ACF318-Financial Accounting SECTION B Question 2 continued/ (v) Inventory at 31st March 2020 had a cost of 998,000. CRNs 80072/87385 (vi) During the year to 31st March 2020 the company entered into lease agreements for the supply of multipurpose printing devices. Details are as follows: Total Fair value at inception of the lease Lease term Lease payments 100,000 3 years 14,000 per annum paid in advance 7 years 37,850 Expected useful life of the asset PV of min. lease payments Rate of interest implicit in the lease 11.35% One payment of 14,000 was made during the year and is included in sundry expenses in the trial balance. No other entries were made in the accounting records for these lease agreements Required: (a) Prepare the journal entries and a brief description of the accounting treatment required to account for notes (i) to (vi) above. (10 Marks) (b) Prepare the Statement of Profit or Loss and other Comprehensive Income and the Statement of Changes in Equity for Finchley plc for the year ended 31st March 2020 and a Statement of Financial Position at that date in accordance with relevant accounting standards as far as the information permits. SHOW ALL WORKINGS (15 Marks) [Total: 25 Marks] SECTION B - Answer any TWO questions Question 2 The following information relates to Finchley plc, which is a manufacturing company. Finchley plc Trial Balance as at 31st March 2020 Debit Credit '000 '000 Share capital 1 each 3,000 8% Preference Shares( treat as equity) 400 8% Loan Notes 500 Accumulated reserves 1,231 General reserve 550 Freehold property at cost 1,856 Plant and machinery 4,452 Accum. depreciation Plant & Machinery 1.4.2019 1,197 Accum. Depreciation property 96 Intangible Asset 450 Inventories 31st March 2019 995 Revenue Preference dividend Loan note interest Factory wages Sundry expenses Receivables Payables Bank Purchases Ordinary dividends 22,285 16 20 1,358 164 1,286 1.464 1,170 16,890 Distribution costs Taxation Administrative expenses Notes: 30 1,310 730 30,727 30,727 (i) The directors estimate that the income tax charge for the year will be 104,000. (i) At 31st March 2020 an impairment review of the intangible asset with an indefinite life was carried out. The Value in Use was calculated to be 400,000 and the Fair Value less costs to Sell was estimated to be 380,000. No adjustment has been made in the trial balance for this impairment. (iii) The buildings element of the property was 600,000 when purchased. The useful life of the building is estimated to be 50 years from the date of acquisition. Depreciation on buildings is to be allocated 75% manufacturing and 25% administration. (iv) Depreciation is to be charged on plant and machinery at 20% reducing balance. (This is to be reported as cost of sales.) Page 5 of 9 continued/