Financial Reporting and Analysis (Other (Not Listed) Sample)

Financial Reporting and Analysis
Name:
Course:
Date:
HOUSE OF GLASS PTY LTD
STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2014
ASSETS
Non-current assets
Cost $Accumulated depreciation $ NBV $
Delivery vehicles105,500(32500)73,000
Total non-current assets73,000
Current assets
Cash at bank329,530
Account receivables67500
Less: provision for doubtful debts(3,625)63,875
Inventory69,250
Prepaid expenses15600
Total current assets478,255
Total assets551,255
Equity and liabilities
Liabilities
Current liabilities
Accounts payable38,000
Accrued expenses payable19,690
Dividend payable15,000
Income tax payable67,000
Total current liabilities139,690
Long-term liabilities
Loan40000
Total liabilities179,690
Equity
Contributed capital 150,000
Retained earnings 221,565
Total equity371,565
Total equity and liabilities551,255
HOUSE OF GLASS PTY LTD
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
Sales: $
Cash sales243,000
Credit sales541,500
Total sales784,500
Less: cost of goods sold(401,000)
Gross profit383500
Less expenses
Annual rent72,000
Operating expenses6,750
Vehicle running expenses32,700
Electricity bill2,760
Depreciation expense21,750
Loan interest1,000
Provision for doubtful debts3,225
Total expenses (140,185)
Profit before tax243,315
Dividend payable(15,000)
Income tax payable(67,000)
Profit after tax161,315
Add: retained earnings brought forward60,250
Retained earnings carried down221565
HOUSE OF GLASS PTY LTD
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
Retained earnings carried down221,565
Non-cash items
Depreciation21,750
243,315
Operating activities
Increase in accounts receivables(13,500)
Decrease in accounts payables(11,000)
Increase in accrued expenses payable14,715
Decrease in inventory116,500
Cash flow from operations106,715
350,030
Cash flow from investing activities
Delivery vehicle(15,500)
Cash flow from financing activities
Dividend (45,000)
Loan 40000
Cash flows from financing activities(5,000)
Net cash flows329,530
Part B
Question 1: Revaluation of the Company’s Land
Revaluation is the process of either decreasing or increasing the carrying value of fixed assets. Revaluation is caused by the prevailing changes in the fair value of a fixed asset. The IFRS (International Financial Reporting Standard) states that the assets of a company should be recorded at their cost values. IFRS also provides for later adjustments in the assets depending on the market forces that are dynamic. The company bought the piece of land at $100000, and the current value of the land according to our reputable valuation expert is $250000. Therefore, the value of the land has increased by an amount of $150000. The asset of the company, in this case, is the piece of land that increases value by $150000. However, the double entry of the transaction is the surplus of the revaluation amount. The revaluation is not recorded in the income statement but rather, it is treated as equity. The revaluation surplus is however recorded in the statement of comprehensive income, only when the company wants to recover an initial or past loss.
For the purpose of keeping records, the asset account is debited with the amount of the revaluation surplus. To complete the double entry, the revaluation surplus account is credited with the revaluation surplus.
Dr. Land Account by $150000
Cr. Revaluation Surplus Account by $150000.
Question 2: Accounting Conventions
Effects of the Reduction in the Inventory Value to the Assets, Liabilities and Shareholders’ Equity
In this case, the assets will decrease by $50000 due to the decrease in the value of the stock as the director feels that the stock cannot fully recover its price. The corresponding decrease in the stock value is caused by the previous losses made by the inventory. The loss is caused by the deterioration of the market conditions and hence a negative impact on the demand for the products of the company.
For the shareholder’s equity, the value also decreases by an amount of $50000. The decrease is caused by the ...