HK Ltd has prepared its draft trial balance to 30 June 20X1, which is shown below.

Trial balance at 30 June 20X1
$000	$000
Freehold land	2,100
Freehold buildings (cost $4,680,000)	4,126
Plant and machinery (cost $3,096,000)	1,858
Fixtures and fittings (cost $864,000)	691
Goodwill	480
Trade receivables	7,263
Trade payables		2,591
Inventory	11,794
Bank balance	11,561
Development grant received		85
Profit on sale of freehold land		536
Sales		381,600
Cost of sales	318,979
Administration expenses	900
Distribution costs	35,100
Directors' emoluments	562
Bad debts	157
Auditors' remuneration	112
Hire of plant and machinery	2400
Loan interest	605
Dividends paid during the year-preference Dividends	162
paid during the year- ordinary	426
9% loan		7,200
Share capital - preference shares (treated as equity)		3,600
Share capital-ordinary shares		5,400
Retained earnings		6,364
	407,376	407,376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following information is available:

 (a) The authorised share capital is 4,000,000 9% preference shares of $1 each and 18,000,000 ordinary shares of 50c each. 

(b) Provide for depreciation at the following rates:

(i) Plant and machinery 20% on cost

 (ii) Fixtures and fittings 10% on cost

(iii) Buildings 2% on cost 

Charge all depreciation to cost of sales.

 (c) Provide $5,348,000 for income tax. 

(d) The loan was raised during the year and there is no outstanding interest accrued at the year-end. 

(e) Government grants of $85,000 have been received in respect of plant purchased during the year and are shown in the trial balance. One-fifth is to be taken into profit in the current year.

(f) During the year a fire took place at one of the company's depots, involving losses of $200,000. These losses have already been written off to cost of sales shown in the trial balance. Since the end of financial year a settlement of $150,000 has been agreed with the company's insurers.

(g) $500,000 of the inventory is obsolete. This has a realisable value of $250,000.

(h) Acquisitions of property, plant and equipment during the year were: 

                Plant     $173,000         Fixtures $144,000

(i) During the year freehold land which cost $720,000 was sold for $1,316.000

(j)A final ordinary dividend of 3c per share is declared and was an obligation before the year-end, together with the balance of the preference dividend. Neither dividend was paid at the year-end.

(k) The goodwill has not been impaired.

 (l) The land was revalued at the year-end at $2,500,000. 

Required: 

(a) Prepare the company's statement of comprehensive income for the year to 30 June 20XI and a statement of financial position as at that date, complying with the relevant accounting standards in so far as the information given permits. (All calculations to nearest $000.) 

(b) Explain the usefulness of the schedule prepared in (a).