Question

Provide a Directors declaration report: Completeness of these in terms of minimum requirements Correctness and adequacy of disclosures Ability to make up information if not provided, or indicate information that needs to be included where this information is not available Format that facilitates usefulness for purpose

The following details are taken from the accounting records of the company as at 30 June 2019 Debit Credit Sales revenue 29,760,300 18,510,400 626,000 780,000 ervices revenue Extraordinary Gain Proceeds from sale of land Expenses Equipment (at cost net of depreciation Vehicles (at cost net of depreciation) Buildings (at cost net of depreciation) Land (at cost) Accounts receivable Allowance for doubtful debts Inventory (at lower of cost or net realisable value) Cash at bank Prepaid expenses Prepaid services revenue Loan from MyBank Provisions Accounts payable Accrued expenses Dividend declared and paid Share capital General Reserve Retained earnings (1 July 2018) 42,497,600 3,210,000 1,300,100 6,956,700 4,280,500 5,420,300 340,000 2,495,100 53,400 245,700 2,975,000 1,700,000 2,210,600 897,450 212,000 357,000 2,649,400 877,600 5,277,650 66,816,400 66,816,400 Additional information: Note: Unless otherwise indicated the events and transactions outlined below have already been accounted for in the balances above if required (a) Included in the amount of 'Expenses' in the trial balance provided above are . Cost of sales $17,930,000 .Salaries and wages $9,214,000 Annual leave expense of $966, 000 Long service leave expense of $86,000 . Power and other utility expenses $1,240,000 . Insurance expense $795,600 .Advertising expenses $1,690,000 . Other general operating expenses of $3,112,500 . Depreciation expense for equipment $680,000. . Depreciation expense for vehicles of $380,000 . Depreciation expense for buildings of $695,000 . Warranty expense of $1,240,000 . $487,000 being cost of land sold in March 2019 . $525,000 payment to auditors ($65,000 of this was for taxation advice and the rest for the audit of the company) $400 for subscription to online TV/sports streaming service for staff break/lounge rooms. . (Note: This does not detail all expenses included in the total of 'Expenses' in the trial balance above. You should classify any remaining expenses as 'other' or 'miscellaneous') (b) The company borrowed $1,700,000 from MyBank on 1 July 2018. On 1 July each year the company is required to make a payment of interest accrued for the year. On 1 July 2019, the company made a payment of $76,500, being interest accrued for the year. The company is required to pay the principal amount in full on 1 July 2022 (c) Only one item of land was sold during the period (in March 2019) for $780,000 cash (d) The extraordinary gain relates to the unexpected receipt of monies. In 2015 a major customer of the company was declared bankrupt owing the company $1,210,000. It had been expected that no money would be received, and the company had written this bad debt off in May 2016. However, an investigation was undertaken by ASIC and assets have now been recovered from the customer. As a result, in April 2019 the company received $626,000 (no further money is expected to be recovered from this previous customer) (e) The balance of the provisions in the trial balance is comprised of Legal provision of $650,000 (see (m) below) Provision for annual leave of $234,000. The balance of the provision for annual leave at 30 June 2018 was $108,000 Provision for Long Service leave of $384,000. No long service period was taken during the year ended 30 June 2019 and none is expected to be taken until 2022 . . . Provision for warranties of $942,600. The company previously provided a 12 month warranty on the majority of its products and services. However, as a number of competitors provide for longer warranty periods, the company decided to change its warranty conditions. From 1 May 2019 the company provided a 3-year warranty on the majority of its products. This is expected to increase the warranty expense for full financial years in the future by around 18% It is expected that 80% of the balance of this warranty provision as at 30 June 2019 will be used up by 30 June 2020. The balance of the provision for warranties at 30 June 2018 was $692,000 (f) The prepaid expenses in the trial balance includes $65,000 for prepaid insurance, $107,000 for prepaid advertising, and $73,700 for prepaid maintenance (cleaning) services. The accrued expenses relate to utilities (e.g. power) Directors had declared a dividend of $357,000 from retained earnings on 2 July 2018. This required no further approval or authorisation. This dividend was paid on 1 September 2018 (g) (h) At 1 July 2018 the share capital comprised 2,500,000 fully paid ordinary shares at an issue price of $1.00 issued on 1 July 2006. Share issue costs paid in relation to this issue were $23,000 .50,000 fully paid ordinary shares at an issue price of $1.00. These were bonus shares issued on 1 August 2012 In lieu of an interim dividend, a bonus share issue of 1 fully paid ordinary share (issue price $1.20) for each 25 shares held, was made on 28 January 2019 from the general reserve The following details are taken from the accounting records of the company as at 30 June 2019 Debit Credit Sales revenue 29,760,300 18,510,400 626,000 780,000 ervices revenue Extraordinary Gain Proceeds from sale of land Expenses Equipment (at cost net of depreciation Vehicles (at cost net of depreciation) Buildings (at cost net of depreciation) Land (at cost) Accounts receivable Allowance for doubtful debts Inventory (at lower of cost or net realisable value) Cash at bank Prepaid expenses Prepaid services revenue Loan from MyBank Provisions Accounts payable Accrued expenses Dividend declared and paid Share capital General Reserve Retained earnings (1 July 2018) 42,497,600 3,210,000 1,300,100 6,956,700 4,280,500 5,420,300 340,000 2,495,100 53,400 245,700 2,975,000 1,700,000 2,210,600 897,450 212,000 357,000 2,649,400 877,600 5,277,650 66,816,400 66,816,400 Additional information: Note: Unless otherwise indicated the events and transactions outlined below have already been accounted for in the balances above if required (a) Included in the amount of 'Expenses' in the trial balance provided above are . Cost of sales $17,930,000 .Salaries and wages $9,214,000 Annual leave expense of $966, 000 Long service leave expense of $86,000 . Power and other utility expenses $1,240,000 . Insurance expense $795,600 .Advertising expenses $1,690,000 . Other general operating expenses of $3,112,500 . Depreciation expense for equipment $680,000. . Depreciation expense for vehicles of $380,000 . Depreciation expense for buildings of $695,000 . Warranty expense of $1,240,000 . $487,000 being cost of land sold in March 2019 . $525,000 payment to auditors ($65,000 of this was for taxation advice and the rest for the audit of the company) $400 for subscription to online TV/sports streaming service for staff break/lounge rooms. . (Note: This does not detail all expenses included in the total of 'Expenses' in the trial balance above. You should classify any remaining expenses as 'other' or 'miscellaneous') (b) The company borrowed $1,700,000 from MyBank on 1 July 2018. On 1 July each year the company is required to make a payment of interest accrued for the year. On 1 July 2019, the company made a payment of $76,500, being interest accrued for the year. The company is required to pay the principal amount in full on 1 July 2022 (c) Only one item of land was sold during the period (in March 2019) for $780,000 cash (d) The extraordinary gain relates to the unexpected receipt of monies. In 2015 a major customer of the company was declared bankrupt owing the company $1,210,000. It had been expected that no money would be received, and the company had written this bad debt off in May 2016. However, an investigation was undertaken by ASIC and assets have now been recovered from the customer. As a result, in April 2019 the company received $626,000 (no further money is expected to be recovered from this previous customer) (e) The balance of the provisions in the trial balance is comprised of Legal provision of $650,000 (see (m) below) Provision for annual leave of $234,000. The balance of the provision for annual leave at 30 June 2018 was $108,000 Provision for Long Service leave of $384,000. No long service period was taken during the year ended 30 June 2019 and none is expected to be taken until 2022 . . . Provision for warranties of $942,600. The company previously provided a 12 month warranty on the majority of its products and services. However, as a number of competitors provide for longer warranty periods, the company decided to change its warranty conditions. From 1 May 2019 the company provided a 3-year warranty on the majority of its products. This is expected to increase the warranty expense for full financial years in the future by around 18% It is expected that 80% of the balance of this warranty provision as at 30 June 2019 will be used up by 30 June 2020. The balance of the provision for warranties at 30 June 2018 was $692,000 (f) The prepaid expenses in the trial balance includes $65,000 for prepaid insurance, $107,000 for prepaid advertising, and $73,700 for prepaid maintenance (cleaning) services. The accrued expenses relate to utilities (e.g. power) Directors had declared a dividend of $357,000 from retained earnings on 2 July 2018. This required no further approval or authorisation. This dividend was paid on 1 September 2018 (g) (h) At 1 July 2018 the share capital comprised 2,500,000 fully paid ordinary shares at an issue price of $1.00 issued on 1 July 2006. Share issue costs paid in relation to this issue were $23,000 .50,000 fully paid ordinary shares at an issue price of $1.00. These were bonus shares issued on 1 August 2012 In lieu of an interim dividend, a bonus share issue of 1 fully paid ordinary share (issue price $1.20) for each 25 shares held, was made on 28 January 2019 from the general reserve