Preliminary Trial Balance for Barbarossa Holdings Limited - Assignment Example

Financial Statements xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date PART A Question 1 Notes to the accounts are the series of additional information that is referred to the main body of the financial statements, (Clarke & Slavin 2010). Councils & Caffarey (2008) assert that, they give more fine points of the numbers in the financial statements; the financial statements are not complete without notes to the accounts. Clarke & Slavin (2010) adds that, they detail and also comment on the information and data provided in the financial statements, they reflect the accounting principles that a firm has employed in preparing the financial statements. As such, they have a significant influence on users and readers judgment of the accounts and the financial statements, (Team 2008). The purpose of notes to the accounts is to supply a full understanding of specific terms and a firm’s financial state. They serve as explanations of how the financial statements have been prepared, the basis of preparation, the accounting policies used, presentation and condition of the financial statements as whole. Question 2 Items that comprise ‘other comprehensive income’ are foreign exchange translation difference, effective portion of changes in fair value of cash flow hedges and change in value of equity reserves, (Eccles & Holt 2005). The relationship that these ‘other comprehensive income’ has to ‘total comprehensive income’ is that they increase the total comprehensive income. They increase the amounts distributable and available as returns. PART B Question 1 Journal entries to support the directors’ resolutions on dividends and transfers to reserves Date 30th June 2013 Dividends paid 10,000 Cash 10,000 To record payment of cash dividends 30th June 2013 Retained earnings 10,000 Plant maintenance reserve 10,000 To record transfer of 10,000 from retained earnings to plant maintenance reserve Question 2 Preliminary Trial Balance for Barbarossa Holdings Limited Trial Balance as at 30 June 2013 Barbarossa Holdings Ltd Trial Balance As At 30 June 2013   Dr Cr   $’000 $’000 Sales   962,000 Cost Of Sales 601,000   Selling Expense 82,000   Administration Expense 26,000   Wages And Salaries Expense 120,000   Employee Entitlements Expense 5,000   Interest Expense 10,000   Interest Revenue 3,000   Depreciation Expense 34,000   Doubtful Debts Expense 8,000   Plant And Machinery 150,000   Freehold Land 20,000   Buildings 80,000   Debentures (10% , 5 Year)   60,000 Inventory 46,000   Accounts Receivable 54,000   Allowance For Doubtful Debts (≡Allowance For Impairment)   8,000 Accrued Employee Entitlements   5,000 Accumulated Depreciation- Plant And Machinery   30,000 Accumulated Depreciation- Buildings   4,000 Goodwill 80,000   Accounts Payable   30,000 Bank Loan   100,000 Bank Overdraft   4,000 Cash At Bank -   Share Capital   250,000 Income Tax Expense 25,950   Income Tax Payable   - Deferred Tax Asset 4,500   Deferred Tax Liability   8,250 Dividend Payable   10,000 Asset Revaluation Reserve/Revaluation Surplus   14,000 Plant Maintenance Reserve   10,000 Retained Earnings (Before Closing Entries) 145,800   Totals 1,495,250 1,495,250 Question 3 Statement of Comprehensive Income for Barbarossa Holdings Ltd Barbarossa Holdings Ltd Statement Of Comprehensive Income For The Year Ended 30 June 2013 Sales $ 962,000 Cost Of Sales $ 601,000 Gross Profit $ 361,000 Less Expenses Administration Expenses $ 193,000 Selling Expenses $ 82,000 Financing Expenses $ 10,000 Total Operating Expenses $ 285,000 Other Expenses $ 25,950 Total Expenses $ 310,950 $ 310,950 Total Profit $ 50,050 Other Incomes Interest Revenue $ 3,000 Net Income For The Year $ 53,050 Question 4 Statement of Financial Position for Barbarossa Holdings Ltd Barbarossa Holdings Ltd Statement Of Financial Position For The Year Ended 30 June 2013 Assets   Current Assets   Inventory $ 46,000 Differed Tax Assets $ 4,500 Account Receivable $ 54,000 Total Current Assets $ 104,500 Non Current Assets   Goodwill $ 80,000 Plant And Machinery $ 120,000 Freehold Land $ 40,000 Building $ 76,000 Total Non Current Assets $ 316,000 Total Assets $ 420,500 Equity And Liabilities   Current Liabilities   Account Payable $ 30,000 Employee Entitlement $ 5,000 Bank Overdraft $ 4,000 Allowance For Doubtful Debts $ 8,000 Deferred Tax Liability $ 8,250 Dividends Payable $ 10,000 Total Current Liabilities $ 65,250 Non Current Liabilities   Bank Loan $ 100,000 Total Liabilities $ 165,250 Net Assets $ 255,250 Equity   Contributed Share Capital $ 250,000 Asset Revaluation Reserve $ 14,000 Plant Maintenance Reserve $ 10,000 Debentures $ 60,000 Retained Earnings $ (145,800) Profit For The Year $ 53,050 Suspense Account $ 14,000 Total Equity $ 255,250 Question 5 Statement of changes in equity for Barbarossa Holdings Ltd Barbarossa Holdings Ltd Statement Of Changes In Equity For The Year Ended 30 June 2011 Equity Retained Earnings Reserves Revaluation Debentures Dividends Opening Balance As At 1st July 2012 $ - $ - $ - $ - $ - $ - Issue Of Shares 100,000 @ $2,50 $ 250,000 $ - $ - $ - $ - $ - Dividends Paid $ - $ - $ - $ - $ - $ 10,000 Transfer Of Retained Earnings To Plant Maintenance Reserve $ (10,000) $ 10,000 $ - $ - $ - Acquisition Of Debentures $ - $ - $ - $ - $ 60,000 $ - Profit For The Year $ - $ 53,050 $ - $ - $ - $ - Revaluation Of Land $ - $ - $ - $ 14,000 $ - $ - Closing Balance As At 30th June 2013 $ 250,000 $ 43,050 $ 10,000 $ 14,000 $ 60,000 $ 10,000 Question 6 Appropriate notes to the accounts 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” Basis of preparation The financial statements have been presented in Australian dollar which is the functional currency of the company. Preparation of these financial statements has been prepared with approval from the management of S Limited. The financials statements have been approved by the Australian securities and investment commission (ASIC). Share capital The company issued shares for the financial period ending 30th June 2013. The shares were issued to help finance purchase of a new business. The number of shares issued was 100,000 at a price of $2.50 per share. Dividends The company directors declared cash dividends of 10cents per share which were hence issued to the shareholders. These dividends were payable on 31st august 2013. Reserves Plant maintenance reserve was created from the retained earnings; the amount of this reserve was $10,000. Finance costs The costs of finance have been treated as expenses in the period in which they were incurred. the rate of capitalization used for qualifying assets is weighted average interest rate applicable to the outstanding borrowings Income tax The company paid income tax expense for the period out of the profits it generated. The rate of profit was 30% of the profits. It has been recognized in the income statement. Goodwill The company acquired another business in the start of financial year that ended 30th June 2013; it acquired the business at a cost of $350,000. as stipulated by the international financial reporting standards and AASB 107, goodwill has been recognized. The amount of goodwill resulting from the acquisition is $80,000. PART C S Ltd Question 1 Working papers Operating activities Working capital = current assets - current liabilities = $1,390,000 - $416,000 = $974,000 Cash inflow = $574,000 - $422,000 = $152,000 Purchase of inventory = $240,000 - $216,000 = $24,000 Increase in account receivables = $672,000 - $528,000 = $144,000 Increase in allowance for doubtful debts = $96,000 - $72,000 = $24,000 Payment of account payables = $192,000 - $168,000 = $24,000 Increase in accrued expenses = $30,000 - $24,000 = $6,000 Investing activities Purchase of land = $240,000 Purchase of plant and equipment = $1,008,000 - $960,000 = $48,000 Increase in differed tax assets = $10,000 Proceed from sale of plant $72,000 Financing activities Increase of long term loan = $264,000 - $240,000 = $24,000 Increase in differed tax liability = $48,000 Issue of shares $240,000 Land revaluation = $120,000 Increase in retained earnings = $1,728,000 - $1,464,000 = $264,000 Question 2 Statement of Cash Flows for S Ltd Cash flows from operating activities Purchase of inventory ($24,000) Increase in allowance for doubtful ($24,000) Payment of account payables ($24,000) Net Cash flows from operating activities ($72,000) Cash flows from investing activities Purchase of land ($240,000) Purchase of plant and equipment ($48,000) Proceed from sale of plant $72,000 Net Cash flows from investing activities ($216,000) Cash flows from financing activities Increase of long term loan $24,000 Issue of shares $240,000 Land revaluation $120,000 Increase in retained earnings $264,000 Net flows from financing activities $648,000 Net increase / (decrease) in cash held $360,000 Net cash and cash equivalent at the beginning $152,000 Net cash and cash equivalent for the period $512,000 Question 3 A reconciliation of net profit after tax with net cash provided by operating activities Net profit after tax $264,000 Less decrease in cash and cash equivalent of operating activities ($72,000) Net profit after the decrease $192,000 A reconciliation of movements of cash and cash equivalents Net increase or (decrease) in cash held $360,000 Net cash and cash equivalent at the beginning $152,000 Net cash and cash equivalent for the period $512,000 References Clarke, F, & Slavin, L, 2010, Full Set of Practice Accounts, How to Manage Your GP Practice, 129-142. Councils, L, & Caffarey, S, 2008, Guidance regarding submission of audited accounts (Section 37), Training (inc Volunteers), 4, 4-000. Eccles, T, & Holt, A, 2005, financial statements and corporate accounts: the conceptual framework, Property Management, 23(5), 374-387. Petroons, J, Hanan, C, Bailey, A, Gupta, D, Mellyn, L, Saal, M, & Mondschein, C, 2007, U.S, Patent No. 7,206,768, Washington, DC: U.S, Patent and Trademark Office. Team, W, 2008, Statement of accounts. Read More