company accounts

[tanaka]

Test 1 CAC1202 The following trial balance relates to Sheba at 30 September 2022: $’000 $’000 Leasehold property - at valuation 1 October 2021 (note (i)) 50,000 Plant and equipment - at cost (note (i)) 76,600 Plant and equipment - accumulated depreciation at 1 October 2021 24,600 Capitalised development expenditure - at 1 October 2021 (note (ii)) 20,000 Development expenditure - accumulated amortisation at 1 October 2021 6,000 Closing inventory at 30 September 2022 20,000 Trade receivables 43,100 Bank 1,300 Trade payables and provisions (note (iii)) 23,800 Revenue (note (i)) 300,000 Cost of sales 198 200 Distribution costs 14,500 Administrative expenses (note (iii)) 22,200 Preference dividend paid 800 Interest on bank borrowings 200 Equity dividend paid 6,000 Research and development costs (note (ii)) 8,600 Equity shares of 25 cents each 50,000 8% redeemable preference shares of $1 each (note (iv)) 20,000 Retained earnings at 1 October 2021 24,500 Leasehold property revaluation surplus 10,000 460200 460 200 The following notes are relevant: (i) Non-current assets - tangible: The leasehold property had a remaining life of 20 years at 1 October 2021. The company’s policy is to revalue its property at each year end and at 30 September 2022 it was valued at $43 million. On 1 October 2021 an item of plant was disposed of for $2·5 million cash. The proceeds have been treated as sales revenue by Sheba. The plant is still included in the above trial balance figures at its cost of $8 million and accumulated depreciation of $4 million (to the date of disposal). All plant is depreciated at 20% per annum using the reducing balance method. Depreciation and amortisation of all non-current assets is charged to cost of sales. (ii) Non-current assets - intangible: In addition to the capitalised development expenditure (of $20 million), further research and development costs were incurred on a new project which commenced on 1 October 2021. The research stage of the new project lasted until 31 December 2021 and incurred $1·4 million of costs. From that date the project incurred development costs of $800,000 per month. On 1 April 2022 the directors became confident that the project would be successful and yield a profit well in excess of its costs. The project is still in development at 30 September 2022. Capitalised development expenditure is amortised at 20% per annum using the straight-line method. All expensed research and development is charged to cost of sales. (iii) Sheba is being sued by a customer for $2 million for breach of contract over a cancelled order. Sheba has obtained legal opinion that there is a 20% chance that Sheba will lose the case. Accordingly Sheba has provided $400,000 ($2 million x 20%) included in administrative expenses in respect of the claim. The unrecoverable legal costs of defending the action are estimated at $100,000. These have not been provided for as the legal action will not go to court until next year. (iv) The preference shares were issued on 1 April 2022 at par. They are redeemable at a large premium which gives them an effective finance cost of 12% per annum. (v) The directors have estimated the provision for income tax for the year ended 30 September 2022 at $11·4 million. Required: (a) Prepare the statement of comprehensive income for the year ended 30 September 2022. (12 marks) (b) Prepare the statement of changes in equity for the year ended 30 September 2022. (3 marks) (c) Prepare the statement of financial position as at 30 September 2022. (10 marks)