Frolova Anna IFF3-3

V4.
The trial balance of Alfa shows the following balances at 31 December 2019:
  Dr Cr
$000 $000
Issued share capital (500,000 shares) 500
Share premium 20
Finance costs 70  
Retained earnings 1 January 2019 346
Inventory (raw materials) at 1 January
60  
2019
Sales 870
Purchases 590  
Purchases returns 26
Sales returns 28  
Carriage outwards 28  
Work-in-progress at 1 January 2019 80  
Intangible assets 170  
Administrative wages 30  
Warehouse plant and equipment – cost 92  
Accumulated depreciation – 1 January
30
2019
Delivery vehicle hire 20  
Distribution expenses 10  
Administrative expenses 30  
Directors’ salaries 30  
Sales allowances 6
Investment income   30
Bank overdraft   20
Trade receivables 380  
Cash at bank 110  
Land 120  
1848 1848

Additional information:

(1) Inventories at 31 December 2019 were valued at $12,000.

(2) Work-in-progress at 31 December 2019 was valued at $3,000

(3) Depreciation charges for the year amounting to $7,000 and $2,000 have been included
in distribution costs and administrative expenses, respectively.
(4) The income tax for the year is evaluated as $20,000

(5) A final dividend of $0.50 per share was declared on 31 March 2020.

(6) There were no disposals of any non-current assets during the year. Land was revalued
at 31 December 2019 to $100,000. No entries have yet been made to record this.
(7) Life insurance for general director is to be accrued $3,000.

(8) Receivables totaling $14,000 are to be written off

(9) General reserve is to be created as $2,000

(10) Allowance for receivables should be created as 2% of net receivables

a) a statement of profit or loss and other comprehensive income for the year ended 31
December 2019,

P&L Statement
$000
Sales revenue 870
Sales returns 28
Sales allowance 1,32[1]
Total sales 840,68
COGS
Open inventory 60
Open work in progress 80
Purchases 590
Purchases returns 26
Close inventory 12
Close work-in-progress 3
COGS 689
Operating expenses:
Distribution expenses 10
Delivery vehicle hire 20
Warehouse plant and equipment – cost 92
Carriage outwards 28
Depreciation expense 9[3]
Insurance 3
Administrative expenses 30
Directors’ salaries 30
Administrative wages 30
Total expense 252
EBIT -100,32
Finance cost 70
Bad debts 14[2]
Investment income 30
EBT -154,32
[4]
Taxes
Net income (154,32)
Other comprehensive income
Loss on revaluation 20[5]
Total loss 174,32
 b) a statement of changes in equity for the year ended 31 December 2019
Share Share Revaluation Retained Total
Statement of changing in equity capital premuim surplus earnings equity
Balance on 1 January 2019 500,000 20,000   346,000 866,000
Changing in accounting policy          
correction of prior error          
Changes in equity for the year 2019          
Issue of share capital          
Reserves        (2)  
Income for the year     (20,000) (154,320) (174,320)
Dividends       (250,000)[6] (250,000)
Balance on 31 December 2019 500,000 20,000 (20,000) (60,320) 441,680

c) a statement of financial position at that date

Statement of financial position 31.дек.19

Assets  
Current assets  
Cash 110,000
Inventory 12,000
Trade receivables 366,000[7]
Allowance for trade receivables (7,320 )
Work in progress 3,000
Fixed assets  
Intangible assets 170,000
Land 100,000
Accumulated depreciation ( 39,000 )
Total Assets 714,680
   
Liabilities  
Accrued expense 3,000
Bank overdraft 20,000
General reserve 2,000
Dividends declared 250,000
Taxes payable  
Owners equity  
Issued share capital (500,000 shares) 500,000
Share premium 20,000
Retained earnings 31 December 2019 ( 60,320 )
Revaluation surplus ( 20,000 )
Total Liabilities & Owners Equity 714,680
d) notes, in accordance with IAS 1 “Presentation of Financial Statements”.
Your answer should be as complete and informative as possible within the limits of the
information given to you. An accounting policy note is also required.

Alfa use revaluation policy, using as measurement basis current value.

[2] Receivables totaling 14,000$ were written off, creating bad debt equals 14,000$,
and [7] reducing trade receivables from 380,000$ to 366,000$. [1] Since allowance for
receivables was created in amount of 2% of net receivables, 366,000 * 0,02 = 7,320$, that means
amount of allowance receivables increased by 7,320-6,000=1,320$.
[3] Depreciation charges, or depreciation expenses, are 7,000+2,000=9,000$, from (3).
[4] Since company do not have income, it can not pay tax on income in amount of 20,000$.
[5] Because land was revalued to 100,000$, while value in TB was 120,000$, it happens to have
20,000$ of loss on revaluation.
[6] Company had 500,000 shares with total value of 500,000$. Dividends were paid as $0.50 per
share. That means 500,000*0,5=250,000$ were paid as dividends.