ACC1100 Lecture Notes - Lecture 11: Retained Earnings, Share Capital, Income Statement

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turquoiserat551

2 Nov 2018

School

Monash University

Department

Business - Accounting

Course

ACC1100

Professor

Alan Serry

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Document Summary

Statement of comprehensive income (normal pro t/loss from income statement) + other comprehensive income. Other includes items of income or expense which are not recognised in the pro t or loss statement: e. g. Revaluation surplus adjustments (aasb116) - standard ignores/frameworks includes. An entity shall present all items of income and expenses recognised in a period: in a single statement of comprehensive income; or, in two statements: pro t/loss, and a second statement of other comprehensive income. Re ects the net changes in equity accounts for the period. Must show for each equity account a reconciliation between opening and closing balances. In the soce of a corporation we would typically include reconciliations of the following accounts: Amounts can also be dividends or transferred to a transferred from retained reserve account earnings to the reserve account to signal that this amount is not distributable to shareholders as dividends. Revenue: income which arises from ordinary activities (sales, fees, interest, dividends)

Related Questions

QUESTION 1 30 MARKS The following information represents the abridged financial statements of Mega Ltd and its subsidiary Ultra Ltd: Statement of financial position as at 31 December 2018 Mega Ltd Ultra Ltd ASSETS Property, plant and equipment 270 000 340 000 Investment in Ultra Ltd: 48 000 shares at fair value 350 000 - (cost: N$ 330 000) Trade receivables 80 000 23 500 Inventories 350 000 218 000 Bank 65 000 - Total assets 1 115 000 581 500 EQUITY AND LIABILITIES Share capital 400 000 240 000 Mark-to-market reserve 20 000 10 000 Retained earnings 375 000 240 000 Long-term borrowings 43 000 21 000 Trade and other payables 277 000 23 500 Bank overdraft - 47 000 Total equity and liabilities 1 115 000 581 500 Statement of profit or loss and other comprehensive income for the year ended 31 December 2018 Mega Ltd Ultra Ltd Revenue 927 000 1 628 000 Cost of sales -472 000 -725 000 Gross profit 455 000 903 000 Other expenses -287 100 -472 000 Dividend received from Ultra Ltd 94 000 - Profit before tax 261 900 431 000 Income tax expense -198 000 -128 000 Profit for the year 63 900 303 000 Other comprehensive income Items that will not be reclassified to profit or loss Mark-to-market reserve 4 000 1 000 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 67 900 304 000 Extract from the Statement of changes in equity for the year ended 31 December 2018 Mark-to-market reserve Retained earnings Mega Ltd Ultra Ltd Mega Ltd Ultra Ltd Balance at 1 Jan 2018 15 000 8 000 215 000 170 000 Changes in equity for 2018 Total comprehensive income for the year: Profit for the year 63 900 303 000 Other comprehensive income for the year 4 000 1 000 Dividends -108 000 -120 000 Balance at 31 December 2018 19 000 9 000 170 900 353 000 Additional information: On 1 January 2018, the date on which Ultra Ltd acquired the interest in Mega Ltd, the equity of Mega Ltd consisted of: Share capital N$ 260 000 Mark-to-market reserve N$ 3 000 Revaluation reserve N$ 7 000 Retained earnings N$ 135 000 Ultra Ltd elected to measure non-controlling interests at fair value at the acquisition date. On 1 January 2018, the fair value of each non-controlling interestâs share was N$8,50 per share, based on market prices. Ultra Ltd classified the investment in Ultra Ltd under IFRS 9 in its separate financial statements and recognised fair value adjustments in a mark-to-market reserve (other comprehensive income). Ignore tax implications. REQUIRED Prepare consolidated financial statements for the Mega Ltd Group for the reporting period ended 31 December 2018. (30 marks

QUESTION 1 30 MARKS

The following information represents the abridged financial statements of Mega Ltd and its subsidiary Ultra Ltd:

Statement of financial position as at 31 December 2018
	Mega Ltd	Ultra Ltd
ASSETS
Property, plant and equipment	270 000	340 000
Investment in Ultra Ltd: 48 000 shares at fair value	350 000	-
(cost: N$ 330 000)
Trade receivables	80 000	23 500
Inventories	350 000	218 000
Bank	65 000	-

Total assets	1 115 000	581 500

EQUITY AND LIABILITIES
Share capital	400 000	240 000
Mark-to-market reserve	20 000	10 000
Retained earnings	375 000	240 000
Long-term borrowings	43 000	21 000
Trade and other payables	277 000	23 500
Bank overdraft	-	47 000

Total equity and liabilities	1 115 000	581 500

Statement of profit or loss and other comprehensive income for the year ended
31 December 2018
	Mega Ltd	Ultra Ltd
Revenue	927 000	1 628 000
Cost of sales	-472 000	-725 000
Gross profit	455 000	903 000
Other expenses	-287 100	-472 000
Dividend received from Ultra Ltd	94 000	-

Profit before tax	261 900	431 000
Income tax expense	-198 000	-128 000
Profit for the year	63 900	303 000

Other comprehensive income
Items that will not be reclassified to profit or loss
Mark-to-market reserve	4 000	1 000

TOTAL COMPREHENSIVE INCOME FOR THE YEAR	67 900	304 000

Extract from the Statement of changes in equity for the year ended 31 December 2018

	Mark-to-market reserve		Retained earnings
	Mega Ltd	Ultra Ltd	Mega Ltd	Ultra Ltd
Balance at 1 Jan 2018	15 000	8 000	215 000	170 000
Changes in equity for 2018
Total comprehensive income for the year:
Profit for the year			63 900	303 000
Other comprehensive income for the year	4 000	1 000
Dividends			-108 000	-120 000

Balance at 31 December 2018	19 000	9 000	170 900	353 000

Additional information:

On 1 January 2018, the date on which Ultra Ltd acquired the interest in Mega Ltd, the equity of Mega Ltd consisted of:

Share capital N$ 260 000

Mark-to-market reserve N$ 3 000

Revaluation reserve N$ 7 000

Retained earnings N$ 135 000

Ultra Ltd elected to measure non-controlling interests at fair value at the acquisition date. On 1 January 2018, the fair value of each non-controlling interestâs share was N$8,50 per share, based on market prices.

Ultra Ltd classified the investment in Ultra Ltd under IFRS 9 in its separate financial statements and recognised fair value adjustments in a mark-to-market reserve (other comprehensive income). Ignore tax implications.

REQUIRED

Prepare consolidated financial statements for the Mega Ltd Group for the reporting period ended 31 December 2018. (30 marks

The following information is available for Whispering WindsCorp. for the year ended December 31, 2017: Other revenues andgains $9,500 Sales revenue $682,900 Other expenses and losses15,200 Operating expenses 238,800 Cost of goods sold 205,400 Salesreturns and allowances 40,000 Other comprehensive income 5,700Prepare a multiple-step income statement for Whispering Winds Corpand comprehensive income statement. The company has a tax rate of30%. This rate also applies to the other comprehensive income.WHISPERING WINDS CORP. Income Statement choose the accountingperiod select an opening name for section one enter an incomestatement item sales re $enter a dollar amount select betweenaddition and deduction: enter an income statement item enter adollar amount select a closing name for section one $enter a totalamount for section one enter an income statement item enter adollar amount select a summarizing line for the first part enter atotal amount for the first part select an income statement itementer a dollar amount select the summarizing line for the secondpart enter a total amount for the second part select an incomestatement item $enter a dollar amount select an income statementitem enter a dollar amount enter a subtotal of the two previousamounts select a summarizing line for the third part enter a totalamount for all three parts enter an income statement item enter adollar amount select a closing name for this statement $enter atotal net income or loss amount WHISPERING WINDS CORP.Comprehensive Income Statement choose the accounting period selecta comprehensive income item $enter a dollar amount select acomprehensive income item enter a dollar amount select a closingname for this statement $enter a total amount for this statement Byaccessing this Question Assistance, you will learn while you earnpoints based on the Point Potential Policy set by yourinstructor.

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ACC1100 Lecture Notes - Lecture 11: Retained Earnings, Share Capital, Income Statement

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