a) NZ IAS 1 requires the reporting entity to disclose in notes the accounting policies used in preparing the financial statements.

Required: Briefly explain the rationale of this requirement. (4 marks)

b) The trial balance of Padma Ltd at 31 December 20X2 was as follows:

Sales revenue $1,600,650

Interest income 35,450

Loss on sale of plant 7,600

Fair value loss on equity investments in other companies (to be taken to profit or loss) 50,670

Dividend revenue 6,500

Cost of sales 850,670

Finance expenses 35,600

Selling and distribution expenses 90,270

Administrative expenses 336,790

Additional information • A loss of $67,870 was recognised on the revaluation of land during 20X2.

• Padma Ltd uses the single statement format for the statement of profit or loss and other comprehensive income.

• Padma Ltd classifies expenses by function. • Income tax rate is 30%.

• Padma Ltd had the following equity account balances as at 1 January 20X2:

Share capital $750,000 ,Retained earnings 345,650 ,Revaluation reserve - land 60,000 5

• Padma Ltd issued shares for $150,000 on 20 October 20X2 and paid an interim dividend of $54,000 to shareholders.

Required: i) Prepare the statement of profit or loss and other comprehensive income of Padma Ltd for the year ended 30 June 20X2, showing the analysis of expenses in the statement. (6 marks) 

ii) Prepare the statement of changes in equity of Padma Ltd for the year ended 30 June 20X2. (6 marks) iii) Briefly explain whether a separate presentation of the fair value loss on equity investments in other companies in the statement of comprehensive income is useful to investors. (4 marks)

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Answer rating: 100% (QA)

i Padma Ltd Statement of profit or loss and other comprehensive income For the year ended 30 June 20... View the full answer