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The following list of account balances relates to Strawberry Ltd at 31 March 20X1. Sales revenue (note a) $'000 $'000 358,450 Cost of sales 185,050

The following list of account balances relates to Strawberry Ltd at 31 March 20X1. Sales revenue (note a) $'000 $'000 358,450 Cost of sales 185,050 Distribution costs 28,700 Administration expenses 15,000 Lease rentals (note b) 20,000 Loan note interest paid 2,000 Dividend paid 12,000 Property at cost (note c) 200,000 Plant and equipment cost Depreciation 1 April 20X0 plant and equipment Development expenditure (note d) Profit on disposal of non-current assets (note c) Trade accounts receivable 154,800 30,000 55,000 34,800 45,000 Inventories: 31 March 20X1 28,240 Cash and bank Trade accounts payable 10,660 29,400 Taxation: over provision in year to 31 March 20X0 2,200 Equity shares of 25c each 150,000 8% loan note (issued in 20W9) 50,000 Retained earnings 1 April 20X0 71,600 741,450 741,450 The following notes are relevant. (a) Included in sales revenue is $27 million, which relates to sales made to customers under sale or return agreements. The expiry date for the return of these goods is 30 April 20X1. Strawberry has charged a mark-up of 20% on cost for these sales. (b) A lease rental of $20 million was paid on 1 April 20X0. It is the first of five annual payments in advance for the rental of an item of equipment that has a cash purchase price of $80 million. The auditors have advised that this is a finance lease and have calculated the implicit interest rate in the lease as 12% per annum. Leased assets should be depreciated on a straight-line basis over the life of the lease. (c) On 1 April 20X0 Strawberry acquired a new property at a cost of $200 million. For the purpose of calculating depreciation only, the asset has been separated into the following elements. Separate asset Cost Life $'000 Land 50,000 freehold Heating system 20,000 10 years Lifts 30,000 15 years Building 100,000 50 years The depreciation of the elements of the property should be calculated on a straight-line basis. The new property replaced an existing one that was sold on the same date for $95 million. It had cost $50 million and had a carrying value of $80 million at the date of sale. The profit on this property has been calculated on the original cost. It had not been depreciated on the basis that the depreciation charge would not be material. Plant and machinery depreciated at 20% on the reducing balance basis. (d) The figure for development expenditure in the list of account balances represents the amounts deferred in previous years in respect of the development of a new product. Unfortunately, during the current year, the government has introduced legislation which effectively bans this type of product. As a consequence of this the project has been abandoned. The directors of Strawberry are of the opinion that writing off the development expenditure, as opposed to its previous deferment, represents a change of accounting policy and therefore wish to treat the write off as a prior period adjustment. (e) A provision for income tax for the year to 31 March 20X1 of $15 million is required. Prepare the income statement and statement of financial position of Strawberry for the year to 31 March 20X1.

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The following list of account balances relates to Strawberry Ltd at 31 March 20X1. S'000 $'000 358,450 185,050 28.700 15,000 20.000 2,000 12.000 200,000 154.800 34,800 Sales revenue (note a) Cost of sales Distribution costs Administration expenses Lease rentals (note b) Loan note interest paid Dividend paid Property at cost (note c) Plant and equipment cost Depreciation 1 April 20X0-plant and equipment Development expenditure (note d) Profit on disposal of non-current assets (note c) Trade accounts receivable Inventories: 31 March 20X1 Cash and bank Trade accounts payable Taxation: over provision in year to 31 March 20X0 Equity shares of 25c each 8% loan note (issued in 2009) Retained earnings 1 April 20X0 30,000 45,000 55,000 28,240 10.660 29,400 2.200 150.000 50,000 71,600 741.450 741.450 The following notes are relevant. (b) (c) Included in sales revenue is $27 million, which relates to sales made to customers under sale or return agreements. The expiry date for the return of these goods is 30 April 20X1. Strawberry has charged a mark-up of 20% on cost for these sales. A lease rental of $20 million was paid on 1 April 20X0. It is the first of five annual payments in advance for the rental of an item of equipment that has a cash purchase price of $80 million. The auditors have advised that this is a finance lease and have calculated the implicit interest rate in the lease as 12% per annum. Leased assets should be depreciated on a straight-line basis over the life of the lease. On 1 April 20X0 Strawberry acquired a new property at a cost of $200 million. For the purpose of calculating depreciation only, the asset has been separated into the following elements. Separate asset Cost Life $'000 Land 50.000 freehold Heating system 20,000 10 years Lifts 30.000 15 years Building 100.000 50 vears The depreciation of the elements of the property should be calculated on a straight-line basis. The new property replaced an existing one that was sold on the same date for $95 million. It had cost $50 million and had a carrying value of $80 million at the date of sale. The profit on this property has been calculated on the original cost. It had not been depreciated on the basis that the depreciation charge would not be material. Plant and machinery depreciated at 20% on the reducing balance basis. The figure for development expenditure in the list of account balances represents the amounts deferred in previous years in respect of the development of a new product. Unfortunately, during the current year, the government has introduced legislation which effectively bans this type of product. As a consequence of this the project has been abandoned. The directors of Strawberry are of the opinion that writing off the development expenditure, as opposed to its previous (d) The following list of account balances relates to Strawberry Ltd at 31 March 20X1. S'000 $'000 358,450 185,050 28.700 15,000 20.000 2,000 12.000 200,000 154.800 34,800 Sales revenue (note a) Cost of sales Distribution costs Administration expenses Lease rentals (note b) Loan note interest paid Dividend paid Property at cost (note c) Plant and equipment cost Depreciation 1 April 20X0-plant and equipment Development expenditure (note d) Profit on disposal of non-current assets (note c) Trade accounts receivable Inventories: 31 March 20X1 Cash and bank Trade accounts payable Taxation: over provision in year to 31 March 20X0 Equity shares of 25c each 8% loan note (issued in 2009) Retained earnings 1 April 20X0 30,000 45,000 55,000 28,240 10.660 29,400 2.200 150.000 50,000 71,600 741.450 741.450 The following notes are relevant. (b) (c) Included in sales revenue is $27 million, which relates to sales made to customers under sale or return agreements. The expiry date for the return of these goods is 30 April 20X1. Strawberry has charged a mark-up of 20% on cost for these sales. A lease rental of $20 million was paid on 1 April 20X0. It is the first of five annual payments in advance for the rental of an item of equipment that has a cash purchase price of $80 million. The auditors have advised that this is a finance lease and have calculated the implicit interest rate in the lease as 12% per annum. Leased assets should be depreciated on a straight-line basis over the life of the lease. On 1 April 20X0 Strawberry acquired a new property at a cost of $200 million. For the purpose of calculating depreciation only, the asset has been separated into the following elements. Separate asset Cost Life $'000 Land 50.000 freehold Heating system 20,000 10 years Lifts 30.000 15 years Building 100.000 50 vears The depreciation of the elements of the property should be calculated on a straight-line basis. The new property replaced an existing one that was sold on the same date for $95 million. It had cost $50 million and had a carrying value of $80 million at the date of sale. The profit on this property has been calculated on the original cost. It had not been depreciated on the basis that the depreciation charge would not be material. Plant and machinery depreciated at 20% on the reducing balance basis. The figure for development expenditure in the list of account balances represents the amounts deferred in previous years in respect of the development of a new product. Unfortunately, during the current year, the government has introduced legislation which effectively bans this type of product. As a consequence of this the project has been abandoned. The directors of Strawberry are of the opinion that writing off the development expenditure, as opposed to its previous (d)

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