Question

GETFIT Ltd, a retail sports equipment company, commenced operations on 10 May 2019 by issuing 200 000 $1.25 shares, payable in full on application on a first-come, first-served basis. By 20 June 2019 the shares were fully subscribed and duly allotted. There were no share issue costs. The company did not commence trading until 1 July 2019.

For the year ending 30 June 2020, the company recorded the following aggregate transactions:

	$
Sales	1 012 000
Interest income	3 000
Cost of Sales	651 000
Sundry income	13 000
Employee entitlements expenses - Selling	5 000
Depreciation expense-to be calculated
Selling & Distribution Expenses	82 000
Administration expenses	26 000
Wages & Salaries - selling	90 000
Wages & Salaries - office	30 000
Doubtful debts expense	8 000
Interest expense	7 000
Other borrowing expenses	3 000
Income tax expense	28 500

The following additional information was noted during the preparation of financial statements for the year ended 30 June 2020:

(a) A cash dividend of 5 cents per share was declared and paid during the 2020 financial year and a final dividend for 2020 of $22 000 was proposed but not recognised in the financial statements.

(b) The land was revalued upward by $20 000 (related income tax 6 000) by Real Valuations Pty Ltd during the year ended 30 June 2020.

(c) Transferred $10 000 out of retained earnings into general reserve.

(d) $40 000 of other loans is repayable in one year.

(e) The Bank loan is for 5 years and repayable in full at the end of the term. The interest rate is 7% and it is secured over the land.

(f) The provision for employee entitlements includes $4 000 payable within 1 year.

(g) GETFIT Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and classifies expenses by function within the statement.

(h) GETFIT Ltd measures inventory at the lower of cost and net realizable value. The cost model is applied to buildings, plant and equipment.

The following assets were purchased on 1 July 2019:

Asset	Cost $	Useful life (years)
Fixtures & Fittings	150 000	5
Buildings	80 000	20

Summarised account balances are provided below:

Year-end balances, 30 June 2020	$
Bank Overdraft	12 000
Cash on hand	3 500
Cash on deposit, at call	59 700
Accounts receivable - trade	48 000
Allowance for doubtful debts/ impairment	8 000
Other receivables	6 000
Inventories, 30 June 2020	46 000
Land	60 000
Franchise	100 000
Accumulated amortisation of franchise	22 000
Debentures 10 year 4%	60 000
Bank loans	100 000
Other loans	55 000
Accounts payable- trade	30 000
Provision for employee entitlements	5 000
Current tax liability	25 900
Deferred tax assets	4 500
Deferred tax liability	8 300
Retained earnings Transfer to General Reserve	10 000
Share Capital	250 000
Dividends paid	10 000
Land revaluation surplus	14 000

1. Prepare appropriate notes to the accounts. (You do not need to prepare notes related to income taxes.      Include the following note as note 1. You may optionally add accounting policies to this note):

“1. Summary of significant accounting policies

Basis of accounting

The financial report is a general purpose financial report which has been prepared on the historical cost basis, except where stated otherwise.

Statement of Compliance

The financial statements have been prepared in accordance with the requirements of the Corporations Act, Australian Accounting Standards which include Australian equivalents to International Financial Reporting Standards (AIFRSs) and AASB Interpretations. Compliance with AIFRSs ensures the financial statements and notes comply with International Financial Reporting Standards”

Answer 1

Notes to Accounts of GETFIT Ltd for the year ended June 2020
Note 3: Revenue & Expenses
Revenue & Expenses
	2020
	$
a) Revenue from Contracts with Customers
Sales	10,12,000
	10,12,000
Other Income
Interest Income	3,000
Sundry Income	13,000
	16,000
b) General & Administration
Employee benefits
Salary & employee benefits	1,25,000
(5000+90000+30000)
Other General & Administration
Selling & Distribution expenses	82,000
Administration Expenses	26,000
Dountfull Debt Expense	8,000
Total Other General & Administration Expense	1,16,000
Total General & Administration Expense	2,41,000
c) Finance Costs
Interest Expense	7,000
Other Borrowing Expenses	3,000
	10,000
d) Depreciation & Amortization
Depreciation on Fixtures & Fittings	30,000
(150000/5)
Depreciation on Buildings	4,000
(80000/20)
	34,000
e) Dividends
Interim Dividend	10,000
(200000*0.05)
Final Dividend	22,000
	32,000