Reference no: EM132623447
The following list of balances has been extracted from the records of Kwame plc as at 31 December 2015, the end of Kwame plc's most recent financial year.
0.50n ordinary share capital 1,870,000
Retained earnings - 1 January 2015 513,500
Goodwill 450,000
Revaluation reserve 350,000
General reserve 100,000
Investment property 1,000,000
Land at cost 340,500
Buildings at cost 200,000
Accumulated depreciation - buildings - 1 January 2015 5,000
Factory plant and equipment at cost 600,000
Accumulated depreciation - Plant and equipment - 1 January 2015 78,500
Furniture and fittings at cost 120,000
Accumulated depreciation - furniture and fittings - 1 January 2015 10,750
Motor vehicles at cost 70,000
Accumulated depreciation - motor vehicles 20,000
Research and development 470,000
10% loan notes 500,000
Trade receivables/payables 162, 630 222,500
Bank overdraft 6,250
Inventories at cost - 1 January 2015 425,650
Purchases - raw materials 650,600
Carriage - raw materials 10,500
Manufacturing wages 250,000
Manufacturing overheads 125,000
Cash 5,120
Sales 1,532,500
Administrative expenses 108,100
Selling and distribution expenses 166,000
Legal and professional fees 54,900
5,209,000
The following additional information is available:
1. Following an impairment review of receivables as at 31 December 2015 specific invoices totaling K32, 000 are to be written off.
2. The balance on development expenditure as at 31 December 2015 comprises: K120, 000 spent during the year on the initial training of staff for a proposed customer call centre in an overseas country with low labour costs. Following social unrest and increasing political instability in that country Kwame plc decided in November 2012 not to proceed any further with this project. K350, 000 was spent during the year to make the company's packaging process cheaper, more efficient and more environmentally responsible. Kwame plc expects to incur further development costs of K107, 000 but is on target to introduce the new packaging process in January 2016. The new process will significantly cut costs, increase output and will recover all its development costs.
3. During the year ended 31 December 2015 Kwame plc paid a dividend of 3 ngwee per share for the year ended 31 December 2015.
4. The goodwill arose on 1 January 2015 when Kwame plc purchased and absorbed another business as a going concern. The directors have been advised that the fair value of the goodwill was K350, 000 as at 31 December 2015.
5. Some plant and equipment was sold during the year for K440, 000. The carrying value of the asset sold during the year was K290, 000 (K360, 000 gross revaluation and K70, 000 accumulated depreciation). Kwame plc uses the revaluation model and the revaluation reserve includes K90, 000 of revaluation surplus relating to the plant and equipment sold during the year.
Kwame plc's depreciation policies are:
Land no depreciation
Buildings 5% straight line basis
Plant and equipment 30% reducing balance
Furniture and fittings 35% reducing balance
Motor vehicles 40% on straight line basis
Depreciation for the year ended 31 December 2015 is still to be charged on all assets in use at the end of the financial year.
6. Kwame plc uses the fair value model for investment properties. The market value of the company's investment properties was estimated at K1, 400,000 as at 31
October 2015.
Required
Problem 1: Prepare the Statement of Financial Position of Kwame plc, the Statement of profit or loss and other comprehensive income and the statement of changes in equity for the year ending 31st December 2015 in accordance with IAS 1 Presentation of financial statements.