Question: Question one. Sunny Ltd Statement of Changes in Equity for the year ended 30 June 2017 Contributed equity General reserve Revaluation reserve Retained earnings Total
Question one.
Sunny Ltd
Statement of Changes in Equity
for the year ended 30 June 2017
Contributed equity General reserve Revaluation reserve Retained earnings Total
$ $ $ $ $
Balance at 1 July 2016 344,000 3,954,500
Total comprehensive income for the year
Issue of ordinary shares as a result of rights issue
Issue of ordinary shares as a result of options exercised
Transfer to general reserve
Inter dividend paid - ord
Final dividend declared - ord
Final dividend declared - pref
Balance at 30 June 2017 3,847,000 6,211,000
Section 1 - Presentation of financial statements (10 MARKS)
The adjusted trial balance of Sunny Ltd as at 30 June 2017 is as follows:
Sunny Ltd
Debit
Credit
$
$
Accounts receivable
1,350,000
Asset revaluation reserve as at 1/7/2016
240,000
Asset revaluation reserve (On 17 June 2017, freehold land was revalued to its fair value of $1,276,000 from its carrying amount of $1,076,000. The related deferred tax has been accounted.)
200,000
Accumulated amortisation - patents & trademarks
25,000
Accumulated impairment loss - goodwill
180,000
Accumulated depreciation -
Plant & machinery
206,000
Fixtures & fittings
47,000
Buildings
40,000
Administrative staff salaries expense
540,000
Advertising expense
120,000
Bank loan (unsecured -short-term repayable due)
40,000
Bank loan (unsecured -long-term repayable amount)
160,000
Carrying amount of plant and machinery sold
24,000
Cost of sales
3,424,000
Deposits at call
120,000
Dividends revenue
43,000
Deferred tax asset
210,000
Debentures held in Emerald Ltd (mature on 30/5/2018)
214,000
Dividends receivable
8,000
Freight inwards
90,000
Freight outwards
115,000
Ordinary shares, fully paid
3,654,000
General reserve
680,000
Goodwill
732,000
Retained profits as at 1/7/2016
750,000
Mortgage loan (secured over land and buildings - due 30/9/2020)
254,000
Accounts payable
472,000
Current tax liabilities
156,000
Provision for long service leave -short term liable
100,000
Provision for long service leave - long term liable
150,000
Deferred tax liability
175,000
Allowance for doubtful debts
77,000
Provision for annual leave
62,000
Freehold land (at fair value)
1,276,000
Buildings (at fair value)
900,000
Long term investment in listed shares as at 1/7/2016
60,000
Long term investment in listed shares (revaluation increment on 30/06/2017)
40,000
Loan to Charlie Ltd (due on 30/6/2020)
220,000
Patents and trademarks
125,000
Plant & machinery - at cost
684,000
Preference shares, fully paid
240,000
Prepayments
40,000
Inventories
1,950,000
Income tax expense
381,000
Final dividend payable
200,000
Fixtures & fittings - at cost
118,000
Cash at bank
530,000
Sales revenue
6,600,000
Sundry revenue
46,200
Sales returns and allowances
12,000
Sales staff salaries and commission expense
500,000
7% debentures - due 30/4/2018 (secured over inventories)
85,000
Proceeds on sale of plant and machinery
40,000
Other administrative expense
370,000
Other selling expense
210,000
Interest expense
68,000
Other expenses
122,000
Underwriting commission and other share issue costs
47,000
Interest revenue
50,000
Interest payable
9,000
Transfer to general reserve
50,000
Interim dividend paid - ord
131,200
Final dividend declared - ord
164,000
Final dividend declared - pref
36,000
Total
14,981,200
14,981,200
Additional information:
i)Included in other administrative expense were:
fees paid to auditor:
25% for audit & review of financial reports
75% for non-audit consulting services)$60,000
fees paid to related practice of the auditor (for
legal services)$12,000
ii)Inventories, $1,950,000, comprised of:
Raw material - at cost$70,000
Work in progress - at cost800,000
Finished goods - at cost1,054,000
Finished goods - at net realisable value26,000
Finished goods are valued at the lower of cost and net realisable value on a weighted average basis.
iii)Contributed equity as at 1 July 2016 consisted of:
2,000,000 ordinary shares issued at $1 each, fully paid$ 2,000,000
100,000 15 % preference shares issued at $2.40 each, fully paid240,000
45,000 share options22,500
iv)On 14 July 2016, a rights issue of 1,280,000 ordinary shares were made at $1.25 each. The underwriting commission and other shares issue costs for the issue amounted to $15,000. The shares issued ranked equally with existing shares for dividend.
v)On 29 May 2017, the 45,000 share options were exercised and 45,000 ordinary shares were allotted at an exercise price of 70 cents each. The allotted shares did not rank for dividend until 2018.
vi)On 17 June 2017, freehold land was revalued to its fair value of $1,276,000 from its carrying amount of $1,076,000. The related deferred tax has been accounted.
vii)On 28 June 2017, Sunny entered into a contract with Magnet Ltd for the construction of three new machines at a cost of $245,000 each. The company expects to take delivery of the first machine in January 2018, and the rest in February 2016.
viii)On 30 June 2017, listed investments were revalued to their fair value. They were purchased at a cost of $60,000 in May 2016 and are classified as long-term investments in equity instruments. The related deferred tax liability had been accounted.
Note: Loan receivables and held-to-maturity investments (such as debentures held in another entity) are to be classified as other financial assets.
ix)An amount of $50,000 was transferred to general reserve from retained earnings.
x)Accounting policies adopted are consistent with those of the previous year.
xi)Tax rate is 30%
Required
Prepare statement of profit or loss and other comprehensive income for Sunny Ltd for the year ended 30 June 2017 according to the requirements of AASB 101 (classify expenses by functions). Show all workings.
Prepare statement of financial position for Sunny Ltd at 30 June 2017 to comply with AASB 101. Use the current and non-current presentation format. Show all workings.
Prepare statement of changes in equity for Sunny Ltd for the year ended 30 June 2017 according to the requirements of AASB 101. Show the dividends per share on the statement. Show all workings.
Prepare ppropriate notes to the following items:
summary of significant accounting policies -
statement of compliance;
an extract of the basis of accounting and inventories;
2)inventories;
3)long-term borrowings;
4)auditor's remuneration;
Sunny Ltd
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30/06/2017
Revenue
Cost of sales
Gross profit
Other revenue
Other income
Selling costs
Administration costs
Other expenses
Finance costs
Profit before income tax
Income tax expense
Profit for the period
Other comprehensive income:
Items that will not be reclassified to profit or loss
Gain arising during the year on revaluation of land 200,000
Gain arising during the year on investments in equity instruments 40,000
Income tax relating to items not reclassified ( 72,000)
Other comprehensive income during the year, net of tax 168,000
Total comprehensive income for the year
Sunny Ltd
Statemnet of Financial Position
as at 30 June 2017
Current Assets
Cash and cash equivalents
Trade and other receivables
Financial assets
Inventories Note 9
Total Current Assets
Non-Current Assets
Investments in equity instruments
Other financial assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred tax assets 107,000
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Short-term provisions
Short-term borrowings
Current portion of long-term borrowings 40,000
Current tax liabilities
Total Current Liabilities
Non-Current Liabilities
Long-term borrowings Note 17
Long-term provisions
Total Non-Current Liabilities
Total Liabilities
Net assets
Equity
Contributed capital
Reserves 1,192,000
Retained earnings
Total Equity.
ii.
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