Question

PRESENTATION OF FINANCIAL STATEMENTS (IAS 1)
Question 1
The following trial balance has been extracted from the books of Tembo Ltd as at 31 December 2019.
K
K
Equity share capital (K1)
270,000
Share Premium
80,000
Revaluation Surplus
20,000
Dividends paid
27,000
Retained earnings at 1 January 2019
235,000
Revenue
2,165,000
Inventory at 1 January 2019
140,000
Purchases
1,260,000
Distribution costs
295,000
Administrative expenses
250,000
Loan interest
25,000
Dividends received
15,000
Interest received
1,000
Receivables and payables
233,000
27,000
Bank
3,000
Land - cost
380,000
Buildings – cost
100,000
Plant and machinery – cost
400,000
Buildings - accumulated depreciation 1 January 2019
30,000
Plant and machinery – accumulated depreciation 1 January 2019
170,000
Debentures (2022)
100,000
Total
3,113,000
3,113,000
Additional information:
1. Depreciation for the year is to be charged against cost of sales as follows:
(a) Buildings – 5% on cost straight line
(b) Plant and machinery – 30% on carrying amount (reducing balance).
2. Land is to be revalued upwards to K100,000.
3. Inventory at the end of the year was valued at cost of K95,000. Included in this amount were goods that had cost K15,000. These goods had become damaged during the year and it is considered that the goods could be sold for K5,000, after paying commission of K500.
4. Income tax of K165,000 is to be provided for the year to 31 December 2019.
Required:
Prepare a statement of profit or loss and other comprehensive income, statement of changes in equity and a statement of financial position for the year ended 31 December 2019.

Answer 1

Statement of Changes to Equity ($)

	Equity Share Capital	Share premium	Revalutation surplus	Retained Earnings	Total
Existing Balance	270,000	80,000	20,000	235000	605,000
Comprehensive income			100,000	56,500	156,500
Dividends Paid				(27,000)	(27,000)
Total	270,000	80,000	120,000	264,500	734,500

Statement of financial position($)

Assets:
Receivables		233,000
Bank		3000
Inventory		84,500
Land (Revalued)		480,000
Buildings	100,000
Accumulated depreciation (30,000+5000)	(35,000)	65,000
Plant and machinery	400,000
Accumulated depreciation (170,000+69000)	(239,000)	161,000
Total assets		1026,500
Liabilities:
Accounts payable		27,000
Provision for taxes		165,000
Debentures		100,000
Equity (as Computed above)		734,500
Total Liability and Equity		1026,500