he following trial balance relates to Queenie as at 30 September 2019: RM'000RM'000 Revenue (note (i)) 312,890 Cost of sales 148,900 Distribution costs 42,125 Administrative expenses (note (ii))34,680 Loan note interest and dividend paid (notes (ii) and (iii)) 19,500 Investment income3200 Equity shares of 25 cents each 50,000 5% loan note (note (ii)) 30,000 Retained earnings at 1 October 20187,300 Plant and equipment at cost (note (iv)) 90,000 Accumulated depreciation at 1 October 2018: plant and equipment 32,400 Equity financial asset investments (note (v))40,000 Inventory at 30 September 201930,040 Trade receivables 42,900 Bank10,845 Current tax (note (vi)) 1,100 Deferred tax (note (vi)) 900 Trade payables23,400 460090460090 The following notes are relevant: (i) On 1 October 2018, Queenie sold one of its products for RM12 million (included in revenue in the trial balance). As part of the sale agreement, Queenie is committed to the ongoing servicing of this product until 30 September 2022 (i.e. four years from the date of sale). The value of this service has been included in the selling price of RM12 million. The estimated cost to Queenie of the servicing is RM800,000 per annum and Queenie’s normal gross profit margin on this type of servicing is 20%. The service performance obligation will be satisfied over time. Ignore discounting. (ii) Queenie issued a RM30 million 5% loan note on 1 October 2018. Issue costs were RM1.2 million and these have been charged to administrative expenses. The loan will be redeemed on 30 September 2021 at a premium which gives an effective interest rate on the loan of 8%. (iii) Queenie paid an equity dividend of 9 cents per share during the year ended 30 September 2019. (iv) Plant and equipment is depreciated at 20% per annum using the reducing balance method. No depreciation has yet been charged for the year ended 30 September 2019. All depreciation is charged to cost of sales. (v) The equity investment is carrying at its fair value. (vi) The balance on current tax represents the under/over provision of the tax liability for the year ended 30 September 2018. A provision for income tax for the year ended 30 September 2019 of 6.2 million is required. At 30 September 2019, Queenie had taxable temporary differences of RM5 million, requiring a provision for deferred tax. Any deferred tax adjustment should be reported in the statement of profit or loss. The income tax rate of Queenie is 30%. Required: (a) Prepare the statement of profit or loss and other comprehensive income for Queenie for the year ended 30 September 2019. (b) Prepare the statement of changes in equity for Queenie for the year ended 30 September 2019. (c) Prepare the statement of financial position
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
The following
(i)) 312,890 Cost of sales 148,900 Distribution costs 42,125 Administrative expenses (note
(ii))34,680 Loan note interest and dividend paid (notes (ii) and (iii)) 19,500 Investment income3200 Equity shares of 25 cents each 50,000 5% loan note (note
(ii)) 30,000
(iv)) 90,000
(v))40,000 Inventory at 30 September 201930,040 Trade receivables 42,900 Bank10,845 Current tax (note
(vi)) 1,100
(i) On 1 October 2018, Queenie sold one of its products for RM12 million (included in revenue in the trial balance). As part of the sale agreement, Queenie is committed to the ongoing servicing of this product until 30 September 2022 (i.e. four years from the date of sale). The value of this service has been included in the selling price of RM12 million. The estimated cost to Queenie of the servicing is RM800,000 per annum and Queenie’s normal gross profit margin on this type of servicing is 20%. The service performance obligation will be satisfied over time. Ignore discounting.
(ii) Queenie issued a RM30 million 5% loan note on 1 October 2018. Issue costs were RM1.2 million and these have been charged to administrative expenses. The loan will be redeemed on 30 September 2021 at a premium which gives an effective interest rate on the loan of 8%.
(iii) Queenie paid an equity dividend of 9 cents per share during the year ended 30 September 2019.
(iv) Plant and equipment is
(v) The equity investment is carrying at its fair value. (vi) The balance on current tax represents the under/over provision of the tax liability for the year ended 30 September 2018. A provision for income tax for the year ended 30 September 2019 of 6.2 million is required. At 30 September 2019, Queenie had taxable temporary differences of RM5 million, requiring a provision for deferred tax. Any deferred tax adjustment should be reported in the statement of profit or loss. The income tax rate of Queenie is 30%.
Required:
(a) Prepare the statement of profit or loss and other comprehensive income for Queenie for the year ended 30 September 2019.
(b) Prepare the statement of changes in equity for Queenie for the year ended 30 September 2019.
(c) Prepare the
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