Question 1

Question 12 (40 marks in total)

Polymier is a company reporting under IFRS. During the year end 31 December 20X5, the company changed its accounting policy with respect to property valuation. There are also a number of other issues that need to be finalised before the financial statements can be published.

Polymier's trial balance from the general ledger at 31 December 20X5 showed the following balances:

	m	m
Revenue		5,296
Purchases	3,338
Distribution costs	1,040
Administrative expenses	690
Inventories at 1 January 20x5	888
Trade receivable	1,090
Trade Payable		868
Cash	62
50p ordinary shares		1,400
Share premium		428
Retained Earnings at 1 January 20x5		674
4% loan note		300
Land	120
Buildings: Cost	640
Accumulated depreciation		128
Plant and equipment: Cost	516
Accumulated depreciation		276
Investment Property at 1 January 20x5	1,096
Rental income		110
	9,480	9,480

Information to be considered including:

a). The company decided to change its accounting policy to its 10-year-old land and buildings from the cost model to the revaluation model. The land is revalued at 150m at 1 January 20X5, and the Buildings are revalued at 700m with an expected useful life of 35 years. No further revaluation was necessary at 31 December 20X5 (The company does not have the policy to account for the change of the depreciation due to the change of revaluation policy).

b). Due to a change in the company's product portfolio plans, an item of plant with a carrying value 22m at 31 December 20X5 (after adjusting for depreciation for the year) may be impaired due to a change in use. An impairment test conducted at 31 December, revealed its fair value less costs to sell to be 16m. The asset is now expected to generate an annual net income stream of 3.8m for the next 5 years at which point the asset would be disposed of for 4.2m. An appropriate discount rate is 8%. 5-year discount factors at 8% are:

Simple Cumulative

0.677 3.993

c) Polymier uses the revaluation model of IAS40. The fair value of the investment property at 31 December 20X5 was 1,172m.

d). The company treats depreciation on plant and equipment as a cost of sale and on land and buildings as an administration cost. The company's accounting policy is to charge a full year's depreciation at the end of the year. The depreciation charge has not been considered in the trial balance. Depreciation rates as per the company's accounting policy note are as follows:

Buildings Straight line over 50 years (before revaluation)

Plant and equipment 20% reducing balance

e). Closing inventories were counted and amounted to 762m at cost.

f). Ignore the corporate tax.

.

Question 2

2. Work out the following extracts of the Statement of Profit and Loss for Polymier for 20X5 (2 marks each; All answers are in unit of Million)):

NUMBER FORMAT when inputting should be numerical only. Answer in whole numbers only, do not use text or symbols.

ACCEPTABLE NUMBER FORMATS ARE 10000

10000.00 will NOT be accepted as right answer

Cost of Goods Sold (

)

Depreciation of Plants and Equipment (

)

Depreciation of Building (

)

Distribution cost (

)

Net Profit

Question 3

3. Prepare the Statement of Financial Position for Polymier for 20X5 (Total 20 marks. All answers are in unit of Million).

NUMBER FORMAT when inputting should be numerical only. Answer in whole numbers only, do not use text or symbols.

ACCEPTABLE NUMBER FORMATS ARE 10000

10000.00 will NOT be accepted as right answer

Statement of Financial Position

Assets

Non-current Assets

Land

Question 4

Buildings

Depreciation of Buildings (

)

Plant and Equipment

Depreciation of Plant and Equipment (

)

Question 5

Investment Property

Question 6

Current Assets

Inventories

Trade Receivable

Cash

Question 7

Total Assets

Question 8

Equity

Share Capital

Share Premium

Revaluation Surplus--PPE

Revaluation Surplus--Investment property

Question 9

Retained Earnings

Question 10

Total equity

Question 11

Liabilities

4% Loan Notes

Trade Payable

Interest Payable