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Emerald Ltd, a manufacturing company, commenced operations on 1 July 2016 by issuing 350 000 $5.00 shares, payable in full on application on a first-come, first-served basis. By 31 July 2016 the shares were fully subscribed and duly allotted. There were share issue costs of $10 000. No additional shares were issued during the year ending 30 June 2017.

For the year ending 30 June 2018, the company recorded the following aggregate transactions:

$

Sales

5 120 000

Interest income

34 000

Sundry income

25 000

Cost of Sales

2 465 000

Employee benefit expenses

856 000

Depreciation expense

244 000

Amortisation - franchise

25 000

Rental expense

120 000

Advertising expense

147 000

Insurance expense

48 000

Freight out expense

110 000

Doubtful debts expense

16 000

Interest expense

36 000

Borrowing Costs

9 000

Other expenses

8 000

Income tax expense

320 000

The following additional information was noted during the preparation of financial statements for the year ended 30 June 2018:

75 000 fully paid ordinary shares have been issued on 1 October 2017 at the price of $4.00.

$135 000 dividends (31.76 cents per share) were declared and paid during the 2018 financial year. A final dividend for 2018 of $51 850 was proposed but not recognised in the financial statements.

There was a gain of $20 000 from the cash flow hedge arrangement during the 2018 financial year. Any gain or loss associated with the cash flow hedge is directly recognised in equity. There was no previously recognised cash flow hedge reserve before the 2018 financial year.

$25 000 of bank loans is repayable within 1 year.

$90 000 of other loans is repayable within 1 year.

The employee benefits of $32 000 are expected to be settled wholly within 12 months.

Emerald Ltd measures inventory at the lower of cost and net realizable value and property, plant and equipment using a cost model.

The summarised balances are provided below:

Year-end balances, 30 June 2018

$

Cash on hand

960 000

Cash on deposit, at call

82 000

Accounts Receivables

665 000

Allowance for doubtful debts/ Impairments

24 000

Other debtors

27 000

Finished goods inventories, 30 June 2018

600 000

Work in Progress inventories 30 June 2018

105 000

Land

94 000

Buildings

230 000

Accumulated depreciation – buildings

60 000

Plant and equipment

1 385 000

Accumulated depreciation – plant and equipment

330 000

Franchises

140 000

Accumulated amortisation of franchise

50 000

Goodwill

620 000

Bank loans

92 000

Other loans

440 000

Accounts payable

696 000

Provision for employee benefits

116 000

Income tax payable

35 000

Deferred tax liability

140 000

Retained earnings, 30 June 2017

225 000

Dividends paid

135 000

Cash flow hedge reserve (equity)

20 000

Required:

For the year ending 30 June, 2018,

a) Using the pro forma table supplied in appendix B, prepare a preliminary trial balance for Emerald Ltd; (5 Marks)

b) Prepare a statement of profit or loss and comprehensive income for Emerald Ltd in accordance with the requirements of AASB 101. Emerald Ltd uses the single statement format for the statement of comprehensive income and classifies expenses by function within the statement; (18 marks)

c) Prepare a statement of changes in equity for Emerald Ltd in accordance with the requirements of AASB 101; (15 marks)

d) Prepare a statement of financial position for Emerald Ltd in accordance with AASB 101. Use the current/non-current presentation format; (17 marks)

e) Prepare appropriate notes to the accounts. (You do not need to prepare notes related to income taxes. Include the following note as note 1. You may optionally add accounting policies to this note): (25 marks).

“1. Summary of significant accounting policies

Basis of accounting

The financial report is a general purpose financial report which has been prepared on the historical cost basis, except where stated otherwise.

Statement of Compliance

The financial statements have been prepared in accordance with the requirements of the Corporations Act, Australian Accounting Standards which include Australian equivalents to International Financial Reporting Standards (AIFRSs) and AASB Interpretations. Compliance with AIFRSs ensures the financial statements and notes comply with International Financial Reporting Standards”

APPENDIX A: PRESENTATION REQUIREMENTS (Departures attract a penalty)

The hard copy of the assignment must be handed in to the lecturer in class. It is also required to be submitted through Turnitin by the due date;

It is worth 20% of the final grade but will be marked out of 100;

The assignment will be marked on the basis of a requirement of "suitable for publication", that is, the relevant statements/notes comprise an external report and each statement is to be presented on one page;

The assignment must be performed individually.

You are to employ an aggregated format whenever appropriate and consistent with provision of minimum line items prescribed in AASB101;

The financial statements and the notes are to be typed in 12 point font;

You are not to use specialized accounting software packages, such as are employed by professional accounting firms, to produce your financial reports;

You are to apply the “cost of sales” method to the classification of expenses in the income statement (see AASB101 paras 97-105);

You are directed to use the current/non-current format for the statement of financial position (balance sheet) and supply a “net assets” line item;

The notes are to be simplified equivalences to published reports; that means a list of constituent components of a given line item with their respective dollar amounts, not footnotes

Your hard copy assignment is to be collated in the following order:

Coversheet (optional for electronic version but mandatory, signed with ticked module and Turnitin ID, for hard copy), Part A followed by Part B (trial balance, statement of profit or loss comprehensive income, statement of changes in equity, statement of financial position, and notes to the accounts.

APPENDIX B

Emerald Ltd - Trial Balance as at 30 June 2018

DR

CR

Sales

$’000

$’000

Interest income

Sundry income

Cost of sales

Employee benefit expenses

Depreciation expense

Amortisation - franchise

Rental expense

Advertising expense (selling)

Insurance expense

Freight out expense

Doubtful debts expense

Interest expense

Borrowing costs

Other expenses

Income tax expense

Cash on hand

Cash on deposit, at call

Accounts Receivables

Allowance for doubtful debts/ Impairments

Other debtors

Finished goods inventories, 30 June 2018

Work in Progress inventories 30 June 2018

Land

Buildings

Accumulated depreciation – buildings

Plant and equipment

Accumulated depreciation – plant and equipment

Franchise

Accumulated amortisation of franchise

Goodwill

Bank loans

Other loans

Accounts payable

Provision for employee benefits

Income tax payable

Deferred tax liability

Retained earnings, 30 June 2017

Dividends paid

Cash flow hedge reserve

Share capital

Totals

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Sixta Kovacek
Sixta KovacekLv2
28 Sep 2019

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