Question (1)
Menzzies Ltd provided the following information for the year ended 31 March 2017.
Additional information
•
•
•
•
On 31 March 2017 inventory was valued at $5 175 000. This included damaged inventory of
$200 000. The damaged inventory can be sold for $150 000 after repairs at a cost of $40 000
Depreciation policy
• The depreciation on buildings was to be charged at 5% per annum on a straight line
basis.
• Land is not depreciated. During the year, land costing $2 000 000 was revalued to $2
500 000. This had not been included in the books.
• The depreciation on plant and machinery was to be charged at 20% per annum on a
reducing (diminishing) balance basis.
• Depreciation was to be apportioned equally between distribution costs and
administrative expenses.
Trade receivables included a debt of $10 000, which was to be written off.
At 31 March 2017:
• distribution costs of $8 000 were owing
• administrative expenses included prepaid insurance of $15 000
• interest on the 5% bank loan was owing for the year
• tax for the year was $400 000
Required:
(a) State which accounting standard must be followed when preparing a statement of profit or
loss.
(b) Prepare the statement of profit or loss for the year ended 31 March 2017.
Question (2)
Shopton Ltd provided the following information for the year ended 30 June 2017
$
At 1 July 2016
Land and Buildings
Cost
450,000
Accumulated Depreciation
50,000
Motor Vehicles
Cost
375,000
Accumulated Depreciation
209,880
Retained earnings
121,651
General reserves
26,000
At 30 June 2017
15% Bank loan (2022)
50,000
Allowance for doubtful debts
12,500
Cash and Cash equivalents
12,325
Closing inventory
45,000
Dividend paid
25,000
Profit for the year
44,920
Share capital (Ordinary share at $1 each)
350,000
Trade and other payables
50,000
Trade and other receivables
92,500
Depreciation for the year ended 30 June 2017 was charged as follows:
Non-Current Assets
Land and Buildings
Depreciation Method
5% per annum straight line.
Land is not depreciated
Motor Vehicles
20% per annum reducing
(diminishing) balance
Adjustment
Land originally costing
$250,000 was revalued to
$300,000.
A motor vehicle costing
$50,000 with accumulated
depreciation of $18,000 was
sold for $33,250.
A motor vehicle costing
$75,000 was purchased.
A full year’s depreciation is charged in the year of acquisition and none in the year of disposal.
•
$15,000 was transferred to general reserve.
•
Profit for the year ended 30 June 2017 did not account for the following:
•
Damaged goods, included in the inventory, costing $5,000, which could be sold for
$4,500 after repairs at a cost of $350.
•
Three months’ interest on the 15% bank loan owing.
•
Profit and loss on disposal of motor vehicle.
Required:
(a) Calculate the adjusted profit for the year ended 30 June 2017.
(b) Prepare the statement of financial position as at 30 June 2017.