Question 1.

The following trial balance relates to Macho plc for the year ended 30 June 2021:

	000	000
Equity shares of 1 each		3,000
Share Premium		500
Retained earnings at 1 July 2020		646
Land and buildings at cost	2,400
Depreciation on land and buildings at 1 July 2020		555
Plant and equipment at cost	2,910
Depreciation on plant and equipment at 1 July 2020		640
Inventory at 1 July 2020	380
Trade receivables	370
Cash and cash equivalents		41
Trade payables		64
6% Loan repayable 2028		100
Revenue		1,288
Purchases	490
Distribution costs	176
Tax provision	5
Administrative expenses	80
Loan interest paid	3
Dividend paid	20
	6,834	6,834

Further notes:

1. Inventory was valued at 235,000 on 30 June 2021.
2. Buildings are to be depreciated on a straight-line basis at 10% and depreciation is treated as an administration expense. Of the total cost of land and buildings, 600,000 relates to land and the remainder to buildings.
3. It is discovered that last year land was depreciated at 10% of cost, in error. This amount is included in the figure for depreciation in the trial balance.
4. Plant and equipment are to be depreciated at 10% reducing balance basis. The expense is allocated to cost of sales.
5. The estimated tax charge for the year is 2,000.
6. Sales include deposits of 20,000 for orders of inventory which cannot now be met. The deposits will have to be refunded.
7. A provision of 4% is required for doubtful debts.
8. On 31 October 2020 there was a 1 for 5 bonus issue. This has not yet been accounted for and will be funded from the share premium account as far as is possible.
9. The 6% loan was taken out in 2019.

Required:

Prepare the following statements in a form suitable for publication. Notes to the accounts are not required.

1. A Statement of Profit or Loss for the year ended 30 June 2021. [8 marks]

2. A Statement of Financial Position as at 30 June 2021. [12 marks]

3. Discuss the correct treatment of the item in note (3). [5 marks]

Total 25 marks