Reference no: EM132781904
Question - The unadjusted trial balance of Buddies Co. on December 31,20x1 is shown below:
Debits Credits
Revenue from service fees 12,000,000
Contract costs 4,000,000
Salaries expense 3,000,000
Advertising expense 680,000
Defined benefits cost 840,000
Dividend income from Hangout Co. 90,000
Totals 8,520,000 12,090,000
Additional information:
a. On July 28,20x1, Buddies Co. sold its investment in bonds measured at amortized cost for 1,000,000. Buddies incurred 50,000 in brokers commission on the sale. The carrying amount of the investment as at the date of sale is 800,000. Buddies inadvertently recorded the transaction as a net debit to cash for 950,000 and a credit to investment account for 950,000.
b. The year end carrying amount of Buddies biological assets is 2,800,000. The year end fair of the biological assets is 2,640,000. Costs to to sell the biological assets at year end are estimated at 140,000.
c. On September 1, 20x1, Buddies Co. acquired 30% interest in Hangout Co. for 8,000,000. The interest acquired gives Buddies significant influence over Hangout. Hangout reported profit of 1,000,000 and other comprehensive income of 120,000 in 20x1. Hangout declared 300,000 dividends at year-end. The profit was earned evenly throughout the year. Hangouts other comprehensive income consists of a revaluation increase recognized on November 1,20x1.
d. The actual valuation report shows the following information:
Service cost 336,000
Net interest cost in net defined benefit liability (asset) 252,000
Remeasurements to the net defined benefit liability (asset) 252,000
Defined benefit cost 840,000
e. Buddies Co. is subject to an income tax rate of 30%. (Assume items there are no temporary differences. Assume items of other comprehensive income are already stated net of tax.)
Requirements -
a. Prepare the year-end adjusting/correcting/reclassification entries.
b. Prepare the statement of profit or loss and other comprehensive income of Buddies Co. using the single statement presentation and the nature of expense method. Make a proper heading for the financial statement. Apply the concepts of PAS 1 and other PFRSs on the separate presentation of items.