Question: The trial balance for LPO at 31
The trial balance for LPO at 31 December 2013 was as follows:
Notes:
(i) Closing inventory at 31 December 2013 was $562,000.
(ii) On 31 December 2013, LPO disposed of some obsolete plant and equipment for $3,000. The plant and equipment had originally cost $46,000 and had a carrying value of $5,000. The purchaser has not yet paid for the plant and equipment and LPO has not made any entries in its financial records for this disposal.
(iii) The income tax due for the year ended 31 December 2013 is estimated at $160,000. The deferred tax provision is to be increased by $31,000.
(iv) Depreciation is charged on buildings using the straight line method at 3% per annum. The cost of land included in land and buildings is $900,000. Buildings depreciation is treated as an administrative expense.
(v) Plant and equipment is depreciated using the reducing balance method at 30%. Depreciation of plant and equipment is regarded as a cost of sales.
(vi) At 31 December 2013, LPO had a construction contract in progress:
LPO uses the cost of work completed as a proportion of total cost to recognize attributable profit for the year.
(vii) On 1 February 2014, LPO was informed that one of its customers, ZZ, had ceased trading. The liquidators advised LPO that it was very unlikely to receive payment of any of the $36,000 due from ZZ at 31 January 2014.
(viii) On 1 July 2013 one of LPO’s customers started litigation against LPO, claiming damages of $30,000. LPO has been advised that the claim will probably succeed.
(ix) On 1 July 2013 LPO issued 50,000 new equity shares at a premium of 20%. All cash was received and is included in the trial balance.
(x) During the year LPO paid a final dividend of $240,000 in respect of the year ended 31 December 2012. This was in addition to the interim dividend paid on 31 July 2013 for the year ended 31 December 2013.
(xi) The long-term loans incur interest at 6% a year and this was not paid until 6 January 2014.
Required:
Prepare LPO’s statement of profit or loss and other comprehensive income and statement of changes in equity for the year to 31 December 2013 AND the statement of financial position at that date in accordance with the requirements of International Financial Reporting Standards. Notes to the financial statements are not required, but all workings must be clearly shown. Do not prepare a statement of accounting policies.
Transcribed Image Text:
Notes $000 $00 Long-term loans (repayable 2020) Administrative expenses (xi) 900 455 Cash received from construction contract client (vi) 2,000 Cash and cash equivalents Construction contract work in progress 215 (vi) 1,875 230 Distribution costs Equity dividend paid Inventory purchases Inventory at I January 2013 Land and buildings at cost Equity shares $1 each, fully paid at 31 December 2013 Plant and equipment at cost Provision for deferred tax (x) 360 1,425 (1) 420 2,500 1,500 1,055 200 Provision for buildings depreciation at I January 2013 Provision for plant and equipment depreciation at I January 2013 Retained earnings at I January 2013 (iv) 225 400 370 Sales revenue 3,010 Share premium at 31 December 2013 Trade payables (ix) 250 145 Trade receivables (vi) 330 Short-term investments 135 9,000 9,000 Contract length 3 years I January 2013 Date commenced Fixed contract price $5,500,000 Contract detail for year ended 31 December 2013: Construction contract work in progress Estimated cost to complete Cash received on account from construction contract client during the year $00 1,875 2,700 2,000
> Worksheet data for Auburn Company are presented in E4.2. Instructions a. Journalize the closing entries at April 30. b. Post the closing entries to Income Summary and Owner’s Capital. Use T-accounts. c. Prepare a post-closing trial bal
> Worksheet data for Auburn Company are presented in E4.2. The owner did not make any additional investments in the business in April. Instructions Prepare an income statement, an owner’s equity statement, and a classified balance sheet.
> On December 31, the adjusted trial balance of Shihata Employment Agency shows the following selected data. Accounts Receivable $24,500 Service Revenue $92,500 Interest Expense 7,700 Interest Payable 2,200 Analysis shows that adjusting entries were m
> Krantz Company pays salaries of $15,000 every Monday for the preceding 5-day week (Monday through Friday). Assume December 31 falls on a Tuesday, so Krantz’s employees have worked 2 days without being paid at the end of the fiscal year. Instructions a.
> These financial statement items are for Basten Company at yearend, July 31, 2020. Salaries and wages payable $ 2,080 Notes payable (long-term) $ 1,800 Salaries and wages expense 48,700 Cash 14,200 Utilities expense 22,600 Accounts receivable 9,780
> The following items were taken from the financial statements of P. Jimenez Company. (All amounts are in thousands.) Long-term debt $ 1,000 Accumulated depreciation—equipment $ 5,655 Prepaid insurance 650 Accounts payable 1,214 Equipment 11,500
> The following are the major balance sheet classifications. Instructions Classify each of the following accounts taken from Faust Company’s balance sheet. ________ Accounts payable ________ Accumulated depreciation—eq
> The adjusted trial balance for Carter Bowling Alley at December 31, 2020, contains the following accounts. Instructions a. Prepare a classified balance sheet; assume that $30,000 of the note payable will be paid in 2021. b. Comment on the liquidity of
> Patel Company has an inexperienced accountant. During the first 2 weeks on the job, the accountant made the following errors in journalizing transactions. All entries were posted as made. 1. A payment on account of $750 to a creditor was debited to Accou
> Blair Natt Company discovered the following errors made in January 2020. 1. A payment of Salaries and Wages Expense of $700 was debited to Equipment and credited to Cash, both for $700. 2. A collection of $1,500 from a client on account was debited to Ca
> What components of revenues and expenses are different between merchandising and service companies?
> Selected accounts for Tamora’s Salon are presented below. All June 30 postings are from closing entries. Instructions a. Prepare the closing entries that were made. b. Post the closing entries to Income Summary. Salaries and Wages
> Ray Louis has prepared the following list of statements about the accounting cycle. 1. “Journalize the transactions” is the first step in the accounting cycle. 2. Reversing entries are a required step in the accounting cycle. 3. Correcting entries do not
> A friend of yours, Mindy Gare, recently completed an undergraduate degree in science and has just started working with a biotechnology company. Mindy tells you that the owners of the business are trying to secure new sources of financing which are needed
> Speyeware International Inc., headquartered in Vancouver, Canada, specializes in Internet safety and computer security products for both the home and commercial markets. In a recent balance sheet, it reported a defi cit of US$5,678,288. It has reported o
> The following characteristics, assumptions, principles, or constraint guide the FASB when it creates accounting standards. Match each item above with a description below. 1. ________ Ability to easily evaluate one company’s results re
> Weber Co. had three major business transactions during 2020. a. Reported at its fair value of $260,000 merchandise inventory with a cost of $208,000. b. The president of Weber Co., Austin Weber, purchased a truck for personal use and charged it to his ex
> The trial balance columns of the worksheet for Dixon Company at June 30, 2020, are as follows. Other data: 1. A physical count reveals $500 of supplies on hand. 2. $100 of the unearned revenue is still unearned at month-end. 3. Accrued salaries are $21
> At Sekon Company, prepayments are debited to expense when paid, and unearned revenues are credited to revenue when cash is received. During January of the current year, the following transactions occurred. Jan. 2 Paid $1,920 for fi re insurance protecti
> Bob Zeller Company has the following balances in selected accounts on December 31, 2020. Service Revenue …………………………… $40,000 Insurance Expense ………………………... $ 2,400 Supplies Expense …………………………... $ 2,450 All the accounts have normal balances. Bob Zeller
> The following data are taken from the comparative balance sheets of Bundies Billiards Club, which prepares its financial statements using the accrual basis of accounting. Members are billed based upon their use of the club’s facilitie
> Anya Clark opened Anya’s Cleaning Service on July 1, 2020. During July, the following transactions were completed. July 1 Anya invested $20,000 cash in the business. 1 Purchased used truck for $12,000, paying $4,000 cash and the balance on account. 3
> The adjusted trial balance for Renfro Company is given in E3.17. Instructions Prepare the income and owner’s equity statements for the year and the balance sheet at August 31. Data from E3.17: Renfro Company Trial Balance August
> At the beginning of the current season on April 1, the ledger of Gage Pro Shop showed Cash $3,000, Inventory $4,000, and Owner’s Capital $7,000. These transactions occurred during April 2020. Apr. 5 Purchased golf bags, clubs, and balls on account from
> Kayla Inc. operates a retail operation that purchases and sells home entertainment products. The company purchases all merchandise inventory on credit and uses a periodic inventory system. The Accounts Payable account is used for recording inventory purc
> At the end of Donaldson Department Store’s fiscal year on November 30, 2020, these accounts appeared in its adjusted trial balance. Additional facts: 1. Merchandise inventory on November 30, 2020, is $52,600. 2. Donaldson Department S
> The trial balance of Gaolee Fashion Center contained the following accounts at November 30, the end of the company’s fiscal year. Adjustment data: 1. Supplies on hand totaled $2,600. 2. Depreciation is $11,500 on the equipment. 3. Int
> Yolanda Hagen, a former disc golf star, operates Yolanda’s Discorama. At the beginning of the current season on April 1, the ledger of Yolanda’s Discorama showed Cash $1,800, Inventory $2,500, and Owner’s Capital $4,300. The following transactions were c
> Big Box Store is located in midtown Madison. During the past several years, net income has been declining because of suburban shopping centers. At the end of the company’s fiscal year on November 30, 2020, the following accounts appeare
> Renner Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Renner showed Cash of $5,000 and Owner’s Capital of $5,000. May 1 Purchased merchandise on account from Braun’s Wholesal
> Kern’s Book Warehouse distributes hardcover books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. At the end of May, Kern’s inventory consisted of books purchased for $1,800. During June, the following merchandising trans
> Horace Culpepper, CPA, was retained by Pulsar Cable to prepare financial statements for April 2020. Horace accumulated all the ledger balances per Pulsar’s records and found the following. Horace Culpepper then reviewed the records an
> In completing the engagement in Question 3, Hardy pays no costs in March, $2,000 in April, and $2,500 in May (incurred in April). How much expense should the fi rm deduct from revenues in the month when it recognizes the revenue? Why?
> Whitegloves Janitorial Service was started 2 years ago by Jenna Olson. Because business has been exceptionally good, Jenna decided on July 1, 2020, to expand operations by acquiring an additional truck and hiring two more assistants. To finance the expan
> Hasty plc’s financial year ended on 31 March 20X8. Inventory taken on 7 April 20X8 amounted to £100,000. The following information needs to be taken into account: (i) Sales invoices totaling £9,000 were raised during the seven days after the year-end. £1
> The accountant of Hanson Products Ltd has asked you how your answer to Question 7 above would be affected using the following two methods of calculating deferred taxation. Required: (a) For each of the years from 20X1 to 20X5, calculate the deferred tax
> Uptodate plc’s financial year ended on 31 March 20X8. Inventory taken on 7 April 20X8 amounted to £200,000. The following information needs to be taken into account: (i) Purchases made during the seven days to 7 April amounted to £40,000. Invoices had no
> Alpha Ltd makes one standard article. You have been given the following information: 1 The inventory sheets at the year-end show the following items: 2 Manufacturing overheads are 100% of labour cost. Selling and distribution expenses are £
> Delta Ltd has been developing a lightweight automated wheelchair. The research costs written off have been far greater than originally estimated and the equity and preference capital has been eroded as seen on the statement of financial position. The fol
> Speedster Ltd commenced trading in 1986 as a wholesaler of lightweight travel accessories. The company was efficient and traded successfully until 2000 when new competitors entered the market selling at lower prices which Speedster could not match. The c
> In the year to 31 December 20X9, Amy bought a new machine and made the following payments in relation to it: Required: (a) State and justify the cost figure which should be used as the basis for depreciation. (b) What does depreciation do, and why is i
> (a) On 1 October 2012, Paradigm acquired 75% of Strata’s equity shares by means of a share exchange of two new shares in Paradigm for every five acquired shares in Strata. In addition, Paradigm issued to the shareholders of Strata a $10
> Discuss the advantages to a company of: (a) purchasing and cancelling its own shares; (b) purchasing and holding its own shares in treasury.
> Applying the principles of control in IFRS 10 Consolidated Financial Statements, as described in Section 22.3.2 of this chapter, you are required to consider whether certain investments of Austin plc are subsidiaries. Austin plc has investments in a numb
> Base plc acquired 60% of the common shares of Ball plc on 1 January 20X0 and gained control. At that date the statements of financial position of the two companies were as follows: Note: The fair value of the property, plant and equipment in Ball at 1/
> Boldwin Construction has entered into a contract with Spears Retailers to construct a new department store on Spears land. The contract sum is £45 million. At 30 June 20X1 the situation is as follows: (a) the contract is 30% complete; (b) expenses to dat
> Norwik Construction plc is a large construction company involved in multiple large contracts around the world. One contract to build three stadiums is being undertaken by the Australasian division. Each stadium has an individual contract price. Jim Norwi
> IAS 10 deals with events after the reporting period. Required: (a) Define the period covered by IAS 10. (b) Explain when the financial statements should be adjusted. (c) Why should non-adjusting events be disclosed? (d) A customer made a claim for £50,
> During its financial year ended 30 June 20X7 Beavers, an engineering company, has worked on several contracts. Information relating to one for Dam Ltd which is being constructed to a specific customer design is given below: The plant and equipment is e
> MACTAR has a series of contracts to resurface sections of motorways. The scale of the contract means several years’ work and each motorway section is regarded as a separate contract. The M62 contract has had major difficulties due to
> Agriculture is a key business activity in many parts of the world, particularly in developing countries. Following extensive discussions with, and funding from, the World Bank, the International Accounting Standards Committee (IASC) developed an accounti
> The statement of income of Bottom, a manufacturing company, for the year ending 31 January 20X2 is as follows: Bottom has used the LIFO method of inventory valuation but the directors wish to assess the implications of using the FIFO method. Relevant d
> The following is the statement of financial position of Alpha Ltd as on 30 June 20X8: The following information is relevant: 1 There are contingent liabilities in respect of (i) a guarantee given to bankers to cover a loan of £30,000 made
> The following are the financial statements of the parent company Swish plc, a subsidiary company Broom and an associate company Handle. Swish acquired 90% of the shares in Broom on 1 January 20X1 when the balance on the retained earnings of Broom was
> The following are the statements of financial position of Garden plc, its subsidiary Rose Ltd and its associate Petal Ltd: On 1 January 20X3 Garden plc acquired 75% of Rose Ltd for £300,000 when Rose’s share capital and r
> The following are the financial statements of the parent company Alpha plc, a subsidiary company Beta and an associate company Gamma. On 1 January 20X5 Alpha plc acquired 80% of Beta plc for £216,000 when Beta plc’s share
> The statements of comprehensive income for Highway plc, Road Ltd and Lane Ltd for the year ended 31 December 20X9 were as follows: Highway plc acquired 80% of Road Ltd for $160,000 on 1.1.20X6 when Road Ltd’s share capital was $64,000
> The statements of income for Continent plc, Island Ltd and River Ltd for the year ended 31 December 20X9 were as follows: Continent plc acquired 80% of Island Ltd for €27,500 on 1 January 20X3, when Island Ltd’s retai
> Rumpus plc is a public listed manufacturing company. Its summarized consolidated financial statements for the year ended 31 March 2014 (and 2013 comparatives where relevant) are as follows: The following additional information is available: (i) The g
> H Ltd has one subsidiary, S Ltd. The company has held a controlling interest for several years. The latest financial statements for the two companies and the consolidated financial statements for the H Group are as shown below: Required: (a) Calculate
> The statements of financial position of Red Ltd and Pink Ltd at 31 December 20X2 are as follows: Statements of comprehensive income for the year ended 31 December 20x2 Red Ltd acquired 75% of the shares in Pink Ltd on 1 January 20X0 when Pink Ltd&aci
> The statements of financial position of Mars plc and Jupiter plc at 31 December 20X2 are as follows: Statements of comprehensive income for the year ended 31 December 20x2 Mars acquired 80% of the shares in Jupiter on 1 January 20X0 when Jupiter&acir
> Gamma is a company that manufactures power tools. Gamma was established by Mr Lee, who owns all of Gamma’s shares. Mrs Lee, Mr Lee’s wife, owns a controlling interest in Delta, a distributor of power tools. Delta is on
> Donna, Inc. operates a defined benefit pension scheme for staff. The pension scheme has been operating for a number of years but not following IAS 19. The finance director is unsure of which accounting policy to adopt under IAS 19 because he has heard ve
> River plc acquired 90% of the common shares and 10% of the 5% bonds in Pool Ltd on 31 March 20X1. All income and expenses are deemed to accrue evenly through the year. On 31 January 20X1 River sold Pool goods for £6,000 plus a markup of one-
> Morn Ltd acquired 90% of the shares in Eve Ltd on 1 January 20X1 for £90,000 when Eve Ltd’s accumulated profits were £50,000. On 10 January 20X1 Morn Ltd received a dividend of £10,800 from Eve Ltd
> Bill plc acquired 80% of the common shares and 10% of the preferred shares in Ben plc on 31 December three years ago when Ben’s retained profits were €45,000. During the year Bill sold Ben goods for €8,
> Forest plc acquired 80% of the ordinary shares of Bulwell plc some years ago. At acquisition, the fair values of the assets of Bulwell plc were the same as their carrying value. Bulwell plc manufacture plant and equipment. On 1 January 20X3, Bulwell sold
> The following are the summarized financial statements of two companies, Peel and Caval, for the financial year ended 31 October 2011. The following information is available: (i) Peel purchased 90% of the ordinary shares in Caval for £240m
> Hyson plc acquired 75% of the shares in Green plc on 1 January 20X0 for £6 million when Green plc’s accumulated profits were £4.5 million. At acquisition, the fair value of Green’s non-current
> The following accounts are the consolidated statement of financial position and parent company statement of financial position for Alpha Ltd as at 30 June 20X2: Notes: 1 There was only one subsidiary, called Beta Ltd. 2 There were no capital reserves i
> On 1 January 20X0 Hill plc purchased 70% of the ordinary shares of Valley plc for £1.3 million. The fair value of the non-controlling interest at that date was £0.5 million. At the date of acquisition, Valley’s
> Prop and Flap have produced the following statements of financial position as at 31 October 2008: The following information is relevant to the preparation of the financial statements of the Prop Group: 1 Prop acquired 80% of the issued ordinary share c
> On 30 September 20X0 Gold plc acquired 75% of the equity shares, 30% of the preferred shares and 20% of the bonds in Silver plc and gained control. The balance of retained earnings on 30 September 20X0 was £16,000. The fair value of the land
> A plc issues 50,000 share options to its employees on 1 January 2008 which the employees can only exercise if they remain with the company until 31 December 2010. The options have a fair value of £5 each on 1 January 2008. It is expected that the holders
> Maxpool plc, a listed company, owned 60% of the shares in Ching Ltd. Bay plc, a listed company, owned the remaining 40% of the £1 ordinary shares in Ching Ltd. The holdings of shares were acquired on 1 January 20X0. On 30 November 20X0 Ching Ltd sold a f
> Summer plc acquired 60% of the equity shares of Winter Ltd on 30 September 20X1 and gained control. At the date of acquisition, the balance of retained earnings of Winter was €35,000. At 31 December 20X1 the statements of financial posit
> Sweden acquired 100% of the equity shares of Oslo on 1 March 20X1 and gained control. At that date the balances on the reserves of Oslo were as follows: Revaluation reserve ………â€&brv
> Bleu plc acquired 80% of the shares of Verte plc on 1 January 20X0 and gained control. At that date the statements of financial position of the two companies were as follows: Required: Prepare a consolidated statement of financial position for Bleu plc
> Set out below is the summarized statement of financial position of Berlin plc at 1 January 20X0. On 1/1/20X0 Berlin acquired 100% of the shares of Hanover for £100,000 and gained control. Required: Prepare the statement of financial posit
> Ham plc acquired 100% of the common shares of Burg plc on 1 January 20X0 and gained control. At that date the statements of financial position of the two companies were as follows: Notes: 1 The fair value is the same as the book value. 2 â‚&
> Rouge plc acquired 100% of the common shares of Noir plc on 1 January 20X0 and gained control. At that date the statements of financial position of the two companies were as follows: Required: Prepare a consolidated statement of financial position for
> On 1 January 20X7 Parent Ltd acquired 75% of the ordinary shares in Daughter Ltd for £9,000 cash. The fair value of the net assets in Daughter Ltd was their book value. Assume in each case that the non controlling interest is measured using
> On 1 January 20X7 Parent Ltd acquired all the ordinary shares in Daughter Ltd for £6,000 cash. The fair value of the net assets in Daughter Ltd was their book value. Required: Prepare the statements of financial position of Parent Ltd and t
> (a) On 1 January 20X7 Parent Ltd acquired all the ordinary shares in Daughter Ltd for £16,200 cash. The fair value of the net assets in Daughter Ltd was £12,000. (b) The purchase consideration was satisfied by the issue of 5,400
> Simple SA has just purchased a roasting/salting machine to produce roasted walnuts. The finance director asks for your advice on how the company should calculate the depreciation on this machine. Details are as follows: Cost of machine ……………………………………….S
> (a) On 1 January 20X7 Parent Ltd acquired all the ordinary shares in Daughter Ltd for £16,200 cash. The fair value of the net assets in Daughter Ltd was their book value. (b) The purchase consideration was satisfied by the issue of 5,400 new
> (a) In 20X3 Arthur is a large loan creditor of X Ltd and receives interest at 20% p.a. on this loan. He also has a 24% shareholding in X Ltd. Until 20X1 he was a director of the company and left after a disagreement. The remaining 76% of the shares are h
> (a) Assume that on 1 January 20X7 Parent Ltd acquired all the ordinary shares in Daughter Ltd for £10,800 cash. The fair value of the net assets in Daughter Ltd was their book value. (b) The purchase consideration was satisfied by the issue
> Backwater Construction Company is reviewing a major contract which is in serious difficulty. The contract price is €10,000,000. The project involves the construction of four buildings of equal size and complexity. The first building has been completed an
> During 2006, Jack Matelot set up a company, JTM, to construct and refurbish marinas in various ports around Europe. The company’s first accounting period ended on 31 October 2006 and during that period JTM won a contract to refurbish a
> The following information relates to Deferred plc: ● EBITDA (earnings before interest, tax, depreciation and amortization) for year ended 31.12.20X1 is £300,000 ● No interest payable in 20X1 ● No amortization ● Equipment cost £100,000 at 1.1.20X1 ● Depre
> Quick build Ltd entered into a two-year contract on 1 January 20X7 at a contract price of £250,000. The estimated cost of the contract was £150,000. At the end of the first year the following information was available: ● contract costs incurred totaled £
> Newbild SA commenced work on the construction of a block of flats on 1 July 20X0. During the period ended 31 March 20X1 contract expenditure was as follows: € Materials issued from stores …………………….13,407 Materials delivered direct to site ………………73,078 W
> At 31 October 20X9, Lytax Ltd was engaged in the following five long-term contracts. In each contract Lytax was building cold storage warehouses on five sites where the land was owned by the customer. Details are given below: It is not expected that an
> Beta Ltd commenced business on 1 January and is making up its first year’s accounts. The company uses standard costs. The company owns a variety of raw materials and components for use in its manufacturing business. The accounting recor
> HK Ltd has prepared its draft trial balance to 30 June 20X1, which is shown below. The following information is available: (a) The authorised share capital is 4,000,000 9% preference shares of $1 each and 18,000,000 ordinary shares of 50c each. (b) Pro
> Purchases of a certain product during July were: Units sold during the month were: Required: Assuming no opening inventories: (a) Determine the cost of goods sold for July under three different valuation methods. (b) Discuss the advantages and/or dis
> Sunhats Ltd manufactures patent hats. It carries inventory of these and sells to wholesalers and retailers via a number of salespeople. The following expenses are charged in the profit and loss account: Required: Which of these expenses can reasonably
> The following list of balances has been extracted from the records of Cowgale company as at 31 October 2011, the end of Cowgale’s most recent financial year: The following additional information is available: 1 Following an impairment
