STATEMENT OF FINANCIAL POSITION 2019 2018 2017 2015 K 2016 KO K00 KW 8608 1,748 2394 1984 13,005 Pant and equipment Investment properties Investment property under development 838,842 8052 864,594 1,041,974 951,785 26,90 23,102 2673 24309 22,982 7,140 12,415 96,504 93,721 Rental income recevable after 12 months 31,086 5,107 Current assets 41,771 Total Assets 1,134,123 7,849 36,438 77.696 1,026,444 972,491 932,786 975,194 Shareholders' funds and abilities 798,982 Total equity 823,615 804202792,155 Non-autent les 127,939 140958 158,050 197 301 30,191 Total aumentables 12692 10,621 12236 1,134,123 Total equity and labilise 1,026,444 972,491 82,786 975,194 STATEMENT OF COMPREHENSIVE INCOME-K For the ended 31 December 2010 2018 2017 2018 2016 K 600 % K'000K 300% K000 % Gross rental income Total property expertes Tots administration expenses mpalment is on trade receivables Tois deprecation 50,579 75,782 57,391 (8,081) 1847,611) 12 0,147) 94 611,637) 201 (10.231) 2014 (11,753) 18% 12,184) 16% 9,955) 17% (3,973) (4634) 71.128) % 1,121) 2% (560) IS (683) 1% 1652) 1504 15 $7,867 60% 27,734 39% Pront from operations 40,483 62%]54,670 72% 34,174 50% Other operating income 70 Change in fair value of investment property 23,225 2,154 161,628 445,734 Net terest expense (16,201) (10,178) (10,440 Exchange forsygan 166) 5415 125,139 Prontylocc) boforo tax 9,639 32,413 (11,893) 414,750 (8.840) Income axexpense Pront Kloce) attor tax (6,815) 2824 07.380) 25,033 (20,733 433 53 Before submitting the reports for audit the CFO has notice that the following information relating to the construction project of building the bridge which was awarded to Lafarge by the Road Development Agency (RDA) which commenced in 2017 has been omitted in the financial records. The initial price agreed in the contract is K90,000,000. Lafarge's initial estimate of contract costs is K80,000,000. It will take 3 years to build the bridge. By the end of year 2017, Lafarge's estimate of contract costs had increased to K80, 500,000 in year 2018, RDA approved a variation resulting in an increase in contract revenue of K2,000,000 and estimated additional contract costs of K1,500,000. At the end 2018, costs incurred included K1000,000 for standard materials stored at the site to be used in the year 2019 to complete the project.Lafarge determines the stage of completion of the contract by using the input method. A summary of the financial data during the construction period is as follows 2017 2018 2019 K,000 K,000 K,000 Initial amount of revenue agreed 90,000 90,000 90,000 Contract Cost incured in the year 20,930 40,750 20,320 The CFO has requested that you deal with this issue so that correct financial statements are submitted for audit. Required a) Citing relevant accounting standard explain what type of error has been made by Lafarge and explain how this error will be accounted for in the books b) Prepare all the required journal entries to update the records of Lafarge (show all your working) c) Prepare a new Income statement and the statement of financial position after recording the above omitted transaction d) Discuss the effect that this omission had on the profit before tax for 2018 and the impact that it would have had to the users of financial statement. STATEMENT OF FINANCIAL POSITION 2019 2018 2017 2015 K 2016 KO K00 KW 8608 1,748 2394 1984 13,005 Pant and equipment Investment properties Investment property under development 838,842 8052 864,594 1,041,974 951,785 26,90 23,102 2673 24309 22,982 7,140 12,415 96,504 93,721 Rental income recevable after 12 months 31,086 5,107 Current assets 41,771 Total Assets 1,134,123 7,849 36,438 77.696 1,026,444 972,491 932,786 975,194 Shareholders' funds and abilities 798,982 Total equity 823,615 804202792,155 Non-autent les 127,939 140958 158,050 197 301 30,191 Total aumentables 12692 10,621 12236 1,134,123 Total equity and labilise 1,026,444 972,491 82,786 975,194 STATEMENT OF COMPREHENSIVE INCOME-K For the ended 31 December 2010 2018 2017 2018 2016 K 600 % K'000K 300% K000 % Gross rental income Total property expertes Tots administration expenses mpalment is on trade receivables Tois deprecation 50,579 75,782 57,391 (8,081) 1847,611) 12 0,147) 94 611,637) 201 (10.231) 2014 (11,753) 18% 12,184) 16% 9,955) 17% (3,973) (4634) 71.128) % 1,121) 2% (560) IS (683) 1% 1652) 1504 15 $7,867 60% 27,734 39% Pront from operations 40,483 62%]54,670 72% 34,174 50% Other operating income 70 Change in fair value of investment property 23,225 2,154 161,628 445,734 Net terest expense (16,201) (10,178) (10,440 Exchange forsygan 166) 5415 125,139 Prontylocc) boforo tax 9,639 32,413 (11,893) 414,750 (8.840) Income axexpense Pront Kloce) attor tax (6,815) 2824 07.380) 25,033 (20,733 433 53 Before submitting the reports for audit the CFO has notice that the following information relating to the construction project of building the bridge which was awarded to Lafarge by the Road Development Agency (RDA) which commenced in 2017 has been omitted in the financial records. The initial price agreed in the contract is K90,000,000. Lafarge's initial estimate of contract costs is K80,000,000. It will take 3 years to build the bridge. By the end of year 2017, Lafarge's estimate of contract costs had increased to K80, 500,000 in year 2018, RDA approved a variation resulting in an increase in contract revenue of K2,000,000 and estimated additional contract costs of K1,500,000. At the end 2018, costs incurred included K1000,000 for standard materials stored at the site to be used in the year 2019 to complete the project.Lafarge determines the stage of completion of the contract by using the input method. A summary of the financial data during the construction period is as follows 2017 2018 2019 K,000 K,000 K,000 Initial amount of revenue agreed 90,000 90,000 90,000 Contract Cost incured in the year 20,930 40,750 20,320 The CFO has requested that you deal with this issue so that correct financial statements are submitted for audit. Required a) Citing relevant accounting standard explain what type of error has been made by Lafarge and explain how this error will be accounted for in the books b) Prepare all the required journal entries to update the records of Lafarge (show all your working) c) Prepare a new Income statement and the statement of financial position after recording the above omitted transaction d) Discuss the effect that this omission had on the profit before tax for 2018 and the impact that it would have had to the users of financial statement