Scorpio Ltd is an Australian public company. The accounting staff of Scorpio Ltd have asked for your assistance in preparing the companys financial statements for the year ended 30 June 2017 and have provided you with the following information:

Scorpio Ltd

Trial Balance

As at 30 June 2017

Item	Debit	Credit
Sales revenue		540,000
Gain on sale of financial assets		4,000
Revaluation of property, plant and equipment		20,000
Other income		16,000
Unrealised gains on cash flow hedges		13,000
Loss for the year from discontinued operations	5,000
Remeasurement of defined benefit superannuation plan	7,500
Occupancy expenses	45,000
Income tax expense	15,000
Finance costs	27,500
Distribution expenses	55,000
Exchange differences on translation of foreign operations	6,500
Administrative expenses	50,000
Cost of goods sold	310,000
Other operating expenses	22,500
Income tax related to items of other comprehensive income:
Remeasurement of defined benefit superannuation plan		2,000
Exchange differences on translation of foreign operations		2,000
Cash flow hedges	4,000
Revaluation of property, plant and equipment	6,000

Notes

In relation to items of other comprehensive income:

Items that will not be reclassified subsequently to profit or loss: revaluation of property, plant and equipment; and remeasurement of defined benefit superannuation plan.

Items that may be reclassified subsequently to profit or loss: cash flow hedges; and exchange differences on translation of foreign operations.

On 1 July 2015, Scorpio Ltd paid $2,000 to purchase a portfolio of financial assets comprising shares in twenty companies listed on the Australian Securities Exchange. In accordance with AASB 9 Financial Instruments , Scorpio Ltd made an irrevocable decision to measure the portfolio of financial assets at fair value through other comprehensive income.

As at 30 June 2016, the fair value of the portfolio of financial assets had increased to $6,000 and Scorpio Ltd recognised a gain of $4,000 (and related income tax expense of $1,000) in other comprehensive income for the year ended 30 June 2016.

Due to concerns about the volatility of the Australian share market, Scorpio Ltd sold the portfolio of financial assets on 1 July 2016 for $6,000. Scorpio Ltd recognised a gain of $4,000 in profit or loss for the year ended 30 June 2017 and this is included in the Trial Balance above. The income tax expense ($1,000) on this gain has already been included in the income tax expense amount in the trial balance.

Comparative figures for the preceding year (ending 30 June 2016) have been omitted.

All amounts in the trial balance and in the notes are in thousands ($000).

Required

Prepare the Statement of profit or loss and other comprehensive income for Scorpio Ltd for the year ended 30 June 2017 in accordance with the requirements of AASB 101 Presentation of Financial Statements. (5 marks)

Explain the adjustment that must be made in the Statement of profit or loss and other comprehensive income as a consequence the gain on the sale of the financial assets being recognised in profit or loss. Why is an adjustment necessary? (1 mark)