“Do not let what you cannot do to interfere with what you can do” ~ John Wooden

NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL
AC1103 – ACCOUNTING I
SEMESTER 1, 2021/2022

Lesson 9 for week beginning 11 October 2021

Topics:

1. Presentation and disclosure of financial statements in accordance to SFRS(I) 1-1

Learning objectives:
Refer to the course outline.

Readings:
1. SFRS(I) 1-1
2. SFRS(I) 1-1 Implementation Guidance

Discussion Question

Question 1 (Applying online lesson 9.1 to present and disclosure financial statements in
accordance to SFRS(I) 1-1)

TED Ltd is a company incorporated in Singapore, and is engaged in the manufacture of electronic
components and electrical appliances. The registered office of the company is at 26 Steel Street,
Singapore 808089. TED is a partly owned subsidiary of XYZ Ltd which is also incorporated in
Singapore. The trial balance of TED Ltd as at 31 December 2014 is re-produced below.

$’000 $’000
Sales 365,000
Purchases of raw materials and consumables 268,750
Bank interest 1,150
Interest on debentures 6,325
Salaries and wages 18,055
Motor vehicle expenses 9,200
Fees – audit 1,150
Utilities, repairs and maintenance 8,510
Rental expenses 1,035
Miscellaneous expenses 1,725
Income tax expense 5,750
Directors’ remuneration 1,150
Ordinary shares 24,500
Retained earnings, 1/1/14 40,250

21S1 AC1103 Lesson 9 Discussion Questions 1

 “Do not let what you cannot do to interfere with what you can do” ~ John Wooden

NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL
AC1103 – ACCOUNTING I
SEMESTER 1, 2021/2022

Debentures 63,250
Bank overdraft 8,625
Provision for income tax 5,750
Trade payables 29,900
Cash in hand 4,600
Trade receivables 28,750
Inventories (FG and WIP), 1/1/14 43,125
Motor vehicles 20,700
Equipment 14,950
Freehold land (acquired 1/1/14) 57,500
Freehold buildings (acquired 1/1/14) 57,500
Accumulated depreciation – equipment 3,450
- motor vehicles 9,200
549,925 549,925

The following items (i) to (v) have not been taken into account in the amounts shown in the
above trial balance:

1. Inventories at 31 December 2014 consist of:

Finished goods $22,875,000
Work-in-process 4,000,000
$26,875,000

The cost of inventories is determined on weighted average basis.

2. Depreciation is to be provided as follows:

- 2% on freehold buildings using straight-line method
- 10% on equipment using the reducing balance method
- 25% on motor vehicles using reducing balance method

3. Of the $8,510,000 charged to the utilities, repairs and maintenance account, $2,300,000 was
pre-paid for repairs. Also, accrued wages totaling $5,175,000 has not been accounted for.

4. The equipment was damaged and was disposed of on the balance sheet date with zero sales
proceed.

5. The fair market value of freehold land as at 31 December 2014 was $60 million. The directors
wish to account for the land at its fair value at balance sheet date.

21S1 AC1103 Lesson 9 Discussion Questions 2

 “Do not let what you cannot do to interfere with what you can do” ~ John Wooden

NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL
AC1103 – ACCOUNTING I
SEMESTER 1, 2021/2022

6. Below is an analysis of various expenses by function.

Cost of sales Distribution Admin Total costs

costs expenses
$’000 $’000 $’000 $’000
Raw materials & consumables 285,000 0 0 285,000
used plus change in inventories of
FG and WIP
Salaries & wages 12,075 10,580 575 23,230
Motor vehicle expenses 0 9,200 0 9,200
Depreciation 1,150 3,450 575 5,175
Utilities, repairs & maintenance* 3,105 1,553 1,552 6,210
Fees – audit 0 0 1,150 1,150
Directors’ salaries** 575 0 575 1,150
Rental expenses * 519 258 258 1,035
302,424 25,041 4,685 332,150

*
These expenses were apportioned on the basis of the space occupied by the activity.
**
The three executive directors spent half their time on production and half on administration.

7. Of the 17.25 million ordinary shares in issue, 7.25 million shares were issued during the year
2014 at $2 each.

8. The financial statements, which are to be prepared in compliance with Singapore Financial
Reporting Standards were approved for issue in accordance with a resolution of the Board of
Directors on 31 March 2015.

Required

(a) Show the necessary journal entries for items (ii) to (v).

(b) Prepare the Statement of profit or loss and other comprehensive income, Statement of
financial position, Statement of changes in equity and Notes to the financial statements
of TED Ltd for the financial year ended 31 December 2014 in a form suitable for publication.
(Using classification of expenses by “function” for Statement of profit or loss and other
comprehensive income presentation).

(c) Prepare TED Ltd’s Statement of profit or loss and other comprehensive income for the year
ended 31 December 2014, using classification of expenses by “nature”.

21S1 AC1103 Lesson 9 Discussion Questions 3

 “Do not let what you cannot do to interfere with what you can do” ~ John Wooden

NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL
AC1103 – ACCOUNTING I
SEMESTER 1, 2021/2022

Guidance to Question 1

(a) Journal Entries (in $’000)

Item Debit Credit

($’000) ($’000)

2 Dr Depreciation expense
Cr Accumulated depreciation – freehold building
Cr Accumulated depreciation – equipment
Cr Accumulated depreciation – motor vehicles

3 Dr Salaries and wages

Cr Salaries and wages payable

Dr Prepayments
Cr Utilities, repairs and maintenance expenses

4 Dr Accumulated depreciation – equipment

Dr Loss on disposal of equipment (Asset written off)
Cr Equipment

5 Dr Freehold land
Cr Revaluation reserve

Items 2, 4 and 5 are Week 10 content.

Item 3 is Week 3 content

21S1 AC1103 Lesson 9 Discussion Questions 4

 “Do not let what you cannot do to interfere with what you can do” ~ John Wooden

NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL
AC1103 – ACCOUNTING I
SEMESTER 1, 2021/2022

(b) Statement of profit or loss and other comprehensive income – By Function

TED Ltd
(Incorporated in Singapore)
Statement of profit or loss and other comprehensive income
for the year ended 31 December 2014

Notes S$'000
Revenue
Cost of sales
Gross profit
Loss on disposal
Distribution costs
Administrative expenses
Other expenses
Finance cost
Profit before tax [3] 13,300
Income tax expense
Profit for the period
Other comprehensive income
Item that will not be reclassified to profit
or loss:
Revaluation surplus
Total other comprehensive income
Total comprehensive income 10,050

[NB: Alternative presentation formats are acceptable.]

21S1 AC1103 Lesson 9 Discussion Questions 5

 “Do not let what you cannot do to interfere with what you can do” ~ John Wooden

NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL
AC1103 – ACCOUNTING I
SEMESTER 1, 2021/2022

Statement of financial position

TED Ltd
(Incorporated in Singapore)
Statement of financial position as at 31 December 2014

Notes $’000
ASSETS
Non-current assets
Property, plant and equipment [4]

Current assets
Inventories [ 5]
Trade receivables
Cash in hand
Prepayments

Total assets 187,500

EQUITY AND LIABILITIES

Share capital [6]
Revaluation reserve
Retained earnings
Total equity 74,800

Non-current liabilities
Debentures
Total non-current liabilities 63,250

Current liabilities
Trade payables
Provision for tax
Accrued charges
Bank overdraft
Total current liabilities 49,450

Total equity and liabilities 187,500

[NB: Alternative presentation formats are acceptable.]

21S1 AC1103 Lesson 9 Discussion Questions 6

 “Do not let what you cannot do to interfere with what you can do” ~ John Wooden

NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL
AC1103 – ACCOUNTING I
SEMESTER 1, 2021/2022

Statement of Changes in Equity

TED LTD
(Incorporated in Singapore)
Statement of Changes in Equity for the year ended 31 December 2014

Notes Share Revalu- Retained Total

capital ation earnings
reserve
S$’000 S$’000 S$’000 S$’000
Balance at 31 December 2013
Total comprehensive income for the year
Issue of share capital [6]
Balance at 31 December 2014 24,500 2,500 47,800 74,800

Disclosure Notes

TED Ltd
(Incorporated in Singapore)
Notes to the financial statements – for the year ended 31 December 2014

1. General Information

TED Ltd is a limited liability company incorporated in the Republic of Singapore which is
also the place of domicile. The company is a partly owned subsidiary of XYZ Ltd,
incorporated in Singapore.

The registered office of the company is at _____________________________.

The principal activities of the company consist of manufacturing electronic components

and electrical appliances.

The financial statements for the financial year ended 31 December 2014 were
authorized for issue in accordance with the resolution of the Board of Directors on 31
March 2015.

The financial statements are presented in Singapore dollars because that is the currency
of the primary economic environment in which the company operates. All values are
rounded to the nearest thousand dollars ($’000).

21S1 AC1103 Lesson 9 Discussion Questions 7

 “Do not let what you cannot do to interfere with what you can do” ~ John Wooden

NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL
AC1103 – ACCOUNTING I
SEMESTER 1, 2021/2022

2. Significant Accounting Policies

(a) Basis of accounting

The financial statements have been prepared in compliance with Singapore Financial
Reporting Standards (International).

The financial statements have been prepared on the historical cost basis, except for
the freehold land which is carried at revalued amount.

(b) All property, plant and equipment are carried at cost less accumulated depreciation
except for the freehold land which is carried at revalued amount.

(c) Depreciation of property, plant and equipment

Property, plant and equipment are depreciated as follows:
Freehold building at 2% on a straight-line basis
Equipment at 10% on a reducing balance basis
Motor vehicles at 25% on a reducing balance basis

Freehold land is not depreciated.

(d) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined
on a . basis. Net realizable value is the estimated selling price in
the ordinary course of business less estimated costs necessary to make the sale.

3. Profit before tax has been arrived at after charging:

S$’000
Employee benefits expense ______
Depreciation expense ______

[NB: Required only if the Statement of comprehensive income presentation is using

“expenses classification by function”]

21S1 AC1103 Lesson 9 Discussion Questions 8

 “Do not let what you cannot do to interfere with what you can do” ~ John Wooden

NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL
AC1103 – ACCOUNTING I
SEMESTER 1, 2021/2022

4. Property, plant and equipment

At 1 January 2014 - - 14,950 20,700 35,650

Additions
Revaluation adjustment
Disposal
At 31 December 2014 60,000 57,500 - 20,700 138,200

Accumulated depreciation
At 1 January 2014 - - 3,450 9,200 12,650
Charge for the year
Disposal
At 31 December 2014 - 1,150 - 12,075 13,225

Net book value

At 31 December 2014
At 31 December 2013 - - 11,500 11,500 23,000

5. Inventories $’000
Finished goods
Work-in-process _____
__26,875

The cost of inventories recognised as an expense is $ , inclusive of a write-

down of $ .

6. Share capital

Number of shares (in millions)

Issued and fully paid share capital
As at 1 January 2014
Addition during the year
As at 31 December 2014 17.25

The company issued 7.25 million shares at $2 per share during the year 2014.

21S1 AC1103 Lesson 9 Discussion Questions 9

 “Do not let what you cannot do to interfere with what you can do” ~ John Wooden

NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL
AC1103 – ACCOUNTING I
SEMESTER 1, 2021/2022

[NB: Share capital dollar amounts ($’000) is not required to be disclosed in the notes to the
financial statements as this has already been shown in the statement of changes in equity.
Breakdown of revaluation reserve is also not required to be disclosed in the notes to the
financial statements as this has already done in the statement of changes in equity.]

(c) Statement of profit or loss and other comprehensive income – By Nature

TED Ltd
(Incorporated in Singapore)
Statement of profit or loss and comprehensive income
for the year ended 31 December 2014

Notes S$’000
Revenue
Changes in inventories
Raw materials & consumables used
Loss on disposal
Employee benefits expense
Depreciation expense
Transport costs
Rental expenses
Utilities, repairs and maintenance expenses
Other expenses #
Finance cost
Profit before tax 13,300
Income tax expense
Profit for the period
Other comprehensive income
Item that will not be reclassified to profit or loss:
Revaluation surplus
Total other comprehensive income 2,500
Total comprehensive income 10,050

#
This includes audit fees and miscellaneous expenses.

21S1 AC1103 Lesson 9 Discussion Questions 10