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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 changes in equity for Emerald Ltd in accordance with the requirements of AASB 101;

Solutions

Expert Solution

Statement of changes in equity of Emerald as on 30th June, 2018.

Amount ($)

Amount ($)

Equity share capital as on 30th June, 2017(350000 shares @5.00 each)

   1,750,000.00

Retained earnings as on 30th June, 2017

       225,000.00

Equity as on 30th June, 2017

   1,975,000.00

Add:

75000 shares issued (75000 shares @4.00 per share)

       300,000.00

Profit after tax (As calculated in note 1)

       775,000.00

Gain from cash flow hedging

         20,000.00

   1,095,000.00

   3,070,000.00

Less:

dividend paid

       135,000.00

Final proposed dividend

         51,850.00

Employee benefits to be settled within a year

         32,000.00

Bank loans repayable within 1 year

         25,000.00

Bank loans repayable within 1 year

         90,000.00

       333,850.00

Equity as on June 30, 2017

   2,736,150.00

Note 1:

Income statement of Emerald Ltd.

Particulars

Amount ($)

Amount ($)

Income:

Sales

   5,120,000.00

Interest income

         34,000.00

Sundry income

         25,000.00

(A): Total income

   5,179,000.00

Expenditures:

Cost of sales

   2,465,000.00

Employee benefits expenses

       856,000.00

Depreciation expenses

       244,000.00

Amortization- franchise

         25,000.00

Rental expense

       120,000.00

Advertising expenses

       147,000.00

Insurance expense

         48,000.00

Freight out expense

       110,000.00

Doubtful debt expense

         16,000.00

Interest expense

         36,000.00

Borrowing costs

           9,000.00

Other expense

           8,000.00

(B): total expenditures

   4,084,000.00

Profit before tax (A-B)

   1,095,000.00

Less: Income tax expense

       320,000.00

Profit after tax

       775,000.00


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