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Emerald Ltd, a manufacturing company, commenced operations on 1 July 2016 by issuing 350 000 $5.00...

Emerald Ltd, a manufacturing company, commenced operations on 1 July 2016 by issuing 350 000 $5.00 shares, payable in full on application on a first-come, first-served basis. By 31 July 2016 the shares were fully subscribed and duly allotted. There were share issue costs of $10 000. No additional shares were issued during the year ending 30 June 2017.

For the year ending 30 June 2018, the company recorded the following aggregate transactions:

$

Sales

5 120 000

Interest income

34 000

Sundry income

25 000

Cost of Sales

2 465 000

Employee benefit expenses

856 000

Depreciation expense

244 000

Amortisation - franchise

25 000

Rental expense

120 000

Advertising expense

147 000

Insurance expense

48 000

Freight out expense

110 000

Doubtful debts expense

16 000

Interest expense

36 000

Borrowing Costs

9 000

Other expenses

8 000

Income tax expense

320 000

The following additional information was noted during the preparation of financial statements for the year ended 30 June 2018:

75 000 fully paid ordinary shares have been issued on 1 October 2017 at the price of $4.00.

$135 000 dividends (31.76 cents per share) were declared and paid during the 2018 financial year. A final dividend for 2018 of $51 850 was proposed but not recognised in the financial statements.

There was a gain of $20 000 from the cash flow hedge arrangement during the 2018 financial year. Any gain or loss associated with the cash flow hedge is directly recognised in equity. There was no previously recognised cash flow hedge reserve before the 2018 financial year.

$25 000 of bank loans is repayable within 1 year.

$90 000 of other loans is repayable within 1 year.

The employee benefits of $32 000 are expected to be settled wholly within 12 months.

Emerald Ltd measures inventory at the lower of cost and net realizable value and property, plant and equipment using a cost model.

The summarised balances are provided below:

Year-end balances, 30 June 2018

$

Cash on hand

960 000

Cash on deposit, at call

82 000

Accounts Receivables

665 000

Allowance for doubtful debts/ Impairments

24 000

Other debtors

27 000

Finished goods inventories, 30 June 2018

600 000

Work in Progress inventories 30 June 2018

105 000

Land

94 000

Buildings

230 000

Accumulated depreciation – buildings

60 000

Plant and equipment

1 385 000

Accumulated depreciation – plant and equipment

330 000

Franchises

140 000

Accumulated amortisation of franchise

50 000

Goodwill

620 000

Bank loans

92 000

Other loans

440 000

Accounts payable

696 000

Provision for employee benefits

116 000

Income tax payable

35 000

Deferred tax liability

140 000

Retained earnings, 30 June 2017

225 000

Dividends paid

135 000

Cash flow hedge reserve (equity)

20 000

Prepare a statement of profit or loss and comprehensive income for Emerald Ltd in accordance with the requirements of AASB 101. Emerald Ltd uses the single statement format for the statement of comprehensive income and classifies expenses by function within the statement;  

Solutions

Expert Solution

STATEMENT OF PROFIT AND LOSS

Particulars

Amount

Revenue from Operations

5120000

Other Income

59000

Total Income

5179000

EXPENSES

a) Cost of Sales

2465000

2465000

b) Purchases of Stock in Trade

c) Changes in Inventories

d) Employee Benefit Expense

856000

856000

e) Finance Costs

36000

9000

45000

f) Depreciation and Amortisation Expense

244000

25000

269000

g) Other Expenses

Rental

120000

Insurance

48000

Advertising

147000

Freight Out

110000

Other Expense

8000

Doubtful Debts Expense

16000

449000

Provisions for

Employee Benefits

116000

Doubtful Debts Expense

24000

274000

TOTAL EXPENSES

1893000

PROFIT BEFORE TAX

572000

Tax Expense

320000

PROFIT AFTER TAX

252000

Dividend

135000

RETAINED EARNINGS

117000

STATEMENT OF OTHER COMPREHENSIVE INCOME

GAIN FROM CASH FLOW HEDGE

20000

INCOME FROM OTHER COMPREHENSIVE INCOME

20000


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