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Task 1 Hussain Co. prepared the following trial balance on 31st December 2020 before taking account of the additional information below: Hussain Co. Trial balance

Task 1

Hussain Co. prepared the following trial balance on 31st December 2020 before taking account of the additional information below:

Hussain Co.

Trial balance as on 31st December 2020

Debit

Credit

OMR

OMR

Revenue

2,070,000

Purchases

1,176,000

Building Cost

350,000

Building accumulated depreciation at 1 January 2020

75,000

Fixtures & fitting Cost

Fixtures & fitting accumulated depreciation at 1 January

386,000

2020

76,600

Land Cost

300,000

Trade and other receivables

37,500

Trade and other payables

83,200

6% Debentures (redeemable at par on 1 September 2022)

40,000

Cash and cash equivalents

29,000

Retained earnings

72,700

Share Capital (R.O 1 shares)

420,000

Share premium

99,000

Distribution costs

276,000

Administrative expenses

289,000

Inventories as at 1 January 2020

12,000

Dividend paid for year ended December 2020

84,000

2,939,500 2,939,500

Additional information:

  1. Inventories on 31st December 2020 had a cost of OMR 18,000 and a net realisable value of OMR 15,000.

  1. On 1st June 2020Hussain Co. issued 300,000 OMR1.000 ordinary shares at a cash price of OMR1.250 per share. The full amount has been recognised in ordinary share capital.

  1. On 1st January 2020 one of Hussain Co.s premises had a refit costing OMR 120,000 and this was recognised in administrative expenses. However, on further investigation, it was discovered that half of the amount should have been recognised as part of fixtures and fittings in accordance with IAS 16 Property, Plant and Equipment.

  1. On 1st January 2020 the board of directors made the decision to revalue the companys land to OMR 700,000.

  1. Depreciation has yet to be charged and should be recognised in administrative expenses. Hussain Co. charges depreciation as follows:

Buildings 2% on cost

Fixtures and fittings 15% reducing balance

  1. Interest has not been accounted for on the 6% debenture for the year ended on 31st December 2020.

  1. Hussain Co. is defending a court case as a customer is claiming damages due to accidentally slipping off the stairs in one of the retail outlets. The legal advisors have indicated that there is an 80% chance that Hussain Co. will have to pay OMR20,000 and a 20% chance they will have to pay OMR50,000. The case will be settled during 2021. Any related expense should be recognised in administrative expenses.

  1. The income tax charge for the year is estimated at OMR 74,900.

REQUIRED

a. As far as the information permits, prepare a statement of comprehensive income and a statement of changes in equity for Hussain Co. for the year ended 31 December 2020 and a

statement of financial position as at that date, in a form suitable for publication. (40Marks) b. Discuss the importane and limitations of financial statements. (10Marks)

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