Question

Section 1 – Presentation of financial statements

The adjusted trial balance of Timber Ltd as at 30 June 2017 is as follows:
Timber Ltd	Debit	Credit
	$	$
Account names
5% debentures – due 30/11/2017(secured over inventories)		60,000
Accounts payable		447,000
Accounts receivable	850,000
Accumulated amortisation – patents & trademarks		45,000
Accumulated depreciation -
Accumulated impairment loss – goodwill		210,000
Administrative staff salaries expense	590,000
Advertising expense	70,000
Allowance for doubtful debts		71,500
Asset Revaluation Reserve - Held to maturity investment (revaluation increment on 30/06/2017 after tax deduction)		21,000
Asset Revaluation Reserve - Land (revaluation increment on 30 June 2017 - after tax deduction)		168,000
Bank loan (unsecured –long-term repayable amount)		210,000
Bank loan (unsecured –short-term repayable due)		90,000
Buildings		90,000
Buildings	1,100,000
Carrying amount of plant and machinery sold	24,000
Cash at bank	800,000
Cost of sales	2,924,000
Current tax liabilities		141,000
Debentures held in Rome Ltd (mature on 30/4/2018)	714,000
Deferred tax asset	190,000
Deferred tax liability		103,000
Deposits at call	100,000
Dividends receivable	8,000
Dividends revenue		68,000
Final dividend declared – ord	145,360
Final dividend declared - pref	45,300
Final dividend payable		190,660
Fixtures & fittings		97,000
Fixtures & fittings - at cost	243,520
Freight inwards	90,000
Freight outwards	115,000
General reserve		780,000
Goodwill	832,000
Held to maturity investment (at fair value)	145,000
Income tax expense	401,000
Interest expense	74,000
Interest payable		19,000
Interest revenue		30,000
Interim dividend paid - ord	109,020
Inventories	1,850,000
Land (at fair value)	1,476,000
Loan to Jets Ltd (due on 30/6/2025)	420,000
Mortgage loan (secured over land and buildings – due 30/9/2022)		504,000
Ordinary shares, fully paid		3,634,000
Other administrative expense	360,000
Other expenses	137,000
Other selling expense	220,000
Patents and trademarks	145,000
Plant & machinery		226,000
Plant & machinery - at cost	884,000
Preference shares, fully paid		226,500
Prepayments	50,000
Proceeds on sale of plant and machinery		50,000
Provision for annual leave		62,000
Provision for long service leave - long term liable		134,000
Provision for long service leave -short term liable		85,000
Retained earnings as at 1/7/2016		850,000
Sales returns	32,000
Sales revenue		6,968,340
Sales staff salaries and commission expense	750,000
Sundry revenue		46,200
Total Asset revaluation reserve as at 1/7/2016		364,000
Transfer to general reserve	60,000
Underwriting commission and other share issue costs	37,000
Total	15,991,200	15,991,200

Prepare a statement of profit or loss and other comprehensive income for Timber Ltd for the year ended 30 June 2017 (classify expenses by functions). Cross reference all workings

Timber Ltd
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30/06/2017
	Reference #
Revenue
Cost of sales
Gross profit
Other revenue
Other income (loss)
Selling expenses
Administrative expenses
Other expenses
Finance costs
Profit before income tax
Income tax expense
Profit for the period
Other comprehensive income:
Items that will not be reclassified to profit or loss
Gain arising during the year on revaluation of land
Gain arising during the year on investments in equity instruments
Income tax relating to items not reclassified
Other comprehensive income during the year, net of tax
Total comprehensive income for the year

Answer 1

Timber Ltd
Statement of Profit and Loss and Other Comprehensive Income
for the year ended 30/06/2017
Account names	Ref #	$	$
Revenue	A	69,36,340
Cost of sales		-29,24,000
Gross profit		40,12,340
Other revenue	B	144200
Other income (loss)	C	50000	42,06,540
Selling expenses	D	-1040000
Administrative expenses	E	-1065000
Other expenses	F	-288000
Finance costs		-74000	-2467000
Profit before income tax			17,39,540
Income tax expense			-4,01,000
Profit for the period			13,38,540
Other comprehensive income:
Items that will not be reclassified to profit or loss
Final dividend declared – ord		-1,45,360
Final dividend declared - pref		-45,300
Interim Dividend paid - ordinary		-1,09,020	-2,99,680
Gain arising during the year on revaluation of land
Gain arising during the year on investments in equity instruments
Income tax relating to items not reclassified
Other comprehensive income during the year, net of tax
Total comprehensive income for the year			10,38,860
Timber Ltd
Balance Sheet as on 30th June, 2017
Account names	Ref #	$	$
SOURCES OF FUNDS
1) Owned Funds
Share Capital			3634000
Preference Shares fully paid			226500
General Reserve		780000
Less: Transfer		-60000	720000
Retained earnings as at 1/7/2016		850000
Add: Profits during the year		10,38,860	18,88,860
Total Asset revaluation reserve as at 1/7/2016		364000
Asset Revaluation Reserve		21000	385000
2) Borrowed Funds
5% Debentures		60000
Bank loan (unsecured –long-term)		210000
Bank loan (unsecured –short-term)		90000
Mortage Loan		504000	864000
Total Capital Employed			7718360
APPLICATION OF FUNDS
Fixed Assets
Land		1476000
Asset Revaluation Reserve - Land		-168000	1308000
Buidings		1100000
Less: Accumulated depreciation		-90000	1010000
Fixtures & fittings - at cost		2,43,520
Less: Accumulated depreciation		-97000	146520
Plant & machinery - at cost		884000
Less: Accumulated depreciation		-226000	658000
Patents & Trade Marks		145000
Less: Accumulated amortisation		-45000	100000
Goodwill		832000
Accumulated impairment loss – goodwill		-210000	622000
Investments
Debentures held in Rome Ltd			714000
Deposits at call			100000
Held to maturity investment (at fair value)			145000
Accounts Receivable		850000
Allowance for doubtful debts		-71500
Net Accounts Receivables		778500
Cash at Bank		800000
Inventories		1850000
Deferred Tax Asset		190000
Dividends receivable		8000
Loan to Jets Ltd		420000
Prepayments		50000
Total Current Assets	G	4096500
Less:
Current Liabilities
Accounts Payable		447000
Current Tax Liabilities		141000
Deferred tax liability		103000
Final dividend payable		1,90,660
Interest Payable		19000
Provision for annual leave		62000
Provision for long service leave - long term liable		1,34,000
Provision for long service leave -short term liable		85,000
	H	11,81,660
Net Current Assets	G-H		29,14,840
TOTAL NET ASSETS			7718360
Workings
Selling expenses	D		$
Advertising expense			70000
Other selling expense			220000
Sales staff salaries and commission expense			750000
			1040000
Administrative expenses	E		$
Administrative staff salaries expense			590000
Freight Outwards			115000
Other Admin expenses			360000
			1065000
Other expenses	F
Freight inwards			90000
Other expenses			137000
Underwriting commission and other share issue costs			37000
Carrying amount of plant and machinery sold			24000
			288000
Revenue	A
Sales
Less: Returns		69,68,340
		-32000	69,36,340
Other revenue	B
Dividends Revenue
Sundry Revenue		68000
Interest Revenue		46200	144200
		30000
Other income (loss)	C
Proceeds on sale of plant and machinery			50000