Source from Picklette ACCA KAPLAN hard copy chapter 1 Example 1 pg 9

The following information has been extracted from the books of Paragon for the year to
31/3/2023
RM000 RM000

Administrative expenses 170

Interest paid 5
Called up share capital (ordinary RM1 each) 200
Dividend 6
Cash at bank and in hand 9
Income tax (remaining balance from previous year) 10
Warranty provision 90
Distribution costs 240
Land & buildings:
at cost (land RM110,000, building RM100,000) 210
accumulated depreciation (at 1.4.2022) 48
Plant & machinery
at cost 125
accumulated depreciation (at 1.4.2022) 75
Retained earnings (at 1.4.2022) 270
10% Loan note (issued in 2021) 80
Purchases 470
Sales 1300
Inventory (at 1.4.2022) 150
Trade payables 60
Trade receivables 728
2123 2123

Additional information

1. Inventory at 31 March 2023 was valued at $250,000.

2. Buildings and plant and machinery are depreciated on a straight-line basis (assuming
no residual value) at the following rates:

On cost: Buildings 5%
Plant & machinery 20%

3. There were no purchases or sales of non-current assets during the year to 31 March
2023.
4. The depreciation charges for the year to 31 March 2023 are to be apportioned as
follows:

Cost of sales 60%

Source from Picklette ACCA KAPLAN hard copy chapter 1 Example 1 pg 9

Distribution costs 20%

Administrative expenses 20%

5. Income taxes for the year to 31 March 2023 are estimated to be $135,000.
6. The 10% loan note was issued on 1 April 2021 and is repayable five years from that
date.
7. The year-end provision for warranty claims has been estimated at $75,000. Warranty
costs are charged to administrative expenses.

Required:

Prepare Paragon's statement of profit or loss for the year to 31 March 2023 and a statement of
financial position as at that date.

Solution:

RM’000
Revenue 1300
Cost of sales (470 + 150 Op INV – 250 Cl inv)+ [60% X (388)
30(W1) ]
Gross profit 912
Distribution (240+[20%X30{W1}] (246)
Administration (170+[20%x30{W1}+-15{warranty}) (161)
Profit from operations 505
Finance cost (80X10%) (8)
Profit before tax 497
Income tax expense (135+10) (145)
Profit for the year 352

Statements of financial position as at 31.12.2023

RM’000

Non-current assets
Property, plant and equipment (W2) 182

Current assets
Inventories 250
Receivables 728
Bank 9
987
Total assets 1169

Equity
Source from Picklette ACCA KAPLAN hard copy chapter 1 Example 1 pg 9

Share capital 200

Retained earnings (W2) 616
816

Non-current liabilities
Loan 80
Provision for warranties (90-15) 75
155
Current liabilities
Payables (60+3[accrued interest]) 63
Tax liabilities 135
198
1,169

Workings

1.

Land building Plant& machinery total

RM’000 RM’000 RM’000 RM’000
Cost b/f 110 100 125 335
Depreciation b/f 0 (48) (75) (123)
Current depreciation 0 (5) (25) (30)
110 47 25 182

2. Retained earning
Opening balance 270
+ profit 352
- dividend (6)
----------------------
Closing 616