Question 2

An entity, Farah PLC, prepared a trial balance at 30 June 2019 as follows:

	Dr	Cr
Equity shares @ 1 each		40,000
Share premium		12,500
Trade and other payables		25,342
Land and buildings cost	281,450
Land and buildings accumulated depreciation		65,332
Plant and machinery cost	94,400
Plant and machinery accumulated depreciation		24,500
Trade receivables	13,731
Accrued expenses		1,217
7% bank loan 2023		26,000
Cash and equivalents		848
Retained earnings 1 July 2018		11,467
Sales revenue		480,742
Purchases	153,444
Administrative expenses	37,666
Distribution expenses	23,587
Allowance for receivables 1 July 2018		550
Inventory 1 July 2018	84,220
	688,498	688,498

The following information is relevant to the preparation of the financial statements for the year ended 30 June 2019:

• Inventory at 30 June 2019 was valued at a cost of 94,302. Included within this were several items of inventory which cost 5,000 but it was estimated they could now be sold for only 4,000.
• Included within land and buildings is non-depreciable land at a cost of 80,000.
• During the year, an item of plant and machinery was disposed of for 5,500. This plant and equipment had cost 12,500 and had a carrying amount of 6,250 at the disposal date. The cash receipt had been wrongly included within sales revenue.
• Depreciation is to be charged to cost of sales for the year ended 30 June 2019 as follows: (a) Buildings 2% per annum on a straight-line basis (b) Plant and machinery 25% per annum on a straight-line basis
• Trade receivables include an amount of 631 which is regarded as irrecoverable and is to be written off. In addition, the allowance for receivables is to be adjusted to 393 at 30 June 2019. Any amounts taken to profit or loss should be included within administrative expenses.
• The bank loan was taken out on 1 April 2019 and is repayable in 2023. Interest is paid annually in arrears.
• Included within administrative expenses is an amount of 3,000 for insurances. This payment covers the fifteen-month period to 30 September 2019.
• An accrual should be made for unpaid distribution costs of 3,245.
• The income tax charge for the year has been estimated at 31,830.

Required:

Prepare the statement of profit or loss of Farah PLC for the year ended 30 June 2019 and the statement of financial position at 30 June 2019.