1.On1July2016the company began construction of an annexe to one of its factory buildings and incurred an expenditure...
Question:
1. On 1 July 2016 the company began construction of an annexe to one of its factory buildings and incurred an expenditure of €150,000. A further €450,000 was spent on 1 September. Both expenditures were financed out of general borrowings – an 8% bank loan of €285,000 and 6% long-term notes payable of €1,600,000. Construction of the annexe is still underway on 31 December 2016. Both the bank loan and notes have been outstanding throughout the whole year and interest payments are made monthly on the last day of each month, thus there is no related interest liability at the end of the year. (Capitalisation of the borrowing costs will not yet affect the accumulated depreciation of the buildings).
2. Shamrock Ltd. has so far carried its land at cost but the management have now decided to start using the revaluation model on the land for the first time. On 31 December 2016 the company’s land is revalued at €480,000. (The land is site for factories and administrative buildings; it is not leased out or held for capital gain).
3. Shamrock Ltd. registered a patent paying a legal fee of €150,000 in early 2016. The patent will be amortised over 6 years on the straight-line basis. 2016 is considered as a full year for amortisation.
4. During the year 2016 research and development costs totalled €20,000, out of which €15,000 was spent on testing a newly developed product before its launch that is planned for early 2017, and €5,000 was spent on search for alternative materials to improve the company’s products in the future.
5. The income tax rate is 20%. The total amount of income tax expense will be payable in 2017.
6. No new shares were issued in 2016.
7. The depreciation expense on all fixed tangible assets for the year 2016 has already been included as part of cost of sales, distribution and administration expenses.
8. All interest on the bank loan and notes payable for the year 2016 has been paid for.
Requirements: . Prepare the following financial statements for Shamrock Ltd. in accordance with the IFRSs:
a) Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2016 (classify income and expenses by function)
b) Statement of Changes in Equity for the year ended 31 December 2016
c) Statement of Financial Position as of 31 December 2016
Governmental and Nonprofit Accounting
ISBN: 978-0132751261
10th edition
Authors: Robert Freeman, Craig Shoulders, Gregory Allison, Robert Smi