Section B $-$ ALL THREE questions are compulsory and MUST be attempted

$2$

Please write your answers to all parts of these questions on the lined pages within the Candidate Answer Booklet.

$1$ The following trial balance extracts $($i$.$e$.$ it is not a complete trial balance$)$ relate to Moston as at $30$ June $2015$:

Revenue $($note $($i$))$

Cost of sales

Research and development costs $($note $($ii$))$

Distribution costs

Administrative expenses $($note $($iv$))$

Loan note interest and dividends paid $($notes $($iv$)$ and $($vii$))$

Investment income

Equity shares of $$1$ each $($note $($vii$))$

$5\%$ loan note $($note $($iv$))$

Retained earnings as at $1$ July $2014$

Revaluation surplus as at $1$ July $2014$

Other components of equity

Property at valuation $1$ July $2014($note $($iii$))$

Plant and equipment at cost $($note $($iii$))$

Accumulated depreciation plant and equipment $1$ July $2014$

Financial asset equity investments at fair value $1$ July $2014($note $($v$))$

$\backslash$table$[[$$$\text{'}000,$$$\text{'}000],[,113,500],[88,500,],[7,800,],[3,600,],[6,800,],[5,000,300],[,30,000],[,20,000],[,6,200],[,3,000],[,9,300],[,],[28,500,],[27,100,9,100],[,]]$

The following notes are relevant:

$($i$)$ Revenue includes a $$3$ million sale made on $1$ January $2015$ of maturing goods which are not biological assets. The carrying amount of these goods at the date of sale was $$2$ million. Moston is still in possession of the goods $($but they have not been included in the inventory count$)$ and has an unexercised option to repurchase them at any time in the next three years. In three years' time the goods are expected to be worth $$5$ million. The repurchase price will be the original selling price plus interest at $10\%$ per annum from the date of sale to the date of repurchase.

$($ii$)$ Moston commenced a research and development project on $1$ January $2015.$ It spent $$1$ million per month on research until $31$ March $2015,$ at which date the project passed into the development stage. From this date it spent $$1\mathrm{.}6$ million per month until the year end $(30$ June $2015),$ at which date development was completed. However, it was not until $1$ May $2015$ that the directors of Moston were confident that the new product would be a commercial success.

Expensed research and development costs should be charged to cost of sales.

$($iii$)$ Non$-$current assets:

Moston's property is carried at fair value which at $30$ June $2015$ was $$29$ million. The remaining life of the property at the beginning of the year $(1$ July $2014)$ was $15$ years. Moston does not make an annual transfer to retained earnings in respect of the revaluation surplus. Ignore deferred tax on the revaluation.

Plant and equipment is depreciated at $15\%$ per annum using the reducing balance method.

No depreciation has yet been charged on any non$-$current asset for the year ended $30$ June $2015.$ All depreciation is charged to cost of sales.

$($iv$)$ The $5\%$ loan note was issued on $1$ July $2014$ at its nominal value of $$20$ million incurring direct issue costs of $$500,000$ which have been charged to administrative expenses. The loan note will be redeemed after three years at a premium which gives the loan note an effective finance cost of $8\%$ per annum. Annual interest was paid on $30$ June $2015.$

$($v$)$ At $30$ June $2015,$ the financial asset equity investments had a fair value of $$9\mathrm{.}6$ million. There were no acquisitions or disposals of these investments during the year.

$($vi$)$ A provision for current tax for the year ended $30$ June $2015$ of $$1*2$ million is required, together with an increase to the deferred tax provision to be charged to profit or loss of $$800,000.$

$2$

$($vii$)$ Moston paid a dividend of $20$ cents per share on $30$ March $2015,$ which was followed the day after by an issue of $10$ million equity shares at their full market value of $$1*70.$ The share premium on the issue was recorded in other components of equity.

Required:

$($a$)$ Prepare the statement of profit or loss and other comprehensive income for Moston for the year ended $30$ June $2015.$

$(11$ marks$)$

$($b$)$ Prepare the statement of changes in equity for Moston for the year ended $30$ June $2015.$

$(4$ marks$)$

Note: The statement of financial position and notes to the financial statements are NOT required.

$(15$ marks$)$