Working 1 Revenue

This transaction is sale and buy back, and repurchase price is higher than original selling price
So in substance, it’s a loan agreement with principlal is $ 3m, and interest rate is 10%/year
Interest from 1/1/2015 to 30/6/2015 150,000
Adjusting entry
Dr revenue 3,000,000
Cr Loan 3,000,000
Dr inventory 2,000,000
Cr Cost of sale 2,000,000
Dr financial expense 150,000
Cr Loan 150,000
Working 2 Research and development cost
According IAS 38, expenditure in research stage should be expensed off.
Expenditure in development stage only be capitalised from date directors were confident that
the new product would be commercial success.
So expenditure of project should be expensed off from January to April (4 months)
and capitalised from May to June (2 months)
Adjusting entry
Dr cost of sale 4,600,000
Dr Intangible asset 3,200,000
Cr Research and development cost 7,800,000
Working 3 Property, plant and equipment
- Property
Openning balance 28,500,000
Depreciation charged in year end 30/6/2015 1,900,000
Closing balance before revaluation 26,600,000
Revalued amount on 30/6/2015 29,000,000
Gain on revaluation 2,400,000
Adjusting entry
Dr cost of sale 1,900,000
Dr property 500,000
Cr OCI 2,400,000
- Plant and equipment
Openning balance 18,000,000
Depreciation charged in year end 30/6/2015 2,700,000
Closing balance 15,300,000
Adjusting entry
Dr cost of sale 2,700,000
Cr plant and equipment 2,700,000
Working 4 Loan note and dividend
Interest paid from loan note 1,000,000
Dividend paid 4,000,000
Openning balance of loan note 19,500,000
Financial expense of loan note for year end 30/6/2015 1,560,000
Ajdusting entry
Dr loan note 500,000
Cr admin expense 500,000
Dr financial expense 560,000
Cr loan note 560,000
Working 5 Equity instrument
Openning balance 8,800,000
Closing balance 9,600,000
Gain on revaluation 800,000
Adjusting entry
Dr Financial asset equity instrument 800,000
Cr Profit from reluation 800,000
Working 6 Tax expense
Current tax expense 1,200,000
Deferred tax expense 800,000
Total tax expense 2,000,000

Statement of profit or loss and other comprehensive income $ '000

Revenue (113,500 - 3,000 (W1)) 110,500
Cost of sales (88,500 + 4,600 (W2) + 1,900 + 2,700 (W3) - 2,000 (W1)) 95,700
Gross profit 14,800
Distribution cost 3,600
Admin expense (6,800 - 500 (W4)) 6,300
Operating profit (Profit before interest and tax) 4,900
Financial expense (1,000 + 560 (W4) + 150 (W1)) 1,710
Investment income 300
Profit from revaluation of equity instruments 800
Profit before tax 4,290
Tax expense (W6) 2,000
Profit after tax 2,290
Other comprehensive income 2,400
Total comprehensive income 4,690
Statements of change in equity

Retained Revaluation Other

Items Share equity
earnings reserve equity
Openning balance 20,000 6,200 3,000 8,600
Issue new share 10,000 700
Profit for the year 2,290
Revaluation of PPE 2,400
Dividend paid -4,000
Total 30,000 4,490 5,400 9,300

Fraud of receivable: stole 2013 of 3m$, 2014 2m$, 2015 4m$

Year 2013
Dr admin expense 3,000 --> decrease profit --> decrease retained earnings
Cr Receivable 3,000
Year 2014
Dr admin expense 2,000 --> decrease profit --> decrease retained earnings
Cr Receivable 2,000
Year 2015
Dr admin expense 4,000
Cr Receivable 4,000
--> openning retained eanings year 2015 decrease 5,000
Working 1 Revenue from product and service $ 000
Normal selling price of product 18,000
Normal selling price of service 2,000
Total 20,000
% revenue of product 90.0%
% revenue of service 10.0%
Revenue recognised for product in year end 31/3/16 14,400
Revenue recognised for service in year end 31/3/16 400
Deferred revenue for service 1,200
Adjusting entry
Dr revenue 1,200
Cr deferred revenue 1,200
Working 2
Total revenue 30,000
Total cost 24,000
Total profit of contract 6,000
% completion 62.50%
Revenue recognised 18,750
COGS recognised 15,000
Profit recognised 3,750
Contract asset 8,750
Adjusting entry
Dr contract asset 3,750
Dr COGS 15,000
Cr revenue 18,750
Working 3 Convertible loan note
Year 1 2 3
Interest paid 1,500 1,500 1,500
Principal paid 30,000
Total cash flow 1,500 1,500 31,500
Discount factor 0.93 0.86 0.79
Present value 1,395 1,290 24,885
Liability component at 1/4/2015 27,570
Equity component at 1/4/2015 2,430
Financial expense for year end 31/3/2016 2,206
Financial expense recording 1,500
Difference 706
Liability component at 31/3/2016 28,276
Adjusting entry
Dr liability component 1,724
Dr financial expense 706
Cr equity component 2,430
Working 4 Non current assets
- Land and buildings
Carrying amount of land at 01/4/2015 14,000
Revaluation amount of land at 01/4/2015 16,000
Gain on revaluation of land 2,000
Carrying amount of building at 01/4/2015 45,000 If no revaluation
Revaluation amount of builing at 01/4/2015 52,200 Revaluation
Gain on revaluation of builing 7,200 Depre excess
Depreciation expense for the year end 31/3/2016 2,900 --> decrease profit --> decrease RE
Excess depreciation because of revaluation 400 Revaluation reserve --> retained earn
Adjusting entry
Dr PPE 9,200
Cr OCI 9,200
Dr COGS 2,900
Cr PPE 2,900
Dr Revaluation Reserve 400
Cr Retained earnings 400
- Plant and equipment
Carrying of plant and equipment at 01/4/2015 46,000
Depreciation expense for the year end 31/3/2016 6,900
Adjusting entry
Dr COGS 6,900
Cr PPE 6,900
- Patent
Carrying amount at 01/4/2015 4,500
Depreciation expense for the year end 31/3/2016 750
Carrying amount at 31/3/2016 3,750
Recoverable amount at 31/3/2016 (higher of FVLC & VIU) 3,400
Impairment loss 350
Adjusting entry
Dr COGS 1,100
Cr PPE 1,100
Working 5 Taxation Deferred tax expense = closing DTL -
Underprovision current tax previous year 1,550
Provision for current tax 11,400
Current tax expense 12,950
Openning Deferred tax liability 4,800
Closing deferred tax liability 3,700
Deferred tax expense -1,100
Total tax expense 11,850

a) Prepare SOPL&OCI for year end 31/3/2016 b) Prepare SOCIE for year end 31/3/
Items
Revenue (267,900 - 1,200 (W1) + 18,750 (W2) 285,450
COGS (166,600 + 15,000 (W2) +2,900 + 6,900 + 1,100 (W4)) 192,500 Brought forward
Gross profit 92,950 Profit for the year
Distribution cost 20,000 Revaluation of PPE
Admin expense 22,000 Transfer excess depn.
Other operating income from royalties 300 Issue convertible loan note
Operating profit 51,250 Carried forward
Finance cost (1,500 + 150 + 706 (W3)) 2,356
Profit before tax 48,894
Tax expense (W5) 11,850
Profit after tax 37,044
Other comprehensive income
Revaluation of building (W4) 9,200
Total comprehensive income 46,244

c) Prepare SOFP at 31/3/2016

Assets
Non current assets
PPE (W4) 107,800
Current assets
Inventory 32,100
Contract asset (W2) 8,750
Receivables 38,500
Total assets 187,150
Equity and liabilities
Equity
Share equity 25,000
Retained earnings 45,444
Revaluation reserves 8,800
Other equity 14,230
Total equity 93,474
Liabilities
Non current liabilities
Deferred tax liability (W5) 3,700
Convertible loan note (W3) 28,276
Deferred revenue 800
Current liabilities
Current tax liability (W5) 11,400
Bank overdraft 2,700
Trade payables 46,400
Deferred revenue 400
Total liabilities 93,676
Total equity and liabilities 187,150
Depre.
 2500
2900
400
ase profit --> decrease RE
tion reserve --> retained earnings

tax expense = closing DTL - openning DTL - DTL arise from revaluation

re SOCIE for year end 31/3/2016

Retaiend Revaluation
Share equity Other equity
earnings reserve
25,000 8,000 0 11,800
37,044
9,200
excess depn. 400 -400
nvertible loan note 2,430
25,000 45,444 8,800 14,230