Emerald Ltd, a manufacturing company, commenced operations on 1 July 2016 by iss
ID: 2394174 • Letter: E
Question
Emerald Ltd, a manufacturing company, commenced operations on 1 July 2016 by issuing 350 000 $5.00 shares, payable in full on application on a first-come, first-served basis. By 31 July 2016 the shares were fully subscribed and duly allotted. There were share issue costs of $10 000. No additional shares were issued during the year ending 30 June 2017.
For the year ending 30 June 2018, the company recorded the following aggregate transactions:
$
Sales
5 120 000
Interest income
34 000
Sundry income
25 000
Cost of Sales
2 465 000
Employee benefit expenses
856 000
Depreciation expense
244 000
Amortisation - franchise
25 000
Rental expense
120 000
Advertising expense
147 000
Insurance expense
48 000
Freight out expense
110 000
Doubtful debts expense
16 000
Interest expense
36 000
Borrowing Costs
9 000
Other expenses
8 000
Income tax expense
320 000
The following additional information was noted during the preparation of financial statements for the year ended 30 June 2018:
75 000 fully paid ordinary shares have been issued on 1 October 2017 at the price of $4.00.
$135 000 dividends (31.76 cents per share) were declared and paid during the 2018 financial year. A final dividend for 2018 of $51 850 was proposed but not recognised in the financial statements.
There was a gain of $20 000 from the cash flow hedge arrangement during the 2018 financial year. Any gain or loss associated with the cash flow hedge is directly recognised in equity. There was no previously recognised cash flow hedge reserve before the 2018 financial year.
$25 000 of bank loans is repayable within 1 year.
$90 000 of other loans is repayable within 1 year.
The employee benefits of $32 000 are expected to be settled wholly within 12 months.
Emerald Ltd measures inventory at the lower of cost and net realizable value and property, plant and equipment using a cost model.
The summarised balances are provided below:
Year-end balances, 30 June 2018
$
Cash on hand
960 000
Cash on deposit, at call
82 000
Accounts Receivables
665 000
Allowance for doubtful debts/ Impairments
24 000
Other debtors
27 000
Finished goods inventories, 30 June 2018
600 000
Work in Progress inventories 30 June 2018
105 000
Land
94 000
Buildings
230 000
Accumulated depreciation – buildings
60 000
Plant and equipment
1 385 000
Accumulated depreciation – plant and equipment
330 000
Franchises
140 000
Accumulated amortisation of franchise
50 000
Goodwill
620 000
Bank loans
92 000
Other loans
440 000
Accounts payable
696 000
Provision for employee benefits
116 000
Income tax payable
35 000
Deferred tax liability
140 000
Retained earnings, 30 June 2017
225 000
Dividends paid
135 000
Cash flow hedge reserve (equity)
20 000
Required:
For the year ending 30 June, 2018,
Using the pro forma table supplied in appendix B, prepare a preliminary trial balance for Emerald Ltd; (5 Marks)
APPENDIX B
Emerald Ltd - Trial Balance as at 30 June 2018
DR
CR
Sales
$’000
$’000
Interest income
Sundry income
Cost of sales
Employee benefit expenses
Depreciation expense
Amortisation - franchise
Rental expense
Advertising expense (selling)
Insurance expense
Freight out expense
Doubtful debts expense
Interest expense
Borrowing costs
Other expenses
Income tax expense
Cash on hand
Cash on deposit, at call
Accounts Receivables
Allowance for doubtful debts/ Impairments
Other debtors
Finished goods inventories, 30 June 2018
Work in Progress inventories 30 June 2018
Land
Buildings
Accumulated depreciation – buildings
Plant and equipment
Accumulated depreciation – plant and equipment
Franchise
Accumulated amortisation of franchise
Goodwill
Bank loans
Other loans
Accounts payable
Provision for employee benefits
Income tax payable
Deferred tax liability
Retained earnings, 30 June 2017
Dividends paid
Cash flow hedge reserve
Share capital
Totals
$
Sales
5 120 000
Interest income
34 000
Sundry income
25 000
Cost of Sales
2 465 000
Employee benefit expenses
856 000
Depreciation expense
244 000
Amortisation - franchise
25 000
Rental expense
120 000
Advertising expense
147 000
Insurance expense
48 000
Freight out expense
110 000
Doubtful debts expense
16 000
Interest expense
36 000
Borrowing Costs
9 000
Other expenses
8 000
Income tax expense
320 000
Explanation / Answer
Workings :
Emerald Ltd - Trial Balance as at 30 June 2018 DR CR $’000 $’000 Sales 5120000.00 Interest income 34000.00 Sundry income 25000.00 Cost of sales 2465000.00 Employee benefit expenses 856000.00 Depreciation expense 244000.00 Amortisation - franchise 25000.00 Rental expense 120000.00 Advertising expense (selling) 147000.00 Insurance expense 48000.00 Freight out expense 110000.00 Doubtful debts expense 16000.00 Interest expense 36000.00 Borrowing costs 9000.00 Other expenses 8000.00 Income tax expense 320000.00 Cash on hand 960000.00 Cash on deposit, at call 82000.00 Accounts Receivables 665000.00 Allowance for doubtful debts/ Impairments 24000.00 Other debtors 27000.00 Finished goods inventories, 30 June 2018 600000.00 Work in Progress inventories 30 June 2018 105000.00 Land 94000.00 Buildings 230000.00 Accumulated depreciation – buildings 60000.00 Plant and equipment 1385000.00 Accumulated depreciation – plant and equipment 330000.00 Franchise 140000.00 Accumulated amortisation of franchise 50000.00 Goodwill 620000.00 Bank loans 92000.00 Other loans 440000.00 Accounts payable 696000.00 Provision for employee benefits 116000.00 Income tax payable 35000.00 Deferred tax liability 140000.00 Retained earnings, 30 June 2017 225000.00 Dividends paid 135000.00 0.00 Cash flow hedge reserve 20000.00 Share capital 2050000.00 Share Cost Expense 10000.00 Totals 9457000.00 9457000.00Workings :
Share Capital 350000 Shares at $ 5 each 1750000.00 75000 Shares at $ 4 each 300000.00 2050000.00Related Questions
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