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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Prepare the statement of profit or loss and other comprehensive income for Style Ltd for the year ended 30 June 2020.

QUESTION FOUR [25] Style Ltd is a company with an authorised share capital of 2 million ordinary shares. The company commenced business on 1 July 2008 primarily retailing fabric. The following list of balances as at 30 June 2020 was extracted from the pre-adjustment trial balance of Style Ltd. Additional information Balances List of selected accounts Ordinary share capital (issued at R2 each) Retained earnings 900 000 675 340 Loan from Generous Bank 2 147 875 Investment in Mine Ltd – shares of R2 each 3 200 000 Inventory – trade goods 1 370 190 Trade debtors 4 99 460 Allowance for credit losses 1 200 Sales 2 174 485 Cost of sales 1 018 120 Interest received (on favourable bank balances) 13 100 Commission received 9 69 300 Advertising 7 20 000 Credit losses 4 2 650 Electricity & water Consumable expenses 8 83 570 1 17 190 SARS - provisional income tax paid 10 103 500 2 000 Suspense account – Safe Insurance Company Other operating expenses 6 664 860 Additional Information: 1) Physical stock was taken at financial year end and valued as follows: Trading inventory... ...R366 690 Consumables inventory.. .R 2 040
Transcribed Image Text:QUESTION FOUR [25] Style Ltd is a company with an authorised share capital of 2 million ordinary shares. The company commenced business on 1 July 2008 primarily retailing fabric. The following list of balances as at 30 June 2020 was extracted from the pre-adjustment trial balance of Style Ltd. Additional information Balances List of selected accounts Ordinary share capital (issued at R2 each) Retained earnings 900 000 675 340 Loan from Generous Bank 2 147 875 Investment in Mine Ltd – shares of R2 each 3 200 000 Inventory – trade goods 1 370 190 Trade debtors 4 99 460 Allowance for credit losses 1 200 Sales 2 174 485 Cost of sales 1 018 120 Interest received (on favourable bank balances) 13 100 Commission received 9 69 300 Advertising 7 20 000 Credit losses 4 2 650 Electricity & water Consumable expenses 8 83 570 1 17 190 SARS - provisional income tax paid 10 103 500 2 000 Suspense account – Safe Insurance Company Other operating expenses 6 664 860 Additional Information: 1) Physical stock was taken at financial year end and valued as follows: Trading inventory... ...R366 690 Consumables inventory.. .R 2 040
2) Generous Bank provided the following details as at 30 June 2020 in respect of the loan they provided to Style Ltd: Balance outstanding at 1 July 2019 Balance outstanding at 30 June 2020 Total payments for the year inclusive of interest R227 500 R183 750 R 79 625 Interest on the loan is capitalised. Style Ltd has not yet recorded the interest for the current financial year. On 25 June 2020, directors of Mine Ltd declared a dividend of 15 cents per share 3) payable to all shareholders registered on 30 June 2020. Style Ltd bought its shares in Mine Ltd during the last financial year that ended 30 June 2019. Y Wayne, a debtor, owed the company a total amount of R3 000. The debtor is 4) now deceased and 60 cents in the Rand has been received from his estate in full settlement of his account. The unpaid balance of his account must be written-off as a credit loss. 5) The allowance for credit losses must be increased by R800. There was fire at the warehouse on 13 February 2020 which destroyed trading 6) stock to the value of R127 000. The insurance company paid out an amount of R115 000. The difference has been posted to a "Suspense account-First Insurance Company. 7) The advertising costs of R20 000 are for a single advertising campaign that was launched on 1 December 2019 for a period of 10 months ending on 30 September 2020 8) The June 2020 electricity and water account of R6 400 is not included in the above records. 9) The commission received includes an amount of R6 300 for which service will be provided during July 2020. 10) Income tax for the year amounted to R122 238 Required: Prepare the statement of profit or loss and other comprehensive income for Style Ltd for the year ended 30 June 2020. NB:- Formats and general presentation should comply with appropriate International Financial Reporting Standards (IFRS). All calculations must be shown. You are required to show combination of figures in brackets on the face of the statement of profit or loss and other comprehensive income.
Transcribed Image Text:2) Generous Bank provided the following details as at 30 June 2020 in respect of the loan they provided to Style Ltd: Balance outstanding at 1 July 2019 Balance outstanding at 30 June 2020 Total payments for the year inclusive of interest R227 500 R183 750 R 79 625 Interest on the loan is capitalised. Style Ltd has not yet recorded the interest for the current financial year. On 25 June 2020, directors of Mine Ltd declared a dividend of 15 cents per share 3) payable to all shareholders registered on 30 June 2020. Style Ltd bought its shares in Mine Ltd during the last financial year that ended 30 June 2019. Y Wayne, a debtor, owed the company a total amount of R3 000. The debtor is 4) now deceased and 60 cents in the Rand has been received from his estate in full settlement of his account. The unpaid balance of his account must be written-off as a credit loss. 5) The allowance for credit losses must be increased by R800. There was fire at the warehouse on 13 February 2020 which destroyed trading 6) stock to the value of R127 000. The insurance company paid out an amount of R115 000. The difference has been posted to a "Suspense account-First Insurance Company. 7) The advertising costs of R20 000 are for a single advertising campaign that was launched on 1 December 2019 for a period of 10 months ending on 30 September 2020 8) The June 2020 electricity and water account of R6 400 is not included in the above records. 9) The commission received includes an amount of R6 300 for which service will be provided during July 2020. 10) Income tax for the year amounted to R122 238 Required: Prepare the statement of profit or loss and other comprehensive income for Style Ltd for the year ended 30 June 2020. NB:- Formats and general presentation should comply with appropriate International Financial Reporting Standards (IFRS). All calculations must be shown. You are required to show combination of figures in brackets on the face of the statement of profit or loss and other comprehensive income.
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