Question

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;

Answer 1

Statement of changes in equity of Emerald as on 30^th 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