uality Bottling Company [QBC] was incorporated as a private company in 2015. All the shares of the company are held by the Managing Director, Mr Kofi Sampana and his family members.. After seven years of successful operation, the Board of Directors decided to get the company listed on Ghana Stock Exchange. As a first step, the Board decided to make an initial public offer [IPO] on the strength of the companys 2022 financial statements. The summarised unaudited financial statements of QBC are as follows: Statement of comprehensive Income the year ended 31 December 2022 GHS000 Revenue from Contract with Customers( note i) 100,000 Cost of sales (48,000) ---------- Gross Profit 52,000 Operational Expenses (23,200) Finance costs [Interest on debenture stocks] (800) --------- Net Profit 28,000 Taxation (@ 25%) ( 7,000) ---------- Profit for the period 21,000 ===== Statement of Changes in Equity for the year ended 31 December 2022 Stated Retained Total Capital Earnings GHS000 GHS000 GHS000 As at I January 2022 8,000 30,000 38,000 Profit for the year 21,000 21,000 Dividend paid (12,360) (12,360) -------- ---------- ---------- As at 321 December 2022 8,000 38,640 46,640 ===== ====== ===== 4 Statement of financial position as at 31 December 2022 ASSETS GHS000 Non-current assets Property at valuation (Land GHS 2 m ; buildings GHS 18m) (ii) 20,000 Plant and equipment (ii) 16,000 Intangible Asset Patent Right (ii) 2,000 Financial asset (fair valued through profit or loss at 1/1/2017) (iii) 5,000 -------- 43,000 -------- Current Assets Inventories 8,000 Trade receivables 9,000 Cash and cash equivalents 3,000 -------- 20,000 --------- Total Assets 63,000 ===== EQUITY AND LIABILIES Stated Capital (4 million shares issued at GHS2.00 per share) 8,000 Retained Earnings 38,640 ---------- 46,640 Non-current liabilities 20% Debenture Stocks [2022-2024] (note v) 4,000 Deferred Tax provision -1 January 2022 (note vi) 3,000 --------- 7,000 Current liabilities Trade Payables and provisions 2,360 Current Tax liability 7,000 -------- 9,360 -------- Total Equity and Liabilities 63,000 ===== The Managing Director, Mr Sampana has contacted you to assist in reviewing the financial statements for correctness. Your examination of the financial statements and the underlying records revealed the following additional information: i) The revenue from contract with customers includes GHS4 million of revenue for credit sales invoiced to a major customer in Tamale [Yelma Enterprise] on 30h December 2022 on CIF basis. On 2nd January 2023, the Customer sent a message that the goods had not arrived. A follow up revealed that the delivery truck was involved in an accident at Buipe and only 50% could be salvaged. The salvaged goods were delivered to Yelma Enterprise at full selling price on 3rd January 2023. The Insurer, Trust Insurance Plc accepted full claim of the cost (cost to the insured) of the damaged goods. QBC applied a mark up on cost of 25% on all these sales. 5 (ii) The depreciable non-current assets have not been depreciated for the year ended 31 December 2022. QBC has a policy of revaluing its land and buildings at the end of each accounting year. The values in the above statement of financial position are as at 1 January 2022 when the buildings had a remaining life of 18 years. A qualified surveyor has valued the land and buildings at 31 December 2022 at GHS22 million. Plant and equipment are depreciated at 12.5% per annum on the reducing balance basis. As at 31 December 2022, the value in use and the fair value less cost to sell were assessed at GHS13.8 million and GHS13.5 million respectively. The patent right was acquired in January 2022 at a cost of GHS2 million. It is expected to be used for 5 years after which the right of usage would have to be renewed in January 2027. iii) The financial assets at fair value through profit or loss are held in a fund whose value changes directly in proportion to a specified market index. At 1 January 2022 the relevant index was 240.0 and at 31 December 2022, the index was 259.2 (iv) QBC offers one year warranty for goods sold. Following from past occurrence, it has been established that 75% of goods sold are not returned for any rectification, 20% are returned for minor faults and 5% are returned for major faults. On the average, minor repairs cost GHS20,000 per unit and major repairs cost GHS100,000 per unit. In the year 2022, two hundred units were sold. Beside these sales, a former employee has sued the company for GHS400,000 for wrongful dismissal and the legal advisors have advised that there is 80% probability that the case will be determined in favour of the employee. (v) The 20% GHS4 million Debenture stocks were issued on 1 January 2022 at par. Interests are payable annually in arrears at 31 December. The stocks would be redeemed at a premium on 31 December 2024; thus yielding an effective interest rate of 25% per annum. (vi) As at 31 December 2022, the company's taxable temporary differences had increased to GHS16 million. The applicable income tax rate is 25%. The above figures do not include the estimated provision for current income tax on the profit for the year ended 31 December 2022. After allowing for any adjustments required in items (i) to (v), the directors have estimated the provision of current tax liability for 2022 at 25% of adjusted profit. (This is in addition to the deferred tax effects of item (vi)). (vii) During the current year,(2022) dividends of GHS12.36 million were paid. These have been correctly accounted for in the above financial statements. The correction of the errors identified above would not affect dividend payment. Required Redraft the financial statements above (taking into consideration the additional information (i) (vi) above