1. The following trial balance relates to Candel at 30 September 20X8: $000 SO00 Leasehold property-at...

  

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1. The following trial balance relates to Candel at 30 September 20X8: $000 SO00 Leasehold property-at valuation 1 October 20X7 (note (i)) Plant and equipment - at cost (note (i)) Plant and equipment - accumulated depreciation at 1 October 20X7 Capitalised development expenditure - at 1 October 20X7 (note (ii)) Development expenditure - accumulated amortisation at 1 October 50,000 76,600 24,600 20,000 6,000 20X7 Closing inventory at 30 September 20X8 Trade receivables Bank Trade payables and provisions (note (iii) Draft profit before tax Preference dividend paid (note (iv) Research and development costs (note (ii)) Equity shares of 25 cents each 8% redeemable preference shares of $1 each (note (iv) Retained earnings at 1 October 20X7 Deferred tax (note (v) Leasehold property revaluation surplus at 1 October 20X7 20.000 43,100 1,300 23,800 59,100 800 8,600 50,000 20,000 18,500 5,800 10,000 219,100 219,100 The following notes are relevant: (i) Non-current assets – tangible: The leasehold property had a remaining life of 20 years at 1 October 20X7. Candel's policy is to revalue its property at each year-end and at 30 September 20X8 it was valued at $43 million. Ignore deferred tax on the revaluation. On 1 October 20X7 an item of plant was disposed of for $2.5 million cash. The proceeds have been treated as sales revenue by Candel. The plant is still included in the above trial balance figures at its cost of $8 million and accumulated depreciation of $4 million (to the date of disposal). All plant is depreciated at 20% per annum using the reducing balance method. Depreciation and amortisation of all non-current assets is charged to cost of sales. (ii) Non-current assets – intangible: In addition to the capitalised development expenditure of S20 million, further research and development costs were incurred on a new project which commenced on 1 October 20X7. The research stage of the new project lasted until 31 December 20X7 and incurred $1.4 million of costs. From that date the project incurred development costs of $800,000 per month. On 1 April 20X8 the directors became confident that the project would be successful and yield a profit well in excess of its costs. The project is still in development at 30 September 20X8. Capitalised development expenditure is amortised at 20% per annum using the straight-line method. All expensed research and development is charged to cost of sales. (iii) Candel is being sued by a customer for $2 million for breach of contract over a cancelled order. Candel has obtained legal opinion that there is a 20% chance that Candel will lose the case. Accordingly Candel has provided $400,000 ($2 million x 20%) included in administrative expenses in respect of the claim. The unrecoverable legal costs of defending the action are estimated at $100,000. These have not been provided for as the legal action will not go to court until next year. (iv) The preference shares were issued on 1 April 20X8 at par. They are redeemable at a large premium which gives them an effective finance cost of 12% per annum. The finance assistant in Candel was uncerlain how to deal with these. The dividend paid in the trial balance represents the debit side of the cash payment made during the year. (v) The directors have estimated the provision for income tax for the year ended 30 September 20X8 at S11.4 million. The required deferred tax provision at 30 September 20X8 is $6 million. Required: (a) Calculate the revised profit for the year, taking into account the items from notes (i) to (v). (b) Prepare the statement of financial position as at 30 September 20X8. Notes to the financial statements and a statement of changes in equity are not required 1. The following trial balance relates to Candel at 30 September 20X8: $000 SO00 Leasehold property-at valuation 1 October 20X7 (note (i)) Plant and equipment - at cost (note (i)) Plant and equipment - accumulated depreciation at 1 October 20X7 Capitalised development expenditure - at 1 October 20X7 (note (ii)) Development expenditure - accumulated amortisation at 1 October 50,000 76,600 24,600 20,000 6,000 20X7 Closing inventory at 30 September 20X8 Trade receivables Bank Trade payables and provisions (note (iii) Draft profit before tax Preference dividend paid (note (iv) Research and development costs (note (ii)) Equity shares of 25 cents each 8% redeemable preference shares of $1 each (note (iv) Retained earnings at 1 October 20X7 Deferred tax (note (v) Leasehold property revaluation surplus at 1 October 20X7 20.000 43,100 1,300 23,800 59,100 800 8,600 50,000 20,000 18,500 5,800 10,000 219,100 219,100 The following notes are relevant: (i) Non-current assets – tangible: The leasehold property had a remaining life of 20 years at 1 October 20X7. Candel's policy is to revalue its property at each year-end and at 30 September 20X8 it was valued at $43 million. Ignore deferred tax on the revaluation. On 1 October 20X7 an item of plant was disposed of for $2.5 million cash. The proceeds have been treated as sales revenue by Candel. The plant is still included in the above trial balance figures at its cost of $8 million and accumulated depreciation of $4 million (to the date of disposal). All plant is depreciated at 20% per annum using the reducing balance method. Depreciation and amortisation of all non-current assets is charged to cost of sales. (ii) Non-current assets – intangible: In addition to the capitalised development expenditure of S20 million, further research and development costs were incurred on a new project which commenced on 1 October 20X7. The research stage of the new project lasted until 31 December 20X7 and incurred $1.4 million of costs. From that date the project incurred development costs of $800,000 per month. On 1 April 20X8 the directors became confident that the project would be successful and yield a profit well in excess of its costs. The project is still in development at 30 September 20X8. Capitalised development expenditure is amortised at 20% per annum using the straight-line method. All expensed research and development is charged to cost of sales. (iii) Candel is being sued by a customer for $2 million for breach of contract over a cancelled order. Candel has obtained legal opinion that there is a 20% chance that Candel will lose the case. Accordingly Candel has provided $400,000 ($2 million x 20%) included in administrative expenses in respect of the claim. The unrecoverable legal costs of defending the action are estimated at $100,000. These have not been provided for as the legal action will not go to court until next year. (iv) The preference shares were issued on 1 April 20X8 at par. They are redeemable at a large premium which gives them an effective finance cost of 12% per annum. The finance assistant in Candel was uncerlain how to deal with these. The dividend paid in the trial balance represents the debit side of the cash payment made during the year. (v) The directors have estimated the provision for income tax for the year ended 30 September 20X8 at S11.4 million. The required deferred tax provision at 30 September 20X8 is $6 million. Required: (a) Calculate the revised profit for the year, taking into account the items from notes (i) to (v). (b) Prepare the statement of financial position as at 30 September 20X8. Notes to the financial statements and a statement of changes in equity are not required

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Answer a Statement of comprehensive income for the year ended 30 September 2008 000 Revenue 300000 2... View the full answer