Financial statement presentation Appliances Ltd, a manufacturing company, commenced operations on 1 July 2017. The draft trial...

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Accounting

Financial statement presentation
Appliances Ltd, a manufacturing company, commencedoperations on 1 July 2017. The draft trial balance for the yearended 30 June 2018 has been prepared as follows:
Appliances Ltd
Draft trial balance as at 30 June 2018
DATA

DR ($)
CR ($)
Sales of goods
12,230,000
Interest income
7,000
Cost of sales
4,685,000
Marketing expense
623,000
Salaries and wages
2,740,000
Administration expenses
143,000
Annual leave expense
210,000
Doubtful debts expense
62,000
Depreciation expense
0
Interest expense
64,000
Other borrowing expenses
6,000
Other expenses
95,000
Warranty expense
64,000
Income tax expense
0
Cash on hand
41,000
Cash management account
193,000
Trade debtors
3,276,000
Allowance for doubtful debts
219,000
Raw material inventory
624,000
Finished goods inventory
1,250,000
Land
500,000
Buildings
900,000
Accumulated depreciation - buildings
0
Plant and equipment
2,600,000
Accumulated depreciation - plant and equipment
0
Patents
150,000
Deferred tax asset
0
Bank loan
400,000
Trade creditors
615,000
Provision for annual leave
200,000
Provision for warranty
55,000
Current tax liability
0
Dividends paid
500,000
Share capital
5,000,000
18,726,000
18,726,000
Additional information:
The bank loan is repayable in 5 years.
The provision for annual leave is payable within 1 year.
The provision for warranty is in respect of a 12-month warrantygiven on certain goods sold.
Share capital consists of 1,000,000 ordinary shares, fully paid to$5.00 each.
Appliances Ltd is a reporting entity.
Appliances Ltd uses the single statement format for the statementof profit or loss and other comprehensive income and presents ananalysis of expenses by nature on the statement.
In relation to the statement of financial position, where AASB 101requires entities to disclose further sub-classifications of theminimum line items on the face of the statement or in the notes,the directors of Appliances Ltd want to report only the minimumline items on the face of the statement, and leave thesub-classifications to be disclosed in the notes.
Whilst reviewing the draft trial balance, you noticethat depreciation and income tax have not been recognised as yet.The following information is available for these items:
The buildings were purchased on 1 July 2017, and have a useful lifeof 30 years and estimated residual value of nil. The plant andequipment was also purchased on 1 July 2017, and has a useful lifeof 10 years and estimated residual value of $50,000. Depreciationis to be recognised on a straight-line basis.
Income tax expense needs to be calculated at 30% of the accountingprofit (you will need to prepare the statement of profit or lossand other comprehensive income after accounting for depreciationabove to determine income tax expense). The deferred tax asset tobe recognised as at 30 June 2018 is $142,200. The current taxliability to be recognised will be the sum of income tax expenseand the deferred tax asset.
Required:
i) Prepare the journal entries torecognise depreciation and income tax in Appliances Ltd’saccounting records as at 30 June 2018. After preparing the journalentries, enter the amounts from your journal entries into the drafttrial balance.
ii) Prepare the statement of profit or loss and othercomprehensive income, statement of financial position, andstatement of changes in equity of Appliances Ltd for the year ended30 June 2018 in accordance with AASB 101. Notes and comparativefigures are not required.

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3.9 Ratings (656 Votes)

GIVENDATAFinancial statement presentation Appliances Ltd amanufacturing company As on 1072017The draft trialbalance for the year ended 30 June 2018 has been prepared in theabove table and additional inforamation also given REQUIREDi Prepare the journalentries See Answer

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Transcribed Image Text

Financial statement presentationAppliances Ltd, a manufacturing company, commencedoperations on 1 July 2017. The draft trial balance for the yearended 30 June 2018 has been prepared as follows:Appliances LtdDraft trial balance as at 30 June 2018DATADR ($)CR ($)Sales of goods12,230,000Interest income7,000Cost of sales4,685,000Marketing expense623,000Salaries and wages2,740,000Administration expenses143,000Annual leave expense210,000Doubtful debts expense62,000Depreciation expense0Interest expense64,000Other borrowing expenses6,000Other expenses95,000Warranty expense64,000Income tax expense0Cash on hand41,000Cash management account193,000Trade debtors3,276,000Allowance for doubtful debts219,000Raw material inventory624,000Finished goods inventory1,250,000Land 500,000Buildings900,000Accumulated depreciation - buildings0Plant and equipment2,600,000Accumulated depreciation - plant and equipment0Patents150,000Deferred tax asset0Bank loan400,000Trade creditors615,000Provision for annual leave200,000Provision for warranty55,000Current tax liability0Dividends paid500,000Share capital5,000,00018,726,00018,726,000Additional information:The bank loan is repayable in 5 years.The provision for annual leave is payable within 1 year.The provision for warranty is in respect of a 12-month warrantygiven on certain goods sold.Share capital consists of 1,000,000 ordinary shares, fully paid to$5.00 each.Appliances Ltd is a reporting entity.Appliances Ltd uses the single statement format for the statementof profit or loss and other comprehensive income and presents ananalysis of expenses by nature on the statement.In relation to the statement of financial position, where AASB 101requires entities to disclose further sub-classifications of theminimum line items on the face of the statement or in the notes,the directors of Appliances Ltd want to report only the minimumline items on the face of the statement, and leave thesub-classifications to be disclosed in the notes.Whilst reviewing the draft trial balance, you noticethat depreciation and income tax have not been recognised as yet.The following information is available for these items:The buildings were purchased on 1 July 2017, and have a useful lifeof 30 years and estimated residual value of nil. The plant andequipment was also purchased on 1 July 2017, and has a useful lifeof 10 years and estimated residual value of $50,000. Depreciationis to be recognised on a straight-line basis.Income tax expense needs to be calculated at 30% of the accountingprofit (you will need to prepare the statement of profit or lossand other comprehensive income after accounting for depreciationabove to determine income tax expense). The deferred tax asset tobe recognised as at 30 June 2018 is $142,200. The current taxliability to be recognised will be the sum of income tax expenseand the deferred tax asset.Required:i) Prepare the journal entries torecognise depreciation and income tax in Appliances Ltd’saccounting records as at 30 June 2018. After preparing the journalentries, enter the amounts from your journal entries into the drafttrial balance.ii) Prepare the statement of profit or loss and othercomprehensive income, statement of financial position, andstatement of changes in equity of Appliances Ltd for the year ended30 June 2018 in accordance with AASB 101. Notes and comparativefigures are not required.