Section 1 Presentation of financial statements (10 MARKS)

The adjusted trial balance of Sunny Ltd as at 30 June 2017 is as follows:
Sunny Ltd	Debit	Credit
	$	$
Accounts receivable	1,350,000
Asset revaluation reserve as at 1/7/2016		240,000
Asset revaluation reserve (On 17 June 2017, freehold land was revalued to its fair value of $1,276,000 from its carrying amount of $1,076,000. The related deferred tax has been accounted.)		200,000
Accumulated amortisation patents & trademarks		25,000
Accumulated impairment loss goodwill		180,000
Accumulated depreciation -
Plant & machinery		206,000
Fixtures & fittings		47,000
Buildings		40,000
Administrative staff salaries expense	540,000
Advertising expense	120,000
Bank loan (unsecured short-term repayable due)		40,000
Bank loan (unsecured long-term repayable amount)		160,000
Carrying amount of plant and machinery sold	24,000
Cost of sales	3,424,000
Deposits at call	120,000
Dividends revenue		43,000
Deferred tax asset	210,000
Debentures held in Emerald Ltd (mature on 30/5/2018)	214,000
Dividends receivable	8,000
Freight inwards	90,000
Freight outwards	115,000
Ordinary shares, fully paid		3,654,000
General reserve		680,000
Goodwill	732,000
Retained profits as at 1/7/2016		750,000
Mortgage loan (secured over land and buildings due 30/9/2020)		254,000
Accounts payable		472,000
Current tax liabilities		156,000
Provision for long service leave -short term liable		100,000
Provision for long service leave - long term liable		150,000
Deferred tax liability		175,000
Allowance for doubtful debts		77,000
Provision for annual leave		62,000
Freehold land (at fair value)	1,276,000
Buildings (at fair value)	900,000
Long term investment in listed shares as at 1/7/2016	60,000
Long term investment in listed shares (revaluation increment on 30/06/2017)	40,000
Loan to Charlie Ltd (due on 30/6/2020)	220,000
Patents and trademarks	125,000
Plant & machinery - at cost	684,000
Preference shares, fully paid		240,000
Prepayments	40,000
Inventories	1,950,000
Income tax expense	381,000
Final dividend payable		200,000
Fixtures & fittings - at cost	118,000
Cash at bank	530,000
Sales revenue		6,600,000
Sundry revenue		46,200
Sales returns and allowances	12,000
Sales staff salaries and commission expense	500,000
7% debentures due 30/4/2018 (secured over inventories)		85,000
Proceeds on sale of plant and machinery		40,000
Other administrative expense	370,000
Other selling expense	210,000
Interest expense	68,000
Other expenses	122,000
Underwriting commission and other share issue costs	47,000
Interest revenue		50,000
Interest payable		9,000
Transfer to general reserve	50,000
Interim dividend paid - ord	131,200
Final dividend declared ord	164,000
Final dividend declared - pref	36,000
Total	14,981,200	14,981,200

Additional information:

i) Included in other administrative expense were:

fees paid to auditor:

25% for audit & review of financial reports

75% for non-audit consulting services) $60,000

fees paid to related practice of the auditor (for

legal services) $12,000

ii) Inventories, $1,950,000, comprised of:

Raw material at cost $70,000

Work in progress at cost 800,000

Finished goods at cost 1,054,000

Finished goods at net realisable value 26,000

Finished goods are valued at the lower of cost and net realisable value on a weighted average basis.

iii) Contributed equity as at 1 July 2016 consisted of:

2,000,000 ordinary shares issued at $1 each, fully paid $ 2,000,000

100,000 15 % preference shares issued at $2.40 each, fully paid 240,000

45,000 share options 22,500

iv) On 14 July 2016, a rights issue of 1,280,000 ordinary shares were made at $1.25 each. The underwriting commission and other shares issue costs for the issue amounted to $15,000. The shares issued ranked equally with existing shares for dividend.

v) On 29 May 2017, the 45,000 share options were exercised and 45,000 ordinary shares were allotted at an exercise price of 70 cents each. The allotted shares did not rank for dividend until 2018.

vi) On 17 June 2017, freehold land was revalued to its fair value of $1,276,000 from its carrying amount of $1,076,000. The related deferred tax has been accounted.

vii) On 28 June 2017, Sunny entered into a contract with Magnet Ltd for the construction of three new machines at a cost of $245,000 each. The company expects to take delivery of the first machine in January 2018, and the rest in February 2016.

viii) On 30 June 2017, listed investments were revalued to their fair value. They were purchased at a cost of $60,000 in May 2016 and are classified as long-term investments in equity instruments. The related deferred tax liability had been accounted.

Note: Loan receivables and held-to-maturity investments (such as debentures held in another entity) are to be classified as other financial assets.

ix) An amount of $50,000 was transferred to general reserve from retained earnings.

x) Accounting policies adopted are consistent with those of the previous year.

xi) Tax rate is 30%

Required

Prepare a statement of profit or loss and other comprehensive income for Sunny Ltd for the year ended 30 June 2017 according to the requirements of AASB 101 (classify expenses by functions). Show all workings.

Prepare a statement of financial position for Sunny Ltd at 30 June 2017 to comply with AASB 101. Use the current and non-current presentation format. Show all workings.

Prepare a statement of changes in equity for Sunny Ltd for the year ended 30 June 2017 according to the requirements of AASB 101. Show the dividends per share on the statement. Show all workings.

Prepare appropriate notes to the following items:

summary of significant accounting policies

statement of compliance;

an extract of the basis of accounting and inventories;

2) inventories;

3) long-term borrowings;

4) auditors remuneration;

Sunny Ltd
Statement of Changes in Equity
for the year ended 30 June 2017
	Contributed equity	General reserve	Revaluation reserve	Retained earnings	Total
	$	$	$	$	$
Balance at 1 July 2016			344,000		3,954,500
Total comprehensive income for the year
Issue of ordinary shares as a result of rights issue
Issue of ordinary shares as a result of options exercised
Transfer to general reserve
Inter dividend paid - ord
Final dividend declared ord
Final dividend declared - pref
Balance at 30 June 2017	3,847,000				6,211,000

Sunny Ltd
Statemnet of Financial Position
as at 30 June 2017
Current Assets
	Cash and cash equivalents
	Trade and other receivables
	Financial assets
	Inventories	Note 9
	Total Current Assets
Non-Current Assets
	Investments in equity instruments
	Other financial assets
	Property, plant and equipment
	Goodwill
	Other intangible assets
	Deferred tax assets		107,000
	Total Non-Current Assets
Total Assets
Current Liabilities
	Trade and other payables
	Short-term provisions
	Short-term borrowings
	Current portion of long-term borrowings		40,000
	Current tax liabilities
	Total Current Liabilities
Non-Current Liabilities
	Long-term borrowings	Note 17
	Long-term provisions
	Total Non-Current Liabilities
Total Liabilities
Net assets
Equity
	Contributed capital
	Reserves		1,192,000
	Retained earnings
Total Equity

Sunny Ltd
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30/06/2017
Revenue
Cost of sales
Gross profit
Other revenue
Other income
Selling costs
Administration costs
Other expenses
Finance costs
Profit before income tax
Income tax expense
Profit for the period
Other comprehensive income:
Items that will not be reclassified to profit or loss
Gain arising during the year on revaluation of land	200,000
Gain arising during the year on investments in equity instruments	40,000
Income tax relating to items not reclassified	( 72,000)
Other comprehensive income during the year, net of tax	168,000
Total comprehensive income for the year