The following information relates to Pear plc for the year ended 31 December 20X6: 

• Profit before tax amounted to £138 000, after taking into account the following:

 • Dividends received of £8 000 and dividend income accrued of £1 600. 

• Operating expenses paid of £40 000 and operating expenses accrued of £8 000. 

• Interest paid of £2 400. • A dividend of £12 000 was declared on 15 February 20X6 in respect of the year ended 31 December 20X5. In addition, a dividend of £14 000 was declared on 15 February 20X7 in respect of the year ended 31 December 20X6. Any dividends declared are usually paid out shortly afterwards. 

• Information relating to tax includes the following: 

• The HMRC ledger account had been partially drawn up. After taking into account the opening balance and the provisional tax payments made during the year, the account had a debit balance of £18,600 at 31 December 20X6. However, no postings had been made for the under or over provision in respect of the 20X5 year and the current tax expense for the 20X6 year. 

• The HMRC account had a debit balance of £18 600 at 31 December 20X6 (after taking into account provisional tax payments made during the year but before accounting for the under or over provision in respect of the 20X5 year and the current tax expense for the 20X6 year). 

• An estimated current tax expense of £30 000 was provided when preparing the financial statements for the year ended 31 December 20X5. The amount owing to the tax authorities for the 20X5 year was assessed during 20X6 and amounts to £31 800. 

• Taxation for the 20X6 year has not yet been calculated. 

• All income earned is taxable and all expenses incurred are deductible, except for entertainment expenses of £5 000 (included within the operating expenses). 

• The dividend income accrued is taxed in the year of accrual and the operating expenses accrued are deductible in the year of accrual. 

• The corporate tax rate is 19% on taxable profits. 

Required:
a) Prepare the ledger account for HMRC for the year from 1 January 20X6 to 31 December 20X6.
b) Prepare the statement of profit or loss of Pear plc for the year ended 31 December 20X6 (starting with the gross profit, which is to be determined).
c) Prepare, in so far as the information allows, the statement of financial position of Pear plc at 31 December 20X6.
B. Considering the accounting requirements for property, plant and equipment in accordance with IAS 16:
a) Properties, typically comprising land and buildings, are acquired together. How are properties accounted for and measured?
b) How does the measurement of property, plant and equipment differ when using the cost model compared to when using the revaluation model?
c) What requirements, if any, must be met before a company may use the revaluation model?
d) In times of increasing fair values, what is the effect of using the revaluation model on a company’s profit before tax?
e) Can a company apply the revaluation model to some of its properties, but choose to use the cost model for other properties that have dropped in value? And is it possible to use the revaluation model for properties, while using the cost model for plant and vehicles?

Required:
Provide short answers, with explanations, to each of the above questions.

Answer rating: 100% (QA)

Ledger Account of HMRC from 010120X6 to 311220X6 Debit Credit Particulars Amount Particulars Amount ... View the full answer