Prepare a statement of profit or loss

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Reference no: EM131115491

Problem # 1

The drafted trial balance of Cloudy Ltd as at 30 June 2016 is shown below.

 

Debit

Credit

Ordinary share capital (1 500 000 shares)

 

 

$1 062 500

General reserve (1/7/15)

 

 

175 000

Revaluation surplus (1/7/15)

 

 

60 000

Retained earnings (1/7/15)

 

 

104 500

Bank loan (long-term)

 

 

46 500

Mortgage (long-term)

 

 

80 000

Accounts payable

 

 

202 000

Provision for employee benefits (long-term)

 

 

5 000

Allowance for doubtful debts

 

 

7 500

Accumulated depreciation:

 

 

12 850

Property, Plant and Equipment (at cost)

 

$  557 500

 

Accounts receivable

 

542 950

 

Inventory

 

651 100

 

Goodwill

 

200 000

 

Cash at bank

 

278 800

 

Interest expense on bank loan and mortgage

 

12 500

 

Sales

 

 

1 730 500

Raw materials and consumables used

 

1 083 100

 

Changes  in  inventories  of  finished   goods

and

 

3 100

work in progress

 

 

 

Other expenses (excluding depreciation)

 

     163 500

                      

 

 

$3 489 450

$3 489 450

Additional information

Details of the balances of PPE and accumulated depreciation accounts are:

Accumulated depreciation:      $12 850, including:

Plant                                            9 500

Office furniture                              850

Buildings                                     2 500

PPE (at cost)

Land (at cost)

$557 500,

211 500

including:

Factory buildings (at cost)

250 000

 

Plant (at cost)

90 000

 

Office furniture (at cost)

6 000

 

The accountant for the company seeks your assistance in preparing the financial statements for external reporting purposes and advises you of the following information that needs to be taken into account before finalising the financial statements.

(a) There were no additions or disposals of the property, plant and equipment (PPE) during the period. Depreciation expenses for PPE have not been recorded. The Company is using the straight-line method based on cost of the asset to depreciate all these assets (except for the land which is not depreciated). The useful lives of assets held by the Company are as the same as the previous year and are presented as follows:

Plant

Office furniture Buildings

10 years

10 years

50 years

(b) The balance of allowance for doubtful debts at the beginning of the year was zero. There was no bad debt written off during the year. The ATO does not allow this to be a deductible expense for the income tax purpose.

(c) The balance of long service leave at the beginning of the year was zero. There was no long-service leave paid to employees during the year. The ATO only allows this to be a deductible expense for the income tax purpose if the leave was actually paid out to the employee.

(d) Following expert advice, the directors decided on 30 June 2016 to revalue the land and factory buildings to reflect current fair values. Consequently, directors placed a value of $200 000 on land and $320 000 on the buildings.

(e) Directors decided to transfer $10 000 from retained earnings to general reserve.

(f) Company tax rate is 30%.

Required:

Based on the ledger balances and the additional information provided, prepare a statement of profit or loss and other comprehensive income (classify expenses by nature), a statement of financial position, a statement of changes in equity and a notes to financial statements (wherever information available) for Cloudy Ltd for the year ended 30 June 2016, to comply with AASB 101.

Verified Expert

This is a verified solution. The given solution is complete in MS Word document. However, Financials are provided in MS Excel document also. The question has been appropriately answered along with the notes to accounts.

Reference no: EM131115491

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