After preparing a draft statement of profit or loss for the year ended 30 September 2014 and adding the years profit (before any adjustments required by notes (i) to (iii) below) to retained earnings, the summarised trial balance of Mawuto as at 30 September 2014 is:

GHC000 GHC000

Equity shares of GHC1 each 40,000

Retained earnings as at 30 September 2014 17,500

Proceeds of 6% loan (note (i)) 30,000

Land (GHC5 million) and buildings at cost (note (ii)) 55,000

Plant and equipment at cost (note (ii)) 58,500

Accumulated depreciation at 1 October 2013: buildings 20,000

plant and equipment 34,500

Current assets 68,700

Current liabilities 38,400

Deferred tax (note (iii)) 2,500

Interest payment (note (i)) 1,800

Current tax (note (iii)) 1,100

184,000 184,000

The following notes are relevant:

(i) The loan note was issued on 1 October 2013 and incurred issue costs of GHC1 million which were charged to profit or loss. Interest of GHC18 million (GHC30 million at 6%) was paid on 30 September 2014. The loan is redeemable on 30 September 2018 at a substantial premium which gives an effective interest rate of 9% per annum. No other repayments are due until 30 September 2018.

(ii) Non-current assets:

The price of property has increased significantly in recent years and on 1 October 2013, the directors decided to revalue the land and buildings. The directors accepted the report of an independent surveyor who valued the land at GHC8 million and the buildings at GHC39 million on that date. The remaining life of the buildings at 1 October 2013 was 15 years. Mawuto does not make an annual transfer to retained profits to reflect the realisation of the revaluation gain; however, the revaluation will give rise to a deferred tax liability. The income tax rate of Mawuto

is 20%.

Plant and equipment is depreciated at 12% per annum using the reducing balance method.

No depreciation has yet been charged on any non-current asset for the year ended 30 September 2014.

(iii) A provision of GHC24 million is required for current income tax on the profit of the year to 30 September 2014. The balance on current tax in the trial balance is the under/over provision of tax for the previous year. In addition to the temporary differences relating to the information in note (ii), Mawuto has further taxable temporary differences of GHC10 million as at 30 September 2014.

Required:

(a) Prepare a schedule of adjustments required to the retained earnings of Mawuto as at 30 September 2014 as

a result of the information in notes (i) to (iii) above.

(b) Prepare the statement of financial position of Mawuto as at 30 September 2014.

Note: The notes to the statement of financial position are not required