Polymier is a company reporting under IFRS. During the year end 31 December 20X5, the company changed
Question:
Polymier is a company reporting under IFRS. During the year end 31 December
20X5, the company changed its accounting policy with respect to property valuation.
There are also a number of other issues that need to be finalised before the financial
statements can be published.
Polymier's trial balance from the general ledger at 31 December 20X5 showed the
following balances:
£ £
Revenue 5,296,000
Purchases 3,338,000
Distribution costs 1,040,000
Administrative expenses 690,000
Inventories at 1 January 20X5 888,000
Trade receivable 1,090,000
Trade Payable 868,000
Cash 62,000
50p ordinary shares 1,400,000
Share premium 428,000
Retained Earnings at 1 January 20X5 674,000
4% loan note 300,000
Land 120,000
Buildings: Cost 640,000
Accumulated depreciation 128,000
Plant and equipment: Cost 516,000
Accumulated depreciation 276,000
Investment Land at 1 January 20X5 1,096,000
Rental income 110,000
9,480,000 9,480,000
Information to be taken into account including:
1). The company decided to change its accounting policy to its 10-year-old land and
buildings from the cost model to the revaluation model. The land is revalued at
£150,000 at 1 January 20X5, and the Buildings are revalued at £720,000 with no
change to its expected useful life. No further revaluation was necessary at 31
December 20X5.
2). Due to a change in the company's product portfolio plans, an item of plant with a
carrying value £22,000 at 31 December 20X5 (after adjusting for depreciation for the
year) may be impaired due to a change in use. An impairment test conducted at 31
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December, revealed its fair value less costs to sell to be £16,000. The asset is now expected to generate an annual net income stream of £3,800 for the next 5 years at which point the asset would be disposed of for £4,200. An appropriate discount rate is 8%. 5 year discount factors at 8% are:
Simple Cumulative
0.677 3.993
3). Polymier uses the revaluation model of IAS40. The fair value of the investment property at 31 December 20X5 was £1,172,000.
4). The company treats depreciation on plant and equipment as a cost of sale and on land and buildings as an administration cost. The company's accounting policy is to charge a full year's depreciation at the end of the year. The depreciation charge has not be considered in the trial balance. Depreciation rates as per the company's accounting policy note are as follows:
Buildings Straight line over 50 years(before revaluation)
Plant and equipment 20% reducing balance
5). Closing inventories were counted and amounted to £762,000 at cost.
6). Ignore the corporate tax.
Required:
1. Fill in the following blanks (2 marks for each figure):
1). The ending balance of Buildings at 31 December 20X5 is ____________.
2). After impairment is accounted, the ending balance of the account Plant and Equipment on the Statement of Financial Position is £_______________; the ending balance of the account Accumulated Depreciation of Plant and Equipment is £____________.
3). The ending balance of the Asset Revaluation Surplus for Land for business use is £_____________; the ending balance of the Asset Revaluation Surplus for Buildings is £______________.n
Introduction to Financial Accounting
ISBN: 978-0133251036
11th edition
Authors: Charles Horngren, Gary Sundem, John Elliott, Donna Philbrick