Entity A is a listed company in Hong Kong. It did not keep completed accounting records for the period from 1 April 2019 to 31 March 2020 because the previous accounting manager suddenly resigned on 1 April 2019 and the position was kept vacant up to 31 March 2020. However, Entity A needs to prepare the financial statements for the year ended 31 March 2020 in order to fulfil the financial reporting requirements. David Chan (David) is the managing director of Entity A. The new accountant, Tammy Li (Tammy) was employed by David on 1 April 2020. She worked very hard to find any useful information to facilitate the preparation for financial statements as at 31 March 2020. The information which was found by Tammy are listed as below: (1) Entity A Statements of Financial Position as at 31 March 2019 $ $ Assets Non-current assets Office equipment 2,625,000 Current assets Inventory 4,150,000 Trade receivables 1,375,000 Bank 715,000 6,240,000 Total assets 8,865,000 Equity and Liabilities Ordinary share capital 6,750,000 Retained earnings 315,000 Total equity 7,065,000 Current liabilities Trade payables 1,575,000 Accrued rent 225,000 Total liabilities 1,800,000 Total equity and liabilities 8,865,000 (2) Cash deposit into bank during the year: $ From customers 10,635,000 Short-term bank loan 2,075,000 Proceeds from sale of office equipment 300,000 (3) Cash paid out from bank during the year: $ Supplier 8,047,500 Rental expenses 275,000 Office expenses 1,437,500 David’s private use 1,750,000 Purchases of office equipment 1,950,000 On 31 March 2020, the carrying amounts of: $ Trade receivables 1,625,000 Inventory 5,950,000 Trade payables 2,462,500 Tammy also found some additional useful information as below: Rent of $300,000 was owed to the property owner on 31 March 2020. The 6-month bank loan was approved and received on 1 January 2020. The interest rate was 10% annually. In this accounting period, cash of $600,000 was taken out and paid for purchases of inventory and cash of $300,000 was also taken out for David’s private use before banking the cash received from customers. All office equipment was purchased on 1 April 2018 at $3,750,000. The original cost and carrying amount of the disposed office equipment were $1,125,000 and $787,500 respectively. The depreciation policy of office equipment is the straight-line method of 30%. David’s private use will be repaid on or before 31 March 2021. The effective profits tax rate is 16.5%.

Entity A is a listed company in Hong Kong. It did not keep completed accounting records for the period from 1 April 2019 to 31 March 2020 because the previous accounting manager suddenly resigned on 1 April 2019 and the position was kept vacant up to 31 March 2020. However, Entity A needs to prepare the financial statements for the year ended 31 March 2020 in order to fulfil the financial reporting requirements. David Chan (David) is the managing director of Entity A. The new accountant, Tammy Li (Tammy) was employed by David on 1 April 2020. She worked very hard to find any useful information to facilitate the preparation for financial statements as at 31 March 2020. The information which was found by Tammy are listed as below: (1) Entity A Statements of Financial Position as at 31 March 2019 $ $ Assets Non-current assets Office equipment 2,625,000 Current assets Inventory 4,150,000 Trade receivables 1,375,000 Bank 715,000 6,240,000 Total assets 8,865,000 Equity and Liabilities Ordinary share capital 6,750,000 Retained earnings 315,000 Total equity 7,065,000 Current liabilities Trade payables 1,575,000 Accrued rent 225,000 Total liabilities 1,800,000 Total equity and liabilities 8,865,000 (2) Cash deposit into bank during the year: $ From customers 10,635,000 Short-term bank loan 2,075,000 Proceeds from sale of office equipment 300,000 (3) Cash paid out from bank during the year: $ Supplier 8,047,500 Rental expenses 275,000 Office expenses 1,437,500 David’s private use 1,750,000 Purchases of office equipment 1,950,000 On 31 March 2020, the carrying amounts of: $ Trade receivables 1,625,000 Inventory 5,950,000 Trade payables 2,462,500 Tammy also found some additional useful information as below: Rent of $300,000 was owed to the property owner on 31 March 2020. The 6-month bank loan was approved and received on 1 January 2020. The interest rate was 10% annually. In this accounting period, cash of $600,000 was taken out and paid for purchases of inventory and cash of $300,000 was also taken out for David’s private use before banking the cash received from customers. All office equipment was purchased on 1 April 2018 at $3,750,000. The original cost and carrying amount of the disposed office equipment were $1,125,000 and $787,500 respectively. The depreciation policy of office equipment is the straight-line method of 30%. David’s private use will be repaid on or before 31 March 2021. The effective profits tax rate is 16.5%.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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However, Entity A needs to prepare the financial statements for the year ended 31 March 2020 in order to fulfil the financial reporting requirements. David Chan (David) is the managing director of Entity A. The new accountant, Tammy Li (Tammy) was employed by David on 1 April 2020. She worked very hard to find any useful information to facilitate the preparation for financial statements as at 31 March 2020.

The information which was found by Tammy are listed as below:

(1)
Entity A
Statements of Financial Position
as at 31 March 2019
	$	$
Assets
Non-current assets
Office equipment		2,625,000
Current assets
Inventory	4,150,000
Trade receivables	1,375,000
Bank	715,000	6,240,000
Total assets		8,865,000

Equity and Liabilities
Ordinary share capital		6,750,000
Retained earnings		315,000
Total equity		7,065,000

Current liabilities
Trade payables	1,575,000
Accrued rent	225,000
Total liabilities		1,800,000
Total equity and liabilities		8,865,000

(2)
Cash deposit into bank during the year:	$
From customers		10,635,000
Short-term bank loan		2,075,000
Proceeds from sale of office equipment	300,000

(3)
Cash paid out from bank during the year:	$
Supplier		8,047,500
Rental expenses		275,000
Office expenses		1,437,500
David’s private use		1,750,000
Purchases of office equipment		1,950,000

On 31 March 2020, the carrying amounts of:	$
Trade receivables		1,625,000
Inventory		5,950,000
Trade payables		2,462,500

Tammy also found some additional useful information as below:

Rent of $300,000 was owed to the property owner on 31 March 2020.
The 6-month bank loan was approved and received on 1 January 2020. The interest rate was 10% annually.
In this accounting period, cash of $600,000 was taken out and paid for purchases of inventory and cash of $300,000 was also taken out for David’s private use before banking the cash received from customers.
All office equipment was purchased on 1 April 2018 at $3,750,000.
The original cost and carrying amount of the disposed office equipment were $1,125,000 and $787,500 respectively.
The depreciation policy of office equipment is the straight-line method of 30%.
David’s private use will be repaid on or before 31 March 2021.
The effective profits tax rate is 16.5%.

REQUIRED:

If you are Tammy, in accordance with HKAS 1 (Revised) Presentation of Financial Statements, prepare:

A Statement of Profit or Loss and Other Comprehensive Income of Entity A for the year ended 31 March 2020; and
A Statement of Financial Position of Entity A as at 31 March 2020.

(Round all figures to the nearest dollar.)

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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