STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013 Kwacha thousands Notes 2018 2017 5 1,141,800 1,008, 232 Revenue Cost of sales (565,859) (527,6901 Gross profit 575,941 480,542 Seling and distribution expenses Marketing expenses Administration expenses (207,905 (151,297) 6 (8,661) 19.99) Operating profit Investment income Other gains and losses Finance costs (265,122) (252,533) 7 9 94,253 66,714 PROFIT BEFORE TAX 10 730 Income tax credit (expense 12 1,975 10,126 67,378 PROFIT FOR THE YEAR (2,045) Other comprehensive Income (2,555) 104,309 57,511 Total comprehensive income for the year 90,589 (38,5731 Basic and diluted earnings per share with exceptional 13 corporate tax credit) Kwachal Basic and diluted earnings per share (from normal results 13 for the year) Kwachal 194.898 10,998 194.898 18,936 0.97 0.09 0.37 0.09 2008 2003 STATEMENT OF FINANCIAL POSITION for the year 2018 in thousands Paptop and re 1,517,28 SIS Equity Inverbalevala T-UTA 1,526,166 1,561,420 Trademarkable .. Amounts romanes 21,517 Cumantan 21196 Total current 2,016,366 EQUITY AND LIABILITIES and apital 21.1 10 wahedaming 1,150,00 1,551, Hocamere Provision for environmentallable Retirement berat plans 19,601 Trama 1,01 Trade papable S, 317,612 Amounts dans to companie Totalcar Bebi Torello 24,705 Total acuity and 526,010 2,006,166 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 1,500,000. 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 PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013 Kwacha thousands Notes 2018 2017 5 1,141,800 1,008, 232 Revenue Cost of sales (565,859) (527,6901 Gross profit 575,941 480,542 Seling and distribution expenses Marketing expenses Administration expenses (207,905 (151,297) 6 (8,661) 19.99) Operating profit Investment income Other gains and losses Finance costs (265,122) (252,533) 7 9 94,253 66,714 PROFIT BEFORE TAX 10 730 Income tax credit (expense 12 1,975 10,126 67,378 PROFIT FOR THE YEAR (2,045) Other comprehensive Income (2,555) 104,309 57,511 Total comprehensive income for the year 90,589 (38,5731 Basic and diluted earnings per share with exceptional 13 corporate tax credit) Kwachal Basic and diluted earnings per share (from normal results 13 for the year) Kwachal 194.898 10,998 194.898 18,936 0.97 0.09 0.37 0.09 2008 2003 STATEMENT OF FINANCIAL POSITION for the year 2018 in thousands Paptop and re 1,517,28 SIS Equity Inverbalevala T-UTA 1,526,166 1,561,420 Trademarkable .. Amounts romanes 21,517 Cumantan 21196 Total current 2,016,366 EQUITY AND LIABILITIES and apital 21.1 10 wahedaming 1,150,00 1,551, Hocamere Provision for environmentallable Retirement berat plans 19,601 Trama 1,01 Trade papable S, 317,612 Amounts dans to companie Totalcar Bebi Torello 24,705 Total acuity and 526,010 2,006,166 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 1,500,000. 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