QUESTION 4 PART A Comwall Industries Limited (CIL) is in the process of preparing its financial statements for the year ended 31 October 2019. The company's main activity is in the processed food industries, selling processed coffee (Coffee Division) and processed fruits (Fruits Division) as separate business lines. During the current year the quantity of coffee sold declined dramatically and the directors decided at a board meeting on 15 October 2019 to cease the production and sale of processed coffee and to sell off the related facilities. Immediately after the meeting the coffee processing staff and suppliers were notified of the situation and an announcement was made in the press. The directors wish to show the Coffee Division's results as a discontinued operation in the financial statements to 31 October 2019. Due to the declining business of the Coffee Division, on 1 August 2019 (three months before the year-end) CIL expanded its operations to offer a farm equipment rental service to local farmers called Agro-Rentals The following are CIL's summarized income statement results, for the year ended 31 October 2019: 31 October 2019 31 October 2018 Fruits Division $ Revenue Cost of sales Gross Profit/loss Coffee Division $ 69,000 42,000 (54,000) (49,500) 15,000 (7,500) Agro- Rentals $ Total $ 6,000 117,000 (4,500) (108,000) $ 120000 (96,000) 1,500 9,000 24,000 Operating expenses (3,000) (4,500) (300) (7,800) (6,000) Profit/(loss) before tax 12,000 (12,000) 1200 1200 18,000 CONTRACTS CORSA MALVERN $000 $000 Agreed Contract Price 24,000 6,200 Cost incurred to date (at 31 March 2021) 11,280 3,474 Cost to completion 7,520 4,246 Agreed value of work completed at 31 March 2021 Progress billings invoiced at 31 March 2021 4,400 3,360 1,000 3,440 900 2,400 Cash received The company uses the input approach to determine the percentage of completion for all contracts. The company considers that the outcome of a contract cannot be estimated reliably until a contract is 30% complete. It is, however, probable that the customer will pay for costs incurred so far. In relation to the Corsa contract $4,000,000 in revenue and $2,400,000 in cost was recognized for the year ended 31 March 2020. REQUIRED: Calculate the amounts which should appear in the income statement and statement of financial position of Trelawny Pavers Limited at 31 March 2021 in respect of the above contracts. The results for the Coffee Division for the year ended 31 October 2018 were: revenue $54 million, cost of sales $45 million and operating expenses of $4.5 million. Required (a) Discuss whether the directors' wish to show the Coffee Division's results as a discontinued operation is justifiable. (b) Assuming the closure of the Coffee Division is a discontinued operation, prepare the (summarized) income statement of Comwall Industries Limited for the year ended 31 October 2019 together with its comparatives. Note. CIL discloses the analysis of its discontinued operations on the face of its income statement. PART B Trelawny Pavers Limited is a construction company that specializes in the construction of roads and bridges. The financial year end of the company is the 31st of March each year. During the year ended 31 March 2020 the company commenced two construction contracts that are expected to take more than two years to complete. The position of each contract at 31 March 2021 is as follows: