Financial statement presentation


Appliances Ltd, a manufacturing company, commenced operations on 1 July 2017. The draft trial balance for the year ended 30 June 2018 has been prepared as follows:


Appliances Ltd
Draft trial balance as at 30 June 2018
DR ($) CR ($)
Sales of goods 12,230,000
Interest income 7,000
Cost of sales 4,685,000
Marketing expense 623,000
Salaries and wages 2,740,000
Administration expenses 143,000
Annual leave expense 210,000
Doubtful debts expense 62,000
Depreciation expense 0
Interest expense 64,000
Other borrowing expenses 6,000
Other expenses 95,000
Warranty expense 64,000
Income tax expense 0
Cash on hand 41,000
Cash management account 193,000
Trade debtors 3,276,000
Allowance for doubtful debts 219,000
Raw material inventory 624,000
Finished goods inventory 1,250,000
Land 500,000
Buildings 900,000
Accumulated depreciation – buildings 0
Plant and equipment 2,600,000
Accumulated depreciation – plant and equipment 0
Patents 150,000
Deferred tax asset 0
Bank loan 400,000
Trade creditors 615,000
Provision for annual leave 200,000
Provision for warranty 55,000
Current tax liability 0
Dividends paid 500,000
Share capital 5,000,000
18,726,000 18,726,000


Additional information:

  • The bank loan is repayable in 5 years.
  • The provision for annual leave is payable within 1 year.
  • The provision for warranty is in respect of a 12-month warranty given on certain goods sold.
  • Share capital consists of 1,000,000 ordinary shares, fully paid to $5.00 each.
  • Appliances Ltd is a reporting entity.
  • Appliances Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and presents an analysis of expenses by nature on the statement.
  • In relation to the statement of financial position, where AASB 101 requires entities to disclose further sub-classifications of the minimum line items on the face of the statement or in the notes, the directors of Appliances Ltd want to report only the minimum line items on the face of the statement, and leave the sub-classifications to be disclosed in the notes.


Whilst reviewing the draft trial balance, you notice that depreciation and income tax have not been recognised as yet. The following information is available for these items:

  • The buildings were purchased on 1 July 2017, and have a useful life of 30 years and estimated residual value of nil. The plant and equipment was also purchased on 1 July 2017, and has a useful life of 10 years and estimated residual value of $50,000. Depreciation is to be recognised on a straight-line basis.
  • Income tax expense needs to be calculated at 30% of the accounting profit (you will need to prepare the statement of profit or loss and other comprehensive income after accounting for depreciation above to determine income tax expense). The deferred tax asset to be recognised as at 30 June 2018 is $142,200. The current tax liability to be recognised will be the sum of income tax expense and the deferred tax asset.




i)   Prepare the journal entries to recognise depreciation and income tax in Appliances Ltd’s accounting records as at 30 June 2018.  After preparing the journal entries, enter the amounts from your journal entries into the draft trial balance.


ii)  Prepare the statement of profit or loss and other comprehensive income, statement of financial position, and statement of changes in equity of Appliances Ltd for the year ended 30 June 2018 in accordance with AASB 101.  Must be presented in both formula view as well as normal view, Notes and comparative figures are not required.


Question 2 Max. marks awarded
Journal entries 2
Preparation of financial statement reports 11
Presentation 2

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