Question 2 6 marks Aetna Electronics Ltd is an Australian public company. The accounting staff of Aetna Electronics Ltd have asked for your assistance in preparing the company's financial statements for the year ended 30 June 2020 and have provided you with the following information: Aetna Electronics Ltd Trial Balance As at 30 June 2020 Debit Credit 360,000 2,000 13,500 24,000 9,000 9,000 Item Sales revenue Gain on sale of financial assets Revaluation of property Other income Remeasurement of defined benefit plan Cash flow hedges Loss for the year from discontinued operations Occupancy expenses Income tax expense Finance costs Marketing expenses Investments in equity Instruments Administrative expenses Cost of sales Other operating expenses Income tax related to items of other comprehensive income: Cash flow hedges Revaluation of property Remeasurement of defined benefit plan Investments in equity instruments 9,000 30,000 14,000 18,000 37,500 4,500 33,000 204,000 16,500 3,000 6,000 4,500 1,500 Notes 1. in relation to Items of other comprehensive Income: Items that will not be reclassified subsequently to profit or loss: revaluation of property; and remeasurement of the defined benefit plan. Items that may be reclassified subsequently to profit or loss: cash flow hedges; and Investments In equity Instruments. On 1 July 2018, Aetna Electronics Ltd pald $1,000 to purchase a portfolio of financial assets (comprising bonds and debentures) which, in accordance with AASB 9 Financial Instruments, were measured at fair value through other comprehensive income. As at 30 June 2019, the fair value of the financial assets had increased to $3,000. Aetna Electronics Ltd recognised a gain of $2,000 (and related Income tax expense of $500) In other comprehensive Income for the year ended 30 June 2019. On 1 July 2019, the financial assets were sold for $3,000 and Aetna Electronics Ltd recognised a gain of $2,000 in profit or loss. The related Income tax expense ($500) has already been included in the income tax expense figure in the trial balance. 3. Comparative figures for the preceding year (ending 30 June 2019) have been omitted. 4. All figures in the trial balance are in thousands ($'000). Required (a) Prepare the Statement of profit or loss and other comprehensive Income for Aetna Electronics Ltd for the year ended 30 June 2020 in accordance with the requirements of AASB 101 Presentation of Financial Statements. (5 marks) (b) Explain the adjustment that must be made in the Statement of profit or loss and other comprehensive income as a consequence the gain on the sale of the financial assets being recognised in profit or loss. Why is an adjustment necessary? (1 mark)
