales promotion	118,000
Interest Expense on Long Term Loan	150,000
Audit Fees	80,000
Donation	70,000
Directors' Fees	740,000
Bank	60,000
Buildings at cost	6,000,000
Accumulated Depreciation - Building		1,600,000
Plant & Equipment at cost	4,800,000
Accumulated Depreciation - Plant & Equipment		1,000,000
Vehicles at cost	1,000,000
Accumulated Depreciation - Vehicles		340,000
Land at fair value	12,000,000
Revaluation Reserve - 1st January 2013		2,000,000
Investment in Shares at cost	4,800,000
Accounts Receivable	4,040,000
Allowance for Doubtful Debts		60,000
Accounts Payable		2,000,000
Long Term Loan		3,000,000
Contributed Equity		16,580,000
Treasury Stock	560,000
Dividends paid	600,000
Retained Earnings1st January 2013		640,000
	74,500,000	74,500,000

The following additional information is relevant for preparing financial statements for the year ended 31^st December 2013:

Allowance for doubtful debts is to be made at a rate of 2% on the balance of accounts receivable outstanding as at 31^st December 2013. Bad debts of $60,000 are to be written off.

Depreciation for the year ended 31^st December 2013 is to be provided on the following basis:

Land: No depreciation is to be provided.

Buildings: 2% on cost.

Plant and equipment: 10% reducing balance basis.

Vehicles: Based on mileage. The total mileage expected from the vehicles is 1,800,000 kilometres. For the year ended 31^st December 2013 the mileage used was 270,000 kilometres.

Long term loan of $3,000,000 was outstanding as at 1^st January 2013. Interest on the loan is payable at 10% per annum. An amount of $600,000 representing the principal component of the long term loan is due for repayment on 20^th January 2014.

Investment in shares comprises of shares available-for-sale $2,800,000 and shares held for trading $2,000,000. As at 31^st December 2013, the market value of shares available-for-sale is $5,800,000 and market value of the shares held for trading is $4,200,000. These market values are considered to be the fair value of the shares.

The cost of inventory as at 31^st December 2013 is $400,000 and the net realisable value is $350,000

A professional valuation consultant re-valued land on 31^st December 2013 at $8,000,000 using fair value. The revaluation reserve as at 1^st January 2013 was in respect of revaluation on land in previous years.

Building was re-valued for the first time. The new market value of the building as at 31^st December 2013 is $4,500,000.

The values of other non-current assets are as follows:

	As at 31st December 2013
	Value In Use	Net Selling price
Vehicles	$400,000	$350,000
Plant and Equipment	$3,000,000	$2,600,000

Tax for the period is $1,638,560.

The contributed equity as at 31 December 2013 includes 1,000,000 ordinary shares issued in September 2013 at $3 per ordinary share.

In the statement of comprehensive income the company classifies the following as other expenses:

Bank service charges

Fines and penalties

Entertainment expenses

Expenses are classified in the Statement of Comprehensive Income by function

REQUIRED:

1.1) Prepare the adjusting entries to take into account the additional information given. You do not need to prepare the closing journal entries.

1.2) Prepare the statement of profit and loss and other comprehensive income for the year ending 31 December 2013.

1.3) Prepare the statement of financial position as at 31 December 2013.

If you could do this step by step That would be really help full

Note it required to do ( presentation and disclosure )