- 15 Marks
FR – L2 – Q67 – Presentation of Financial Statements
Prepare Wenchi Exports' profit/loss statement and financial position for 20X4 using trial balance, with adjustments for inventory, patents, revaluation, bad debts, and tax.
Question
The trial balance of Wenchi Exports Limited at 31 December 20X4 is as follows.
| GH₵ in million | ||
|---|---|---|
| Dr | Cr | |
| Patent rights | 60 | |
| Work-in-progress, 1 January 20X4 | 125 | |
| Buildings at cost | 300 | |
| Ordinary share capital | 600 | |
| Revenue | 1,740 | |
| Staff costs | 260 | |
| Accumulated depreciation on buildings, 1 January 20X4 | 60 | |
| Inventories of finished games, 1 January 20X4 | 155 | |
| Consultancy fees | 44 | |
| Directors’ salaries | 360 | |
| Computers at cost | 50 | |
| Accumulated depreciation on computers, 1 January 20X4 | 20 | |
| Dividends paid | 125 | |
| Cash | 440 | |
| Receivables | 420 | |
| Trade payables | 294 | |
| Sundry expenses | 94 | |
| Accumulated profits, 1 January 20X4 | 279 | |
| 2,633 | 2,633 |
The following information is also relevant.
(1) Closing inventories of finished games are valued at GH₵180 million. Work in progress has increased to GH₵140 million.
(2) The patent rights relate to a computer program with a three-year lifespan.
(3) On 1 January 20X4 buildings were revalued to GH₵360 million. This has not yet been reflected in the accounts. Computers are depreciated over five years. Buildings are now to be depreciated over 30 years.
(4) An allowance for bad debts (irrecoverable debts) of 5% is to be created.
(5) There is an estimated bill for current tax of GH₵120 million which has not yet been recognised.
Required
Prepare a statement of profit or loss (analysing expenses by nature) for the year ended 31 December 20X4 and a statement of financial position as at that date.
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