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Following is the trial balance of Moby for the preparation of financial statements of 2013; before adjustments listed below.

 

  $000 $000
Revenue        227,800
Cost of sales      164,500  
Contract to construct asset (note (i)) 4,000  
Distribution costs 13,500  
Administrative expenses (note (iii) 16,500  
Bank interest 900  
Dividend 2,000  
Lease rental paid on 30 September 2013
(note (ii))
9,200  
Land ($12 million) and
building ($48 million) at cost (note (ii))
60,000  
Owned plant and equipment at cost
(note (ii))
65,700  
Leased plant at initial carrying amount
(note (ii))
35,000  
Accumulated depreciation
at 1 October 2012:
   
   building   10,000
   owned plant and equipment   17,700
   leased plant   7,000
Inventory at 30 September 2013 26,600  
Trade receivables 38,500  
Bank   5,300
Insurance provision (note (iii))   150
Deferred tax (note (iv))   8,000
Lease obligation
at 1 October 2012 (note (ii))
  29,300
Trade payables   21,300
Current tax (note (iv))   1,050
Equity shares of 20 cents each   45,800
Share premium   3,200
Loan note (note (v))   40,000
Retained earnings at 1 October 2012   19,800
  ––––––– –––––––
  436,400 436,400
  ––––––– –––––––

 

The following notes are relevant:

  1. During the year, Moby entered into a contract to construct an asset for a customer. The performance obligation is satisfied over time. The balance in the trial balance represents:

           Cost incurred to date     $14 million

           Value of contract billed (work certified) and cash received        $10 million

 The contract commenced on 1 October 2012 and is for a fixed price of $25 million. The costs to complete the contract at 30 September 2013 are estimated at $6 million. Moby’s policy is to measure progress based on the work certified as a percentage of the contract price.

                 

  1. Non-current assets:

 Moby decided to revalue its land and building, for the first time, on 1 October 2012. A qualified valuer determined the relevant revalued amounts to be $16 million for the land and $38.4 million for the building. The building’s remaining life at the date of the revaluation was 16 years. This revaluation has not yet been reflected in the trial balance figures. Moby does not make a transfer from the revaluation reserve to retained earnings in respect of the realization of the revaluation surplus. Deferred tax is applicable to the revaluation surplus at 25%.

 The leased plant was acquired on 1 October 2011 under a five-year lease which has an implicit interest rate of 10% per annum. The rentals are $9.2 million per annum payable on 30 September each year.

 Owned plant and equipment is depreciated at 12.5% per annum using the reducing balance method.

 No depreciation has yet been charged on any non-current asset for the year ended 30 September 2013. All depreciation is charged to cost of sales.

  1. On 1 October 2012, Moby received a renewal quote of $400,000 from the company’s property insurer. The directors were surprised at how much it had increased and believed it would be less expensive for the company to ‘self-insure’. Accordingly, they charged $400,000 to administrative expenses and credited the same amount to the insurance provision. During the year, the company incurred $250,000 of expenses relating to previously insured property damage which it has debited to the provision.
  2. A provision for income tax for the year ended 30 September 2013 of $3.4 million is required. The balance on current tax represents the under/over provision of the tax liability for the year ended 30 September 2012. At 30 September 2013, the tax base of Moby’s net assets was $24 million less than their carrying amounts. This does not include the effect of the revaluation in note (ii) above. The income tax rate of Moby is 25%.
  3. The $40 million loan note was issued at par on 1 October 2012. No interest will be paid on the loan; however, it will be redeemed on 30 September 2015 for $53,240,000 which gives an effective finance cost of 10% per annum.
  4. A share issue was made on 31 December 2012 of 4 million shares for $1 per share. It was correctly accounted for.

Requirements:

  1. Prepare the statement of profit or loss and other comprehensive income for Moby for the year ended 30 September 2013.  (10 marks)
  2. Prepare the statement of changes in equity for Moby for the year ended 30 September 2013   (3 marks)
  3. Prepare the statement of financial position for Moby as at 30 September 2013.        (7 marks)
Marks: 20

Answers submitted

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7570
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Lokonath Debnath's picture
Lokonath Debnath
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7564
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Md Kamrul Islam's picture
Md Kamrul Islam
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Md. Tariful Mur...
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5487
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Pronob Kumer Shill
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7568
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Rumpa Haque Sharkar
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7572
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Syed Tapu
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7566
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MD.Sabuj Sarker nil
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5489
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Annapurna Das Roy's picture
Annapurna Das Roy
04/20/2019 - 18:17

5493
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Ariful islam's picture
Ariful islam
04/20/2019 - 18:16

5501
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Md Akash Hossen's picture
Md Akash Hossen
04/20/2019 - 18:15

5491
20