The following is the trial balance of Friends Co at 31 December 2020:

000	000
Dr	Cr
Sales	20,338,560
Cost of sales	9,801,000
Distribution Cost	3,433,320
Administration Cost	3,979,800
Finance Cost	102,168
Taxation	56,430
Deferred tax	81,972
Debentures	178,200
Non-current assets:
Buildings	2,376,000
Buildings accumulated depreciation	406,296
Land	665,280
Plant	1,487,376
Plant accumulated depreciation	487,080
Closing Inventory	1,657,260
Receivables	1,894,860
Payables	908,820
Bank	58,212
Ordinary Class A share capital	2,352,240
Ordinary Class B share capital	736,560
Retained Profit	986,040
Dividend paid	1,080,486
26,533,980	26,533,980

On 1 January 2020 the company revalued its non-current assets. These revaluations have not yet been included in the trial balance above.

Revaluation details are as follows:

Land revalued to 700,000. Building revalued to 2,000,000. The expected life on 1 January 2020 for the building was determined at 40 years. It is company policy to include the depreciation on buildings in cost of sales.

Depreciation for all the other assets has already been calculated for the year ending 31 December 2020. Friends plc. operates in a country where tax is not applicable on revaluation surplus.

On 1 August 2020, an entity issued 900,000-four-year convertible bonds that have a coupon rate of 3.7%. The market rate of interest for similar bond without conversion rights is 4.5% (being the interest rate for an equivalent debt without the conversion option). On 31st December 2020, the deferred tax liability declined by 1,972.

 

 Required:

 prepare the following statements: 

a. Statement of profit or loss and other comprehensive income for the year ended 31 December 2021.

 b. Statement of financial position as at 31 December 2021.

Answer rating: 100% (QA)

To prepare the required financial statements we will need to adjust the trial balance and incorporate the revaluation of noncurrent assets the issuanc... View the full answer