Preparing the statement of profit or loss (Carter Co)
Questions are in English, the exam language. Companies and figures are invented for practice.
Carter Co prepares financial statements to 31 March 20X9. The draft balances include the following.
| Balance | $ |
|---|---|
| Revenue | 2,400,000 |
| Cost of sales (before depreciation) | 1,350,000 |
| Distribution costs | 120,000 |
| Administrative expenses | 210,000 |
| Building at cost (no land element) | 1,000,000 |
| Building: accumulated depreciation at 1 April 20X8 | 200,000 |
| Plant at cost | 500,000 |
| Plant: accumulated depreciation at 1 April 20X8 | 140,000 |
| Finance costs (loan note interest paid) | 25,000 |
(1) Revenue includes $200,000 received on 31 March 20X9 for goods that will be delivered in April 20X9.
(2) On 1 April 20X8 the building was revalued to $1,200,000; its remaining life at that date was 40 years. Carter does not transfer excess depreciation to retained earnings. Plant is depreciated at 20% a year on the reducing balance. All depreciation is charged to cost of sales.
(3) On 1 April 20X8 Carter issued a $500,000 5% loan note. After issue costs, the amount initially recognised was $470,000 and the effective interest rate is 8%. The coupon paid on 31 March 20X9 is the only finance cost recorded.
(4) Income tax for the year is estimated at $85,000. Last year's tax was over-provided by $6,000.
- (a) Revenue for the year ($)2 marks
- (b) Revaluation surplus recognised on 1 April 20X8 ($)2 marks
- (c) Depreciation of the building for the year ($)2 marks
- (d) Depreciation of plant for the year ($)2 marks
- (e) Finance cost for the year ($)2 marks
- (f) Carrying amount of the loan note at 31 March 20X9 ($)2 marks
- (g) Income tax expense for the year ($)2 marks
- (h) Profit for the year ($)3 marks
- (i) Explain how the $200,000 received on 31 March 20X9 should be treated, with reference to IFRS 15.3 marks