Question

Question 1

Explain how Sandin Ltd should account for the following items/situations, justifying your answers by reference to the conceptual framework’s definition of accounting elements.

1. Receipt of artwork of sentimental value only
2. Sandin Ltd is the guarantor for an employee’s bank loan:
   1. You have no reason to believe the employee will default on the loan.
   2. As the employee is in serious financial difficulties, you think it likely that he will default on the on the loan.
3. Sandin Ltd receives 1,000 in Hefe Ltd, trading at $4 each, as a gift from a grateful client.
4. The panoramic view of the coast from Sandin Ltd’s café windows, which you are convinced attracts customers to the café.
5. The court has ordered Sandin Ltd to repair the environmental damage it caused to the local river system. You have no idea how much this repair work will cost.

Question 2

Melvin Ltd reported the following balances at the end of December 2019. Prepare a Statement of Profit or Loss and a Statement of Financial Position.

Accounts payable	$16,000	Inventory	$36,000
Accounts receivable	30,000	PPE - Land	80,000
Long term bank loan	26,000	PPE - Vehicles	8,000
PPE* - Buildings	151,000	Retained earnings (open)	60,000
Cash	48,000	Sales	400,000
Ordinary shares	150,000	Supplies	3,000
Cost of goods sold	180,000	Supplies expense	6,000
Equipment	70,000	Wages expense	40,000

• PPE = Property, plant & equipment

Answer 1

Answer-1: Please specify the appliable accounting standards as well like whether to answer on the basis of IFRS or national accounting standards.

Answer-2:

Part-1: Statement of profit and loss:

A statement of profit and loss also known as income statement is a financial report that provides brief summary of revenues and expenses along with profit earned or loss incurred over a given period of time.

Melvin Ltd
Statement of Profit and Loss
December 31, 2019
Sales		400000
Cost of Goods Sold		180000
Gross Profit		220000
Supplies Expense	6000
Wages Expense	40000	46000
Income from Operations		174000
Other Revenues		--
Other Expenses		--
Income from Continuing Operations before taxes		174000
Income Taxes (30%)		--
Income from Continuing Operations		174000
Loss from Discontinued Operations		--
Income before Extraordinary Items		--
Extraordinary Items		--
Net Income		174000

Part-2: Statement of Financial Position:

Statement of financial position also called balance sheet shows a company’s assets, liabilities and equity at a specific point of time.

Melvin Ltd.
Statement of Financial Position
December 31, 2019
ASSETS
Current Assets
Accounts Receivables	30000
Cash	48000
Inventory	36000
Supplies	3000
Total Cureent Assets		117000
Property, Plant & Equipments
Buildings	151000
Equipments	70000
Land	80000
Vehicles	8000
Total PPE's		309000
Total Assets		426000
Equity & Liabilities
Current Liabilities
Accounts Payable	16000
Total Current Liabilities		16000
Non-current Liabilities
Bank Loan	26000
Total Non-current Liabilities		26000
Stockholders' Equity
Common Stock	150000
Retained Earnings ($60,000 + $174,000)	234000
Total Stockholders’ Equity		384000
Total Liabilities and Stockholders' Equity		426000