Required: Prepare the following financial statements, suitable for publication, after incorporating the above adjustments. a Statement of profit or loss and other comprehensive income for the year ended 31 December 20X4. (30 marks) b Statement of financial position as at 31 December 20X4. (40 marks) Question 2 (70 marks) Goodhope Limited was incorporated in Hong Kong in January 20X1 and made profits by manufacturing and selling batteries for e-pads. Goodhope has a financial year end on 31 December. The following information has been extracted from the books at 31 December 20X4: Credit $000 800,000 Debit S000 Sales Cost of sales 430,000 Tax expense 13,400 Selling and distribution expenses 82,000 General and administrative expenses 56.900 Finance costs 13,000 Cash and bank balances 290,000 Retained profits at 1 January 20x3 20x4 Revaluation surplus at 1 January 20X320X4 Share capital (500,000 ordinary shares) Accounts receivables 228,000 Provision for bad debts at 1 January 2083 2084 Inventories 420,000 Tangible non-current assets 1,402,000 Accumulated depreciation at 1 January 20x3 20x4 Accounts payables Tax payables Deferred tax liability Long-term bank loans 2.935,300 457,400 80,000 500,000 13,200 615,000 165,000 7,700 7,000 290,000 2,935,300 In the preparation of the financial statements for the year 20X4, it was found that there were some issues to be resolved: 1 A motor van was purchased in July 20X3 for selling and distribution use. The cost of the van was $500,000. The estimated useful life was five years. On 1 October 20X4, the motor van was seriously damaged in a traffic accident. After the repair, the remaining useful life of the motor van was expected to be two more years at 31 December 20x4. In the review of the financial records of 20X3. Goodhope discovered that the closing inventory of 20X3 had been overstated by $200,000 in both the statement of profit or loss for the year ended 20x3 and the statement of financial position at 31 December 20X3. A customer sued Goodhope for the defective chips used for the 9-phone. The defective chips had caused malfunction and the customer needed to incur costs to recall and replace the chip of the sold products. The customer filed the claim for a total compensation of $700,000 from Goodhope in May 20X4. Goodhope considered that the claim was of no merit and decided to disclose the lawsuit in the notes of accounts. In March 20X5, the court ruled that Goodhope should pay the compensation in the amount of $450,000. The full amount was payable by 15 April 20X5. Moon Limited, one of the customers who purchased batteries from Goodhope, was found to have used the batteries for illegal activities in January 20X5. The assets of Moon were confiscated by the government for criminal investigation. Moon owed Goodhope $80,000 at 31 December 20X4. On 20 February 20X5, the board of directors were pleased with the company's outstanding performance in 20X4 and decided to pay an additional month of cash bonus. This extra cash bonus of $500,000 would be paid in April 20X5. Goodhope has a practice of paying discretional bonus to reward outstanding performance. No provision had been made in the books for this amount
