Question A2 The statements of financial position of Red Sea Ltd for the past two years and the company's most recent income statement are set out below: Statement of comprehensive income for the year to 31 December 2020 000 Sales revenue 42,568 Cost of sales (37,474) Gross profit 5,094 Gain on disposal of property, plant and equipment 4,000 Distribution costs (3,705) Administrative expenses (1,320) Finance costs, interest on loans (1,010) Profit before taxation 3,059 Taxation (1,044) Profit for the year 2,015 Statement of financial position as of 31 December 2020 2020 2019 Assets 000 000 Non-current assets Property, plant and equipment 68,091 38,000 Current assets Inventories 1,022 1,033 Trade receivables 1,160 200 Cash and cash equivalents 300 2,182 1,533 Total assets 70,273 39,533 Equity Ordinary share capital Share premium Retained eamings 40,000 20,000 7,000 10,000 3,015 53,015 1,150 28,150 Liabilities Non-current liabilities Bank loans 11,000 8,403 Current liabilities 1,370 1,350 Trade payables Current tax liability Bank overdraft 1,850 1,630 3,038 6,258 Total equity and liabilities 70,273 2,980 39,533 The following information is also available in relation to the year to 31 December 2020: i. The total depreciation charge for the year was 6,000,000. ii. Property, plant and equipment costing 19,000,000 with accumulated depreciation of 7,000,000 was sold during the year at a profit of 4,000,000. All sales and purchases were on credit. Other expenses were paid for in cash. Dividends totalling 150,000 were paid during the year. iii. iv. Required: Prepare a statement of cash flows for Red Sea Ltd for the year to 31 December 2020, in accordance with the requirements of accounting standard IAS 7 and using the direct or indirect method. Show all your workings. Total: 25 marks Question A3 (a) Discuss the role of the IASB and standardisation/harmonisation of accounting standards. its efforts towards the (10 marks) (b) IAS 16 allows two different ways of measuring property, plant and equipment subsequent to its initial recognition as an asset. These are the cost model and "revaluation" model. Explain the two models and how to account for gains and losses under each model. (10 marks) Total: 20 marks