The following trial balance relates to Glory plc at 31 December 2020:” “£000” “£000” “Leasehold property – at valuation 31 December 2019 (Note (i)) 25,200 Plant & equipment (owned) at cost (Note (ii) & (iv)) 46,800 Accumulated depreciation - Owned plant & equipment 12,800 Finance lease payments (Note (iii)) 10,128 Inventory (Note (vi)) 29,400 Trade receivables & payables 39,100 35,000 Bank 4,928 Revenue (Note (v)) 310,000 Purchases (Note (v)) 234,500 Distribution costs 19,500 Administrative expenses 27,500 Preference dividend paid 1,200 Equity dividend paid 2,000 Equity shares of 50p each 25,000 6% £1 preference shares (Note (ix)) 40,000 Retained earnings 4,900 Current taxation 700 Deferred taxation 3,400 436,028 436,028” “The following notes are relevant:” “(i) The leasehold property was acquired on 1 January 2019 at a cost of £30,000,000. The lease was for 15 years at that date. Glory plc’s accounting policy is to revalue the property at market value at each year-end. The valuation in the trial balance of £25,200,000 as at 31 December 2019 led to an impairment charge of £2,800,000, which was reported in the Income Statement for the year ended 31 December 2019. At 31 December 2020 the property was valued at £24,900,000.” “(ii) Owned plant & equipment is depreciated at 25% per annum on a reducing balance basis.” “(iii) Plant & equipment was acquired under a finance lease on 1 January 2020. The rentals are an initial £4,128,000 payable on 1 January 2020, followed by £6,000,000 per annum for four years payable annually in arrears. The interest rate implicit in the lease is 8% per annum. Leased plant & equipment is to be depreciated at 25% per annum on the straight line basis. Only the payments of £4,128,000 on 1 January 2020 plus £6,000,000 on 31 December 2020 have been reflected in the trial balance above.” “(iv) No depreciation has been charged on the non-current assets for the year ended 31 December 2020. All depreciation is charged to Cost of Sales.” “(v) Glory plc’s revenue includes £8,000,000 for goods it sold acting as an agent for another company. Glory plc earns commission of 20% on these sales. The balance of £6,400,000 (which has been included in Cost of Sales) has been paid to the other company.” “(vi) Closing inventories as at 31 December 2020 have been valued at £28,200,000.” “(vii) The estimated current taxation charge for the year ended 31 December 2020 is £4,500,000. The balance of current taxation in the trial balance represents the over/under provision of the current taxation charge for the year ended 31 December 2019. No taxation has been paid in respect of the year ended 31 December 2020.” “(viii) Glory plc receives capital allowances on the plant & equipment that it owns. As at 31 December 2020 the tax written down value of its owned plant & equipment, as shown in its draft corporation tax computation for the year ended 31 December, amounted to £15,500,000. The current rate of corporation tax is 20% and this is expected to remain unchanged for the foreseeable future.” “REQUIRED: Prepare the Statement of Comprehensive Income for the year ended 31 December 2020 together with a Statement of Financial Position as at that date, in compliance with IAS 1. Notes to the financial statements showing movements in retained earnings and narrative disclosures are required, but Accounting policy Notes and numerical analysis Notes are not required.
The following
|
“£000” |
“£000” |
|
|
“Leasehold property – at valuation 31 December 2019 (Note (i)) |
25,200 |
|
|
Plant & equipment (owned) at cost (Note (ii) & (iv)) |
46,800 |
|
|
Accumulated |
||
|
- Owned plant & equipment |
12,800 |
|
|
Finance lease payments (Note (iii)) |
10,128 |
|
|
Inventory (Note (vi)) |
29,400 |
|
|
Trade receivables & payables |
39,100 |
35,000 |
|
Bank |
4,928 |
|
|
Revenue (Note (v)) |
310,000 |
|
|
Purchases (Note (v)) |
234,500 |
|
|
Distribution costs |
19,500 |
|
|
Administrative expenses |
27,500 |
|
|
Preference dividend paid |
1,200 |
|
|
Equity dividend paid |
2,000 |
|
|
Equity shares of 50p each |
25,000 |
|
|
6% £1 |
40,000 |
|
|
|
4,900 |
|
|
Current |
700 |
|
|
Deferred taxation |
3,400 |
|
|
436,028 |
436,028” |
“The following notes are relevant:”
“(i) The leasehold property was acquired on 1 January 2019 at a cost of £30,000,000. The lease was for 15 years at that date. Glory plc’s accounting policy is to revalue the property at market value at each year-end. The valuation in the trial balance of £25,200,000 as at 31 December 2019 led to an impairment charge of £2,800,000, which was reported in the Income Statement for the year ended 31 December 2019. At 31 December 2020 the property was valued at £24,900,000.”
“(ii) Owned plant & equipment is depreciated at 25% per annum on a reducing balance basis.”
“(iii) Plant & equipment was acquired under a finance lease on 1 January 2020. The rentals are an initial £4,128,000 payable on 1 January 2020, followed by £6,000,000 per annum for four years payable annually in arrears. The interest rate implicit in the lease is 8% per annum. Leased plant & equipment is to be depreciated at 25% per annum on the straight line basis. Only the payments of £4,128,000 on 1 January 2020 plus £6,000,000 on 31 December 2020 have been reflected in the trial balance above.”
“(iv) No depreciation has been charged on the non-current assets for the year ended 31 December 2020. All depreciation is charged to Cost of Sales.”
“(v) Glory plc’s revenue includes £8,000,000 for goods it sold acting as an agent for another company. Glory plc earns commission of 20% on these sales. The balance of £6,400,000 (which has been included in Cost of Sales) has been paid to the other company.”
“(vi) Closing inventories as at 31 December 2020 have been valued at £28,200,000.”
“(vii) The estimated current taxation charge for the year ended 31 December 2020 is £4,500,000. The balance of current taxation in the trial balance represents the over/under provision of the current taxation charge for the year ended 31 December 2019. No taxation has been paid in respect of the year ended 31 December 2020.”
“(viii) Glory plc receives capital allowances on the plant & equipment that it owns. As at 31 December 2020 the tax written down value of its owned plant & equipment, as shown in its draft corporation tax computation for the year ended 31 December, amounted to £15,500,000. The current rate of corporation tax is 20% and this is expected to remain unchanged for the foreseeable future.”
“REQUIRED:
Prepare the Statement of Comprehensive Income for the year ended 31 December 2020 together with a
Notes to the financial statements showing movements in retained earnings and narrative disclosures are required, but Accounting policy Notes and numerical analysis Notes are not required.
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