Raffles Ltd trades as a wine wholesaler with a large warehouse in Asia. The trainee accountant at Raffles Ltd has produced the following draft accounts for the year ended 31 December 20X6.
Statement of comprehensive income
$
Sales ...................... 1,628,000
Less: Cost of sales ............... 1,100,000
Gross profit .................... 528,000
Debenture interest paid ............... 9,000
Distribution costs ................. 32,800
Audit fees ..................... 7,000
Impairment of goodwill ............... 2,500
Income tax liability on profits ............. 165,000
Interim dividend .................. 18,000
Dividend received from Diat P€™or plc ......... (6,000)
Bank interest ................... 3,000
Over provision of income tax in prior years ....... (4,250)
Depreciation
Land and buildings ................. 3,000
Plant and machinery ................ 10,000
Fixtures and fittings ................. 6,750
Administrative expenses ............... 206,300
Net profit ...................... 74,900

The following information is relevant:
1. The directors maintain that the investments in Diat P€™or plc will be held by the company on a continuing basis and that the current market value of the investments at the period end was $135,000. However, since the period end there has been a substantial fall in market prices and these investments are now valued at $90,000.
2. The authorized share capital of Raffles Ltd is 600,000 ordinary shares.
3. During the year the company paid shareholders the proposed 20X5 final dividend of $30,000. This transaction has already been recorded in the accounts.
4. The company incurred $150,000 in restructuring costs during the year. These have been debited to the administrative expenses account. The trainee accountant subsequently informs you that tax relief of $45,000 will be given on these costs and that this relief has not yet been accounted for in the records.
5. The company employs an average of ten staff, 60% of who work in the wine purchasing and importing department, 30% in the distribution department and the remainder in the accounts department. Staff costs total $75,000.
6. The company has three directors. The managing director ear ns $18,000 while the purchasing and distribution directors ear n $14,000 each. In addition the directors receive bonuses and pensions of $1,800 each. All staff costs have been debited to the statement of comprehensive income.
7. The directors propose to decrease the bad debt provision by $1,500 as a result of the improved credit control in the company in recent months.
8. Depreciation policies is as follows:
Land and buildings: No depreciation on land. Buildings are depreciated over 25 years on a straight-line basis. This is to be charged to cost of sales.
Plant and machinery: 10% on cost, charge to cost of sales.
Fixtures and fittings: 25% reducing balance, charge to administration.
9. The directors have provided information on a potential lawsuit. A customer is suing them for allegedly tampering with the imported wine by injecting an illegal substance to improve the color of the wine. The managing director informs you that this lawsuit is just €˜sour grapes€™ by a jealous customer and provides evidence from the company solicitor which indicates that there is only a small possibility that the claim for $8,000 will succeed.
10. Purchased goodwill was acquired in 20X3 for $50,000. The annual impairment test revealed an impairment of $2,500 in the current year.
11. Plant and machinery of $80,000 was purchased during the year to add to the $20,000 plant already owned. Fixtures and fittings acquired two years ago with a net book value of $13,500 were disposed of. Accumulated depreciation of fixtures and fittings at 1 January 20X6 was $37,500.
12. Land was revalued by $25,000 by Messrs Moneybags, Chartered Surveyors, on an open market value basis, to $175,000 during the year. The revaluation surplus was credited to the revaluation reserve. There is no change in the value of the buildings.
13. Gross profits is stated after charging $15,000 relating to obsolete cases of wine that have €˜gone off €™. Since that time an offer has been received by the company for its obsolete wine stock of $8,000, provided the company does additional vilification on the wine at a cost of $2,000 to bring it up to the buyer€™s requirements. A cash discount of 5% is allowed for early settlement and it is anticipated that the buyer will take advantage of this discount.
14. Costs of $10,000 relating to special plant and machinery have been included in cost of sales in error. This was not spotted until after the production of the draft accounts.

Required:
(a) Prepare a statement of comprehensive income for the year ended 31 December 20X6 and a statement of financial position at that date for presentation to the members of Raffles Ltd in accordance with relevant accounting standards.
(b) Produce detailed notes to both statements of Raffles Ltd for the year ended 31 December20X6.

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Draft statement of financial position at 3l December 20X 12,700 Inventory 80,000 Receivables Bank balance 10% debentures 20X9 Ordinary share capital 50c nominal value Trade payables Income tax Creditor Retained earnings Revaluation reserve 156,350 179,830 238,000 74,000 0,250 Land and buildings Plant and machinery 250,000 32,830 Fixtures and fittings 65,000 will 25,000 40,000 30,000 Investments at cost 838,430 838,430