NanCheese Bhd, a company supplying electronic gadgets, is currently preparing its financial statements for the year ending

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Question:

NanCheese Bhd, a company supplying electronic gadgets, is currently preparing its financial statements for the year ending 31 December 2016. Below is the trial balance as at 31 December 2016:

	Debit RM ‘000	Credit RM ‘000
Freehold land at valuation as at 1 January 2016	30,000
Building at cost as at 1 January 2016	15,000
Equipment at cost as at 1 January 2016	3,405
Accumulated depreciation as at 1 January 2016:
Building		1,500
Equipment		681
Investment property	4,328
Development cost	6,600
Ordinary shares of RM1.00 each		34,500
Retained earnings as at 1 January 2016		8,850
Asset revaluation reserve		2,000
5% Debentures		6,000
Trade receivables and payables	432	620
Bank	835
Inventories	1,207
Tax paid	888
Sales		26,307
Cost of sales	8,047
Dividend received		24
Dividend paid	338
Administrative expenses	6,513
Distribution expenses	2,666
Finance cost	250
Accruals		27
	80,509	80,509

Additional information:

1. The land is revalued every three years and the balance in the asset revaluation reserve is related to the previous years’ revaluation. Current year revaluation showed a decrease of RM0.5 million in the value of the land and this has not been recorded.

2. As at year end, NanCheese Bhd has provided a 10% allowance for doubtful debt to one of its receivables, Komi Bhd for a debt amount of RM45,000. However, on 15 January 2017, Komi Bhd was declared a bankrupt and none of the amount due to the company is recoverable.

3. NanCheese Bhd was under litigation when one of its employee sued the company due to serious injury at work. Hence, a contingent liability was recognised as at year end. However, on 6 January 2017, the case came to court and the judgment was in favour of the employee which required the company to pay RM500,000 for the damage.

4. A class of inventory of NanCheese Bhd has been valued at RM280,000 when the net realizable value was RM325,000. On 2 January 2017, the inventory was sold only at RM265,200 due to the recent product introduced by a competitor.

5. It is the policy of the company to depreciate its building over 50 years on a yearly basis. Equipment is depreciated over 10 years based on period of ownership. Depreciation expense is to be included as part of the administrative expenses.

6. Included in the total development cost was RM200,000 incurred in relation to research expense during the year ended 31 December 2016.

7. The tax expense for the year was RM250,000 and the income tax rate is 25%.

8. The investment property is measured based on the fair value model. The fair value is estimated at RM4,900,000 as at 31 December 2016.

Required:

Prepare Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity for the year ended 31 December 2016 and Statement of Financial Position as at that date for NanCheese Bhd. together with the note to the property plant and equipment in a format suitable for publication. (Show all workings.)