Task 1 (25)

Roderick Ltd has asked for your help with the preparation of his financial statements for year ended 30 April 2020. The trial balance of the company as at 30 April 2020 and further information is given below:

Trial balance as at 30 April 2020

	Debit P000	Credit P000
Distribution costs	6,852
Administration expenses	3,378
Interest	240
Trade receivables	5,455
Trade payables		2,363
Interim dividend paid	300
Ordinary share capital		12,000
Revenue		31,710
Long-term loan (8% debentures, payable 2020)		6,000
Plant and equipment - cost	16,641
Plant and equipment -Accumulated depreciation @ 1 May 2016		3,036
Purchases	15,525
Cash and cash equivalents	304
Retained earnings		8,197
Opening inventories	6,531
Share premium		2,000
Final dividend for the year ended 30 April 2017	100
Land and buildings cost / valuation	12,200
Land and buildings accumulated depreciation @ 1 May 2016		220
Revaluation reserve @ 1 May 2016		2,000
	67,526	67,526

Further information:

1. Closing inventory at 30 April 2020 was valued at P7,878,000
2. The corporation tax charge for the year has been calculated as P1,900,000
3. It has been noted that after year end, that one of the products made by the company was faulty. It was decided that the product be recalled at an estimated cost to the company of P10,000. All these products were sold prior to year-end. No adjustments have yet been made to the 2020 accounts. The recall expenses are classified as administrative costs.
4. Interest on the long-term loan has been paid for the six months of the year. No adjustment has been made for the interest due for the final six months of the year.
5. P1,500,000 of revenue returns has been treated as revenue in the 2020 year, in error
6. Depreciation is allocated to administrative expenses and is to be provided for the year to 30 April 2020 as follows:

1. Buildings 10% pa Straight line basis
2. Plant and equipment 20% pa Diminishing balance basis

7. Land (included in the trial balance at a value of P10,000,000 is to be revalued to P13,000,000 in the 2020 financial statements.
8. All of the operations are continuing operations

Required to prepare: Statement of profit or loss and other comprehensive income for the year ended 30 April 2020

Task 2 (25)

The directors of Nancy Ltd believe that the non-current assets of the company are undervalued. They have received a professional valuation of the land and buildings which shows that these are worth more than is stated in the latest financial statements. The land and buildings have current market value of P641,000 and P558, 000 respectively. The land and buildings currently have amounts of P431, 000 and P328,000 respectively.

Prepare brief notes for the directors of Nancy Ltd to answer the following questions in accordance with IAS 16 property, plant and equipment

(a) can we show the land and buildings at valuation rather than cost? (5)

(b) if we did so, how would the valuation of the land and buildings be reflected in the financial statements? (10)

(c) How often we would have to revalue our land and buildings? (5)

(d) if we revalue our land and buildings, must we still charge depreciation? (5)