Reference no: EM132489828

Aetna Electronics Ltd is an Australian public company. The accounting staff of Aetna Electronics Ltd have asked for your assistance in preparing the company's financial statements for the year ended 30 June 2020 and have provided you with the following information:

               Aetna Electronics Ltd

                    Trial Balance

           As at 30 June 2020

Item                                                                                    Debit                                        Credit

Sales revenue                                                                                                360,000

Gain on sale of financial assets                                                                             2,000

Revaluation of property                                                                                       13,500

Other income                                                                                                    24,000

Remeasurement of defined benefit plan                                                                    9,000

Cash flow hedges                                                                                                 9,000

Loss for the year from discontinued operations            9,000

Occupancy expenses                                             30,000

Income tax expense                                               14,000

Finance costs                                                        18,000

Marketing expenses                                                 37,500

Investments in equity instruments                              4,500

Administrative expenses                                         33,000

Cost of sales                                                      204,000

Other operating expenses                                      16,500

Income tax related to items of other comprehensive income:

Cash flow hedges                                     3,000

Revaluation of property                             6,000

Remeasurement of defined benefit plan         4,500

Investments in equity instruments                1,500

Notes

1. In relation to items of other comprehensive income:

• Items that will not be reclassified subsequently to profit or loss: revaluation of property; and remeasurement of the defined benefit plan.
• Items that may be reclassified subsequently to profit or loss: cash flow hedges; and investments in equity instruments.

2. On 1 July 2018, Aetna Electronics Ltd paid $1,000 to purchase a portfolio of financial assets (comprising bonds and debentures) which, in accordance with AASB 9 Financial Instruments, were measured at fair value through other comprehensive income. As at 30 June 2019, the fair value of the financial assets had increased to $3,000. Aetna Electronics Ltd recognised a gain of $2,000 (and related income tax expense of $500) in other comprehensive income for the year ended 30 June 2019. On 1 July 2019, the financial assets were sold for $3,000 and Aetna Electronics Ltd recognised a gain of $2,000 in profit or loss. The related income tax expense ($500) has already been included in the income tax expense figure in the trial balance.

3. Comparative figures for the preceding year (ending 30 June 2019) have been omitted.

4. All figures in the trial balance are in thousands (000).

Required

Question (a) Prepare the Statement of profit or loss and other comprehensive income for Aetna Electronics Ltd for the year ended 30 June 2020 in accordance with the requirements of AASB 101 Presentation of Financial Statements.

Question (b) Explain the adjustment that must be made in the Statement of profit or loss and other comprehensive income as a consequence the gain on the sale of the financial assets being recognised in profit or loss. Why is an adjustment necessary?