№1
At 1 July 2016 the statement of financial position of Cougar contained the following items:
$m
Share capital (ordinary shares of 50c each)
100
Share premium account
140
Revaluation surplus
60
Retained earnings
120
––––
420
——
During the year ended 30 June 2016 the following events took place:
(i)
A material error in calculating the inventory at 30 June 2016 was discovered. The effect of the
error was a reduction in the inventory at that date from $30 million to $24 million.
(ii)
On 1 July 2016 the company issued 200 million ordinary shares, ranking equally with those
already in issue, at $1.40 per share.
(iii)
Some land held by the company as a non-current asset was sold for $100 million. The land had
originally cost $25 million and was revalued to $85 million in 2015, giving rise to the
revaluation surplus of $60 million shown above.
(iv)
The company’s draft pre-tax profit for the year ended 30 June 2017 was $40 million. In
calculating this figure the opening inventory was taken as $30 million, and $15 million was
included as the profit on the sale of the land. (See items (i) and (iii) above).
(v)
Dividends totalling 2c per share were paid in the year on the enlarged capital.
Required:
Prepare Cougar’s statement of changes in equity for the year ended 30 June 2017.
№2
The draft statement of financial position shown below has been prepared for Shuswap as at 31 December
2016:
Cost
Accumulated Carrying
depreciation
amount
$000
$000
$000
Assets
Non-current assets
Land and buildings
9,000
1,000
8,000
Plant and equipment
21,000
9,000
12,000
––––––
––––––
––––––
30,000
10,000
20,000
———
———
Current assets
Inventories
3,000
Receivables
2,600
Cash at bank
1,900
––––––
Total assets
27,500
———
Equity and liabilities
Equity
Share capital (ordinary shares of 50c each)
6,000
Retained earnings
Non-current liabilities: Loan notes (redeemable 2020)
Current liabilities
Trade payables
Suspense account
12,400
2,000
2,100
––––––
22,500
5,000
––––––
27,500
———
The following further information is available:
(1)
It has been decided to revalue the land and buildings to $12,000,000 at 31 December 2016.
(2)
Trade receivables totalling $200,000 are to be written off.
(3)
During the year there was a contra settlement of $106,000 in which an amount due to a supplier
was set off against the amount due from the same company for goods sold to it. No entry has
yet been made to record the set-off.
(4)
Some inventory items included in the draft statement of financial position at cost $500,000
were sold after the reporting period for $400,000, with selling expenses of $40,000.
(5)
The suspense account is made up of two items:
(a)
The proceeds of issue of 4,000,000 50c shares at $1·10 per share, credited to the
suspense account from the cash book.
(b)
The balance of the account is the proceeds of sale of some plant on 1 January 2016
with a carrying amount at the date of sale of $700,000 and which had originally cost
$1,400,000. No other accounting entries have yet been made for the disposal apart
from the cash book entry for the receipt of the proceeds. Depreciation on plant has
been charged at 25% (straight line basis) in preparing the draft statement of financial
position without allowing for the sale. The depreciation for the year relating to the
plant sold should be adjusted for in full.
Required:
Prepare Shuswap’s statement of financial position as at 31 December 2016, complying as far as
possible with IAS 1 “Presentation of Financial Statements”.
№3
At 31 December the capital structure of Armani was as follows:
Ordinary share capital (3,000,000 shares of 50 cents each)
Share premium
Revaluation surplus
Retained earnings
$000
1,500
300
150
75
The directors of Armani, none of whom is a qualified accountant, are considering the following
proposals:
(a)
To make a bonus issue of one ordinary share for every two held, in order to raise $750,000.
(b)
To pay a dividend of 5c per share.
(c)
To increase the revaluation surplus to $500,000 by revaluing goodwill from $750,000 to
$1,100,000.
(d)
To combine all reserves into a single figure.
Required:
Comment on the validity of each of these proposals.