Given below is the trial balance of Fern Bhd as at 31 December 2021:

revenue		4724000
cost of sales	3388800
Inventory 31/12/2021	168000
admin expense	366400
rental income from investment property		16000
finance cost	180000
freehold land 1/1/2021	1200000
building 1/1/2021	224000
equipment	200000
machinery	576000
Acc depn 1/1/2021-building//equipment//machinery		16800//80000//268800
investment property 1/1/2021	292000
selling & distribution	340000
trade receivable	170800
bank	208800
bank overdraft		148800
trade payables		388800
ordinary share capital		420000
non-redeemable preference share		240000
other payables		280000
revaluation reserve-building 1/1/2021		32000
retained earning 1/1/2021		559600
development cost 1/1/2021	20000
6% IMBee bank loan		232000
ordinary dividend paid	32000
preference dividend paid	24000
tax paid	16000
	7406800	7406800

The following additional information has not been accounted for in the books of Fern
Bhd:

1. The freehold property and building were revalued at its fair market value of $1,500,000 and $170,000 on January 1, 2021. The freehold land has previously been revalued with an $50,000 deficiency. From the previous revaluation, the building has a revaluation surplus of $32,000. The building's remaining useful life was 40 years at the time of revaluation.
The company's policy is to depreciate all buildings using a straight-line technique.
In the meantime, freehold land does not depreciate. Building depreciation is to be included in administrative costs. For freehold property and buildings, the corporation uses the revaluation approach.

2. On January 1, 2017, Fern Bhd purchased the equipment. The equipment has a ten-year expected useful life and no residual value. The equipment was damaged on January 1, 2021, and an impairment test was performed. On January 1, 2021, the fair value less cost to sell was 90,000, while the value in use was 88,000. The company's policy is to depreciate equipment using a straight-line method.

3.On December 5, 2021, the company purchased new machinery from Nine Bhd for $45,000.The new machinery, like the rest of the company's machinery, will be depreciated at 15% per year using the declining balance technique on a yearly basis. The new machinery, on the other hand, is expected to have a residual worth of $5,000. On that date, the company received a $20,000 government subsidy for the purchase of new machinery and paid the remaining balance by check. The company's policy is to adopt the net-off approach for accounting for government grants.

4. On September 1, 2021, Fern Bhd purchased a retail building for $180,000 in order to demonstrate and advertise its products. The marketing department immediately put the shop building to use. A further $20,000 had been spent on a small repair of the shop building by Fern Bhd. On September 1, 2021, the renovation will commence. However, because to a covid-19 case involving two of the renovation workers, the work was halted for two weeks. The renovations began on September 15 and will be completed by September 30, 2021. The company had previously asked for a $200,000 loan from Mine Bank to help fund the purchase and restoration of the shop building. On July 4, 2021, Mine Bank granted a five-year term loan with a borrowing cost of 3% per year. Beginning on July 31, 2021, Dawn Bhd paid a monthly payment of $3,844 to Mine Bank. The shop building, like the rest of the company's structures, is depreciated using the straight-line approach. The shop building's and renovation's anticipated useful lives are 40 and 5 years, respectively.

5. On April 1, 2021, a neighbouring company, Dawn Bhd, sold one of its machines to Fern Bhd at its fair worth of $80,000 due to a pressing financial requirement. Dawn Bhd quickly rented the gear back for a four-year period at a monthly cost of $1,800. The first rental will be due on April 30, 2021. The interest will be allocated using the straight line technique over the lease duration. Dawn Bhd paid a total of $106,000 for the machine a year ago.The machine's carrying amount as of 1 April 2021 is $79,500. The machinery is expected to last for 5 years.

6. On December 31, 2021, the Board of Directors decided to sell the investment property in the usual course of business due to the covid-19 epidemic, which harmed the rental value of properties. The investment home, which is now rented to a tenant, was put up for sale right away. The market value is $250,000 as of December 31, 2021. Fern Bhd's policy is to value investment properties utilising the fair value technique.
7. At the beginning of 2021, the development cost was for a new product called "Click." The cost incurred fits the capitalization criterion. $10,000 in additional development expenditures were incurred and paid on March 31, 2021. On April 1, 2021, "Click" will be released into the market. The new product is expected to provide benefits to the organisation for the next six years.
8. Inventory items HotZ brought forward from the previous year that have remained unsold are included in the closing inventory at 31 December 2021. HotZ items were carried at a net realisable value of $30,000 each. HotZ's inventory products were originally priced at $35,000. There was a dramatic spike in demand for inventory goods HotZ as of December 31, 2021, and it was predicted that these things may be sold for $36,500.

9. Tax payable as at 31 December 2021 is $8,000.

Prepare the following financial statements in the form suitable for publication
i. Statement of Profit or Loss and other Comprehensive Income for the year ended
31 December 2021.
(Disclosure of Basic Earnings per Share is required)
ii. Statement of Changes in Equity for the year ended 31 December 2021.
iii. Statement of Financial Position as at 31 December 2021.
iv. Notes to the account for property, plant and equipment.

Answer rating: 100% (QA)

Solution Depreciation The accounting method in which the cost o... View the full answer