uestion 3  Here are the financial statements of Premier Suites Ltd on 31 December 2020 Premier Suites Ltd Abridged Statement of profit or loss& other Comprehensive Income for the year ended 31 December 2020   Revenue Cost of Sales Operating profit before taxation Income tax expense Profit for the Year Notes 2020   239 000 (194 000) 45 000 (9 500) 35 500   Premier Suites Ltd Statement of Financial position as at 31 December 2020   Notes 2020   2021   ASSETS           Non-current assets 6   316 200   281 000 Current assets     93 000   34 000 Inventories 7   61 300   28 000 Account receivables 8   25 800   6 000 Cash and cash equivalents     5 900     TOTAL ASSETS     409 200   315 000 EQUITY AND LIABILITIES           Capital and reserves     381 000   192 500 Ordinary share capital (400 000 ordinary shares) 2   214 000   105 000 Non-distributable reserve: Profit on sale of land     6 000   0 Distributable reserve:           General reserve     50 000   30 000 Retained earnings     11 000   17 500 Preference share capital (100 000 6% convertible preference shares)     100 000   40 000 Non-current liabilities     0   100 000 8% mortgage debentures 3   0   100 000 Current liabilities     28 200   22 500 Accounts payable     24 200   17 400 Bank overdraft     0   2 100 Shareholders for dividends     4 000   3 000 TOTAL EQUITY AND LIABILITIES     409 200   315 000             Premier Suites Ltd Notes to the financial statements for the year ended 31 December 2020 6. Property, Plant and Equipment       Cost Accumulated depreciation Carrying value 2020 2019 2020 2019 2020 2019 Land and buildings 268 100 242 100 0 0 268 100 242 100 Plant and machinery 58 700 34 000 21 600 11 600 37 100 22 400 Vehicles 18 000 18 000 9 000 4 500 9 000 13 500 Furniture and fittings 5 000 5 000 3 000 2 000 2 000 3 000   349 800 299 100 33 600 18 100 316 200 281 000   Premier Suites Ltd Statement of changes in equity for the year ended 31 December 2020   Ordinary Share capital Preferenc e share capital Profit on expropria tion of land General reserve Retained earnings   Total Balance at 1 January 2020 105 000 40 000   30 000 17 500 192 500 Profit for the year         35 500 35 500 Dividends declared         (16 000) (16 000) New shares issued 110 000 60 000       170 000 Profit on sale of land     6 000   (6 000)   Share issue expenses (1 000)         (1 000) Inter-reserve transfer       20 000 (20 000)   Balance 31 December 2020 214 000 100 000 6 000 50 000 11 000 381 000   Additional information: Favorable market conditions enabled the company to place 200 000 ordinary shares privately with institutional investors at 55c per share and also to issue 60 000 6% preference shares to the public at N$1 per share. The issue of new shares was to redeem the mortgage debentures The company paid share issue expenses of N$1 000 and this amount was written off at 31 December 2020. The company had sold a small plot in December 2020. The cost of the land disposed of was N$4 000 (No other fixed assets were sold or scrapped during the year) Included in the profit before taxation is interest paid of N$5 400, and interest received of N$ 1 300. Dividends declared consists of: Ordinary dividends N$10 000 Preference dividends N$ 6 000             3.1 Prepare a statement of Cash Flow of Premier Suites Ltd for the year ended 31 December 2020 to comply with the requirements of IAS 7. Using the direct method.   3.2 Prepare the following notes to comply with the requirements of IAS 7 and Companies Act 24 of 2008: 3.2.1 Reconciliation of the profit before tax to cash generated from operating activities. 3.2.2 Accounting policy and notes for cash and cash equivalent

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Question 3 

Here are the financial statements of Premier Suites Ltd on 31 December 2020

Premier Suites Ltd Abridged Statement of profit or loss& other Comprehensive Income for the year ended 31 December 2020

 

Revenue

Cost of Sales

Operating profit before taxation

Income tax expense

Profit for the Year

Notes

2020

 

239 000

(194 000)

45 000

(9 500)

35 500

 

Premier Suites Ltd Statement of Financial position as at 31 December 2020

 

Notes

2020

 

2021

 

ASSETS

 

 

 

 

 

Non-current assets

6

 

316 200

 

281 000

Current assets

 

 

93 000

 

34 000

Inventories

7

 

61 300

 

28 000

Account receivables

8

 

25 800

 

6 000

Cash and cash equivalents

 

 

5 900

 

 

TOTAL ASSETS

 

 

409 200

 

315 000

EQUITY AND LIABILITIES

 

 

 

 

 

Capital and reserves

 

 

381 000

 

192 500

Ordinary share capital (400 000 ordinary shares)

2

 

214 000

 

105 000

Non-distributable reserve: Profit on sale of land

 

 

6 000

 

0

Distributable reserve:

 

 

 

 

 

General reserve

 

 

50 000

 

30 000

Retained earnings

 

 

11 000

 

17 500

Preference share capital (100 000 6% convertible preference shares)

 

 

100 000

 

40 000

Non-current liabilities

 

 

0

 

100 000

8% mortgage debentures

3

 

0

 

100 000

Current liabilities

 

 

28 200

 

22 500

Accounts payable

 

 

24 200

 

17 400

Bank overdraft

 

 

0

 

2 100

Shareholders for dividends

 

 

4 000

 

3 000

TOTAL EQUITY AND LIABILITIES

 

 

409 200

 

315 000

 

 

 

 

 

 

Premier Suites Ltd Notes to the financial statements for the year ended 31 December 2020

6.

Property, Plant and

Equipment

 

 

 

Cost

Accumulated depreciation

Carrying value

2020

2019

2020

2019

2020

2019

Land and buildings

268 100

242 100

0

0

268 100

242 100

Plant and machinery

58 700

34 000

21 600

11 600

37 100

22 400

Vehicles

18 000

18 000

9 000

4 500

9 000

13 500

Furniture and fittings

5 000

5 000

3 000

2 000

2 000

3 000

 

349 800

299 100

33 600

18 100

316 200

281 000

 

Premier Suites Ltd Statement of changes in equity for the year ended 31 December 2020

 

Ordinary Share capital

Preferenc e share capital

Profit on expropria tion of land

General reserve

Retained earnings

 

Total

Balance at 1 January 2020

105 000

40 000

 

30 000

17 500

192 500

Profit for the year

 

 

 

 

35 500

35 500

Dividends declared

 

 

 

 

(16 000)

(16 000)

New shares issued

110 000

60 000

 

 

 

170 000

Profit on sale of land

 

 

6 000

 

(6 000)

 

Share issue expenses

(1 000)

 

 

 

 

(1 000)

Inter-reserve transfer

 

 

 

20 000

(20 000)

 

Balance 31 December 2020

214 000

100 000

6 000

50 000

11 000

381 000

 

Additional information:

  1. Favorable market conditions enabled the company to place 200 000 ordinary shares privately with institutional investors at 55c per share and also to issue 60 000 6% preference shares to the public at N$1 per share.
    • The issue of new shares was to redeem the mortgage debentures
    • The company paid share issue expenses of N$1 000 and this amount was written off at 31 December 2020.
  2. The company had sold a small plot in December 2020. The cost of the land disposed of was N$4 000 (No other fixed assets were sold or scrapped during the year)
  3. Included in the profit before taxation is interest paid of N$5 400, and interest received of N$ 1 300.
  4. Dividends declared consists of:
    • Ordinary dividends N$10 000
    • Preference dividends N$ 6 000

 

 

 

 

   

3.1

Prepare a statement of Cash Flow of Premier Suites Ltd for the year ended 31 December 2020 to comply with the requirements of IAS 7.

Using the direct method.

 

3.2

Prepare the following notes to comply with the requirements of IAS 7 and Companies Act 24 of 2008:

3.2.1 Reconciliation of the profit before tax to cash generated from operating activities.

3.2.2 Accounting policy and notes for cash and cash equivalent

 

 

 

 

 

 

 

 

 

 

 

 

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