QUESTION 3 GoldRing plc manufactures and sells jewellery. Set out below are the draft extracts from the financial statements for GoldRing plc: Statement of financial position for the year ended 31 March 2021 000 PPE 30,098 Inventories 14,000 Total assets 44,098 Equity and liabilities 12,000 Share capital Retained earnings 8,038 Other reserves 6,000 Non-current liabilities 11,000 Current liabilities 7,060 Total equity and liabilities 44,098 Statement of comprehensive Income for the year ended 31 March 2021 Revenue Cost of sales Gross profit Operating expenses Finance costs Profit for the year Other comprehensive income Total comprehensive income 000 115.425 (80,120) 35,305 (22.084) (51) 13,170 13.170 The following financial reporting issues are unresolved: Issue 1 Hedge transaction On 1 July 2020. GoldRing plc bought 2,000 ounces of gold which it recognised in its inventory. This cost 1,200 per ounce GoldRing plc was concerned that the fair value of this inventory would fall, so on 1 July 2020 it sold 2,000 ounces in the futures market for 1,400 per ounce for delivery on 30 June 2021. At 31 March 2021, the fair value of the inventory was 1,600 per ounce while the futures price for 30 June 2021 delivery was 1,700 per ounce. GoldRing plc has not made any adjustments to reflect the futures transaction or the change in the inventory fair value in its financial statements but would like to apply the hedge accounting provisions of IFRS 9 Issue 2 Financial asset On 1 January 2021, GoldRing plc purchased shares issued in GY plc for a total consideration of 2,200,000. The shareholding represents less than 5% of the shares in GY plc. Transaction costs were 10,000. GoldRing plc has incorrectly recorded the share purchase and payment of transaction costs by the following journal: Dr Operating expenses Cr Cash 000 2.210 2.210 On 31 March 2021, the market price for the shares which are publicly traded on a stock exchange, was 1,800,000. GoldRing ple does not wish to classify the shares as fair value through other comprehensive income (FVOCI). REQUIRED: a) Set out and explain, for Issue 1 Hedge transaction and Issue 2 Financial asset, the appropriate financial reporting treatments in the financial statements of GoldRing plc for the year ended 31 March 2021. Show all journal entries required to correct the financial statements for the year ended 31 March 2021 (20 marks) QUESTION 3 GoldRing plc manufactures and sells jewellery. Set out below are the draft extracts from the financial statements for GoldRing plc: Statement of financial position for the year ended 31 March 2021 000 PPE 30,098 Inventories 14,000 Total assets 44,098 Equity and liabilities 12,000 Share capital Retained earnings 8,038 Other reserves 6,000 Non-current liabilities 11,000 Current liabilities 7,060 Total equity and liabilities 44,098 Statement of comprehensive Income for the year ended 31 March 2021 Revenue Cost of sales Gross profit Operating expenses Finance costs Profit for the year Other comprehensive income Total comprehensive income 000 115.425 (80,120) 35,305 (22.084) (51) 13,170 13.170 The following financial reporting issues are unresolved: Issue 1 Hedge transaction On 1 July 2020. GoldRing plc bought 2,000 ounces of gold which it recognised in its inventory. This cost 1,200 per ounce GoldRing plc was concerned that the fair value of this inventory would fall, so on 1 July 2020 it sold 2,000 ounces in the futures market for 1,400 per ounce for delivery on 30 June 2021. At 31 March 2021, the fair value of the inventory was 1,600 per ounce while the futures price for 30 June 2021 delivery was 1,700 per ounce. GoldRing plc has not made any adjustments to reflect the futures transaction or the change in the inventory fair value in its financial statements but would like to apply the hedge accounting provisions of IFRS 9 Issue 2 Financial asset On 1 January 2021, GoldRing plc purchased shares issued in GY plc for a total consideration of 2,200,000. The shareholding represents less than 5% of the shares in GY plc. Transaction costs were 10,000. GoldRing plc has incorrectly recorded the share purchase and payment of transaction costs by the following journal: Dr Operating expenses Cr Cash 000 2.210 2.210 On 31 March 2021, the market price for the shares which are publicly traded on a stock exchange, was 1,800,000. GoldRing ple does not wish to classify the shares as fair value through other comprehensive income (FVOCI). REQUIRED: a) Set out and explain, for Issue 1 Hedge transaction and Issue 2 Financial asset, the appropriate financial reporting treatments in the financial statements of GoldRing plc for the year ended 31 March 2021. Show all journal entries required to correct the financial statements for the year ended 31 March 2021 (20 marks)