Question 1 You have been asked to help prepare the financial statements of Orb, a limited liability company, for the year ended 31 December 2020. Orbs trial balance at 31 December 2020 is set out below. Orb - Trial Balance at 31 December 2020 Dr. 000 Cr. 000 Revenue 5,400 Purchases 2,950 Inventory 1 January 2020 730 Distribution costs 480 Administrative expenses 500 Plant and Equipment at cost (note 4) 1,600 Plant and Equipment accumulated depreciation at 1 January 2020 650 Buildings at cost (note 2) 1,960 Buildings accumulated depreciation at 1 January 2020 400 Research and Development (note 3) 620 Dividend paid 60 Ordinary shares of 0.50 each (note 9) 800 Share Premium (note 9) 130 Retained Earnings 1 January 2020 890 Interest paid on 10% Loan note 120 Trade Receivables 360 Allowance for impairment of receivables 1 Jan 2020 (note 6) 50 Bank a/c (note 9) 550 Trade payables 410 10% Loan Note Repayable in 2028 1,200 9,930 9,930 Some further information has come to light and you have been asked to review the trial balance in the light of this information and to make any further adjustments necessary before preparing the financial statements. The following additional information is provided: 1.) The cost of closing inventory was 900,000 at 31 December 2020. However, this inventory had been damaged by a flood in November 2020 and was sold in January 2021 for 570,000. 2.) A survey fee of 40,000 for a building bought during the year had been included in administrative expenses. Buildings are depreciated on a straight line basis over 25 years. 3.) During the year Orb carried out investigations into future products. 620,000 was spent, of which 500,000 qualified as development and the remainder as research. The future products had not yet come into production by 31 December 2020. 3 4.) Depreciation on plant and equipment is to be provided at 20% on a reducing balance basis. 5.) All depreciation is to be charged to cost of sales. 6.) The balance on the allowance for receivables account has been set at 30,000 at 31 December 2020. Any adjustments to the allowance for receivables should be included in administrative expenses. 7.) A provision for income tax for the year ended 31 December 2020 of 280,000 is required. 8.) Accruals of 140,000 for administrative expenses at 31 December 2020 and prepayments of 80,000 for distribution costs have not yet been reported. There had been no accruals or prepayments at 31 December 2019. 9.) Orb has not yet made any record at all for a one for four rights issue of ordinary shares at 0.60 per share that occurred on 30 December 2020. Required: In accordance with IAS 1 Presentation of Financial Statements: (a) Prepare Orbs statement of profit or loss and other comprehensive income for the year ending 31 December 2020. (24 marks) (b) Prepare Orb's statement of changes in equity for the year ending 31 December 2020. (8 marks) (c) Prepare Orbs statement of financial position as at 31 December 2020.