EXAMINE THE END-OF-YEAR FINANCIAL STATEMENTS OF A PUBLIC LIMITED COMPANY

You have just joined Betterway Company (B Co.), a public limited company involved in manufacturing Cement and related products and supplying all over the country and across borders. Mark Selby (your senior at work) has asked you to prepare a report that outlines the accounting concepts and accounting standards and assess their relevance in preparing the financial statements of a public limited company like B Co.

The reporting period has just ended and Mark has prepared the trial balance of B Co. for the year ended 31^st December, 2020.

Description	Dr ($’000)	Cr ($’000)
Land and buildings (land $20m) (note 1)	80,000
Accumulated Depreciation (Building) till 1st January 2020		16,800
Plant and Equipment- Cost (note 1)	81,250
Accumulated Depreciation (plant and equipment) till 1stJanuary 2020		29,250
Inventory at 31st December 2020 (note 2)	22,740
Trade receivables (note 6)	47,077
Cash at bank	8,678
Revenue		289,000
Cost of sales	203,500
Distribution cost	9,100
Administrative expenses (note 1, 6 and 7)	24,700
Finance cost (note 3)	1,500
Allowance for doubtful debts		500
Income tax (note 4)		700
Trade Payables		22,650
8% Loan notes		25,000
Share capital (par value 50 cents)		60,000
Share premium		15,000
Retained earnings at 1st January 2020 (note 5)		19,645
	478,545	478,545

On 15^th January 2021 you had a meeting with Mark Selby and he provided you with the following additional information in relation to preparing financial statements of B Co. for the year ended 31^stDecember 2020.

1. Land and buildings were purchased on 1^st January 2013, with buildings being depreciated on straight line basis. On 1^st January 2020, the directors decided to revalue the land and buildings to $79,000,000 ($25million for the land). The buildings were originally depreciated over a useful life of 25 years which has not changed.

No depreciated has yet been charged on any of the non-current assets, plant and equipment is depreciated at 20% reducing balance method. 60% of the depreciation relating to Building is charged to cost of sales with the rest being charged to administrative expenses. All of the depreciation relating to plant and equipment is charged to cost of sales.

2. The inventory includes goods with a cost of $1,280,000 but shortly after the year end, it was discovered that their net realisable value will only be $930,000.
3. Finance cost relates to the interest paid on 8% loan notes with interest being paid quarterly in arrears. the interest payment for the last quarter was still outstanding at the reporting date.
4. The directors estimated the current year tax liability to be $11,230,000. the income tax balance in the trial balance represent the overprovision for tax liability relating to the year ended 31^st December 2019.
5. A dividend of 7 cents per shares was declared on 30^th December 2020.
6. The directors have decided to write off irrecoverable debts amounting to $827,000 and make and allowance for doubtful debts of 2% of remaining receivables. Irrecoverable debts expense in movement in allowance for doubtful debts is reported as part of administrative expenses.
7. Included in the administrative expenses figure is the rent of $7,000,000. this amount was paid on 1^stJanuary 2020 for the 14 months period ending 28^th February 2021.
8. the market price of B Co.’s shares stood at $1.75/share at reporting date.

question

prepare financial statement of position for betterway co

identify different stakeholders and the significance of financial statements of each shareholder of company in cement industry.

Answer rating: 100% (QA)

ANSWER 2 Depreciation accounting Valu... View the full answer