3.
Answer bank

Sample answers to Practice Questions 13 to 18 for the workbook From Transactions to Financial Statements.

Question 13: GreenPea Retail

Answer
  1. Journal entries
1 Owner investment Dr Cr
Cash 50,000
Share capital 50,000
 
2 Credit purchases
Purchases 12,000
Accounts payable 12,000
 
3 Equipment purchase
Shop equipment 8,000
Cash 8,000
 
4 Rent paid
Rent expense 2,400
Cash 2,400
 
5 Cash sales
Cash 9,000
Sales 9,000
 
6 Credit sales
Accounts receivable 6,000
Sales 6,000
 
7 Cash received from customers
Cash 3,000
Accounts receivable 3,000
 
8 Cash payment to suppliers
Accounts payable 4,000
Cash 4,000
 
9 Salaries expense paid
Salaries expense 2,200
Cash 2,200
 
10 Utilities expense paid
Utility expenses 500
Cash 500
  1. Trial balance
Account Debit (CU) Credit (CU)
Cash 44,900
Accounts receivable 3,000
Purchases 12,000
Rent expense 2,400
Shop equipment 8,000
Accounts payable 8,000
Share capital 50,000
Sales revenue 15,000
Salaries expense 2,200
Utilities expense 500
Total 73,000 73,000
  1. Adjusting journal entries
Rent expense: prepayment adjustment Dr Cr
Prepaid rent 2,000
Rent expense 2,000
 
Accrued utilities
Utility expense 150
Accrued utilities 150
 
Depreciation on equipment
Depreciation expense 200
Accumulated depreciation 200
 
Closing inventory
Closing inventory (SoFP) 2,800
Closing inventory 2,800
 
Inventory write-down to net realisable value
Inventory write-down expense 200
Closing inventory (SoFP) 200
  1. Adjusted trial balance
Trial balance Adjustments Adjusted trial balance
Account Debit (CU) Credit (CU) Debit (CU) Credit (CU) Debit (CU) Credit (CU)
Cash 44,900 44,900
Accounts receivable 3,000 3,000
Purchases 12,000 12,000
Rent expense 2,400 2,000 400
Shop equipment 8,000 8,000
Accounts payable 8,000 8,000
Share capital 50,000 50,000
Sales revenue 15,000 15,000
Salaries expense 2,200 2,200
Utilities expense 500 150 650
Prepaid rent 2,000 2,000
Accrued utilities 150 150
Depreciation expense 200 200
Depreciation (SoFP) 200 200
Closing inventory (SoFP) 2,800 200 2,600
Closing inventory (CoGS) 2,800 2,800
Inventory write-down expense 200 200
Total 73,000 73,000 5,350 5,350 76,150 76,150
  1. SoPL
GreenPea Retail Ltd
Statement of Profit and Loss for the month ended 31 Jan 20x5
CU
Sales 15,000
Cost of goods sold:
    Opening inventory 0
    Purchases 12,000
    Closing inventory (2,800) (9,200)
Gross profit 5,800
Operating expenses:
    Salaries expense 2,200
    Rent expense 400
    Utilities expense 650
    Depreciation expense 200
    Inventory write-down expense 200 (3,650)
Operating profit 2,150
Interest 0
Profit after interest 2,150
Tax 0
Profit for the year 2,150
  1. SoFP
GreenPea Retail Ltd
Statement of Financial Position as at 31 Jan 20x5
CU
Non-current assets
Shop equipment 8,000
Less: Accumulated depreciation (200)
Net book value 7,800
 
Current assets
Cash 44,900
Accounts receivable 3,00
Inventory 2,600
Prepaid rent 2,000
52,500
Total assets 60,300
 
Equity and liabilities
Share capital 50,000
Retained earnings 2,150
52,150
 
Non-current liabilities −
 
Current liabilities
Accounts payable 8,000
Utilities payable 150
8,150
Total equity and liabilities 60,300

Question 14: Apex Consulting

Answer
  1. Journal entries
1 Owner investment Dr ('000) Cr ('000)
Cash 100
Share capital 100
 
2 Bank loan received
Cash 40
Bank loan 40
 
3 Equipment purchase
Office equipment 25
Cash 25
 
4 Rent paid
Rent expense 36
Cash 36
 
5 Service revenue - cash
Cash 120
Revenue 120
 
6 Service revenue - credit
Accounts receivable 60
Revenue 60
 
7 Cash received from clients
Cash 40
Accounts receivable 40
 
8 Consulting staff salaries paid
Cost of services (consulting salaries) 50
Cash 50
 
9 Admin salaries paid
Administrative salaries expense 20
Cash 20
 
10 Insurance paid
Insurance expenses 6
Cash 6
  1. Trial balance
Account Debit (CU'000) Credit (CU'000)
Cash 163
Accounts receivable 20
Office equipment 25
Rent expense 36
Insurance expense 6
Cost of services (consulting salaries) 50
Administrative salaries expense 20
Bank loan 40
Share capital 100
Revenue 180
Total 320 320
  1. Adjusting entries
Rent expense: prepayment adjustment Dr ('000) Cr ('000)
Prepaid rent 24
Rent expense 24
 
Rent paid = 36,000 for three years
Annual expense = 36,000/3 = 12,000
Therefore, prepayment/overstated expenses = 36,000 − 12,000 = 24,000
 
Insurance expense – prepayment adjustment
Prepaid insurance 4
Insurance expense 4
 
Insurance paid = 6,000 for three years
Annual expense = 6,000/3 = 2,000
Therefore, prepayment/overstated expense = 6,000 − 2,000 = 4,000
 
Accrued consulting salaries
Cost of services (consulting salaries) 5
Salaries payable 5
 
Depreciation
Depreciation expense 5
Accumulated depreciation 5
 
Cost of equipment = 25,000; useful life = five years
Annual straight-line depreciation = (25,000 − 0)/5 = 5,000
 
Accrued interest
Interest expense 2.4
Interest payable 2.4
 
Loan = 40,000; interest rate = 6%
Annual interest = 40,000 × 6% = 2,400
 
Income tax
Tax expense 15
Tax payable 15
  1. Extended trial balance
Trial balance Adjustments Adjusted trial balance
Account Debit (CU) Credit (CU) Debit (CU) Credit (CU) Debit (CU) Credit (CU)
Cash 163 163
Accounts receivable 20 20
Office equipment 25 25
Accumulated depreciation (SoFP) 5 5
Depreciation expense 5 5
Prepaid rent 24 24
Rent expense 36 24 23
Prepaid insurance 4 4
Insurance expenses 6 4 2
Cost of services (consulting salaries) 50 5 55
Salaries payable 5 5
Administrative salaries expense 20 20
Interest expense 2.4 2.4
Interest payable 2.4 2.4
Tax expense 15 15
Tax payable 15 15
Bank loan 40 40
Share capital 100 100
Revenue 180 180
Total 320 320 55.4 55.4 347.4 347.4
  1. SoPL
Apex Consulting Pty Ltd
Statement of Profit and Loss for the year ended 31 Dec 20x8
CU'000
Revenue 180
Operating expenses:
    Cost of services (consulting salaries) 55
    Administrative salaries 20
    Rent expense 12
    Insurance expense 2
    Depreciation expense 5 (94)
Operating profit 86
Interest (2.4)
Profit after interest 83.6
Tax (15)
Profit for the year 68.6
  1. SoFP
Apex Consulting Pty Ltd
Statement of Financial Position as at 31 Dec 20x8
CU'000
Non-current assets
Office equipment 25
Less: Accumulated depreciation (5)
Net book value 20
 
Current assets
Cash 163
Accounts receivable 20
Prepaid rent 24
Prepaid insurance 4
211
Total assets 231
 
Equity and liabilities
Share capital 100
Retained earnings 68.6
168.6
 
Non-current liabilities
Bank loan 40
 
Current liabilities
Salaries payable 5
Interest payable 2.4
Tax payable 15
22.4
Total equity and liabilities 231

Question 15: Jones

Answer
  1. Journal entries
1 Capital introduced Dr ('000) Cr ('000)
Cash 100,000
Capital 100,000
 
2 Credit purchases
Purchases 70,000
Accounts payable 70,000
 
3 Payment to suppliers
Accounts payable 50,000
Cash 50,000
 
4 Credit sales
Accounts receivable 120,000
Sales 120,000
 
5 Cash received from customers
Cash 90,000
Accounts receivable 90,000
 
6 Wages paid
Wages expenses 30,000
Cash 30,000
 
7 Rent paid
Rent expenses 12,000
Cash 12,000
 
8 Drawings
Drawings 13,000
Cash 13,000
 
9 Loan received
Cash 20,000
Bank loan 20,000
 
10 Equipment purchases
Equipment 15,000
Cash 15,000
  1. Trial balance
Account Debit (CU) Credit (CU)
Cash* 93,000
Accounts receivable 30,000
Opening inventory 12,000
Equipment 15,000
Purchases 70,000
Wages expense 30,000
Rent expense 12,000
Drawings 13,000
Accounts payable 20,000
Bank loan 20,000
Capital** 115,000
Sales 120,000
Total 275,000 275,000

* Includes opening cash balance of 3,000.
** Includes opening capital of 15,000 and capital introduced during the year, 100,000.

  1. Adjusting entries
Closing inventory Dr Cr
Closing inventory (SoFP) 20,000
Closing inventory (CoGS) 20,000
 
Bad debt
Bad debt expense 3,000
Accounts receivable 3,000
 
Expected credit losses
Expected credit loss expense (SoPL) 1,350
Loss allowance (SoFP) 1,350
 
Remaining receivables after write-off = 30,000 − 3,000 = 27,000
Allowance required = 5%
Therefore, allowance to be created = 27,000 × 5% = 1,350
 
Depreciation
Depreciation expense 3,000
Accumulated depreciation 3,000
 
Cost = 15,000; rate = 20%
Depreciation for the year = 15,000 × 20% = 3,000
 
Interest on loan
Interest expense 1,000
Interest payable 1,000
 
Loan = 20,000; rate = 5%
Interest for the year = 20,000 × 5% = 1,000
 
Tax for the year
Tax expense 6,000
Tax payable 6,000
 
Provision for warranty
Warranty expense 2,000
Provision for warranty 2,000
  1. Adjusted trial balance
Trial balance Adjustments Adjusted trial balance
Account Debit (CU) Credit (CU) Debit (CU) Credit (CU) Debit (CU) Credit (CU)
Cash 93,000 93,000
Accounts receivable 30,000 3,000 27,000
Loss allowance 1,350 1,350
Equipment 15,000 15,000
Accumulated depreciation (SoFP) 3,000 3,000
Opening inventory 12,000 12,000
Purchases 70,000 70,000
Closing inventory (SoFP) 20,000 20,000
Closing inventory (CoGS) 20,000 20,000
Bad debt expense 3,000 3,000
Expected credit loss expense 1,350 1,350
Depreciation expense 3,000 3,000
Interest expense 1,000 1,000
Tax expense 6,000 6,000
Tax payable 6,000 6,000
Warranty expense 2,000 2,000
Provision for warranty 2,000 2,000
Wages expense 30,000 30,000
Rent expense 12,000 12,000
Drawings 13,000 13,000
Accounts payable 20,000 20,000
Bank loan 20,000 20,000
Capital 115,000 115,000
Sales 120,000 120,000
Total 275,000 275,000 36,350 36,350 308,350 308,350
  1. SoPL
Jones Enterprises
Statement of Profit and Loss for the month ended 31 Jan 20x6
CU
Sales 120,000
Cost of goods sold:
    Opening inventory 12,000
    Purchases 70,000
    Closing inventory (20,000) (62,000)
Gross profit 58,000
Operating expenses:
    Wages expense 30,000
    Rent expense 12,000
    Bad debt expense 3,000
    Expected credit loss 1,350
    Depreciation expense 3,000
    Warranty expense 2,000 (51,350)
Operating profit 6,650
Interest (1,000)
Profit after interest 5,650
Tax (6,000)
Loss for the year (350)
  1. SoFP
Jones Enterprises
Statement of Financial Position as at 31 Jan 20x6
CU
Non-current assets
Shop equipment 15,000
Less: Accumulated depreciation (3,000)
Net book value 12,000
 
Current assets
Cash 93,000
Accounts receivable 27,000
Less: Loss allowance (1,350)
Net receivables 25,650
Inventory 20,000
138,650
Total assets 150,650
 
Equity and liabilities
Capital 115,000
Less: Drawings (13,000)
Less: Loss for the year (350)
101,650
 
Non-current liabilities
Bank loan 20,000
 
Current liabilities
Accounts payable 20,000
Interest Payable 1,000
Tax payable 6,000
Provision for warranty 2,000
29,000
Total equity and liabilities 150,650

Question 16: FitLife

Answer
  1. Journal entries
1 Owner investment Dr Cr
Cash 80,000
Share capital 80,000
 
2 Bank loan received
Cash 30,000
Bank loan 30,000
 
3 Equipment purchase
Equipment 20,000
Cash 20,000
 
4 Rent paid
Rent expense 24,000
Cash 24,000
 
5 Cash received in advance (recognised as deferred income, a liability)
Cash 48,000
Deferred income 48,000
 
6 Cash revenue earned
Cash 60,000
Revenue 60,000
 
7 Credit revenue
Accounts receivable 20,000
Revenue 20,000
 
8 Cash received from customers
Cash 15,000
Accounts receivable 15,000
 
9 Salaries (fitness instructors)
Salaries expense 35,000
Cash 35,000
 
10 Administrative salaries
Administrative salaries expense 12,000
Cash 12,000
 
11 Insurance paid
Insurance expense 3,600
Cash 3,600
 
12 Dividends paid
Dividends 10,000
Cash 10,000
  1. Trial balance
Account Debit (CU) Credit (CU)
Cash 128,400
Accounts receivable 5,000
Equipment 20,000
Rent expense 24,000
Insurance expense 3,600
Salaries expense 35,000
Administrative salaries expense 12,000
Dividends 10,000
Deferred income 48,000
Bank loan 30,000
Share capital 80,000
Revenue 80,000
Total 238,000 238,000
  1. Adjusting entries
Rent – no adjustment required Dr Cr
Rent relates to 12-month period, fully within the year
 
Insurance (prepayment adjustment)
Prepaid insurance 2,400
Insurance expense 2,400
 
Insurance paid = 3,600 for three years
Annual expense = 3,600/3 = 1,200
Therefore, prepayment/overstated expense = 3,600 − 1,200 = 2,400
 
Deferred income (revenue recognition)
Deferred income (revenue recognition) 36,000
Revenue 36,000
 
Cash received in advance = 48,000
Revenue earned = 36,000; Therefore, remaining liability = 12,000
 
Accrued salaries
Salaries expense 4,000
Salaries payable 4,000
 
Depreciation
Depreciation expense 4,000
Accumulated depreciation 4,000
 
Cost of equipment = 20,000; useful life = five years
Annual straight-line depreciation = (20,000 − 0)/5 = 4,000
 
Accrued interest
Interest expense 1,500
Interest payable 1,500
 
Loan = 30,000; interest rate = 5%
Annual interest = 30,000 × 5% = 1,500
 
Income tax
Tax expense 6,000
Tax payable 6,000
  1. Extended trial balance
Trial balance Adjustments Adjusted trial balance
Account Debit (CU) Credit (CU) Debit (CU) Credit (CU) Debit (CU) Credit (CU)
Cash 128,400 128,400
Accounts receivable 5,000 5,000
Equipment 20,000 20,000
Accumulated depreciation (SoFP) 4,000 4,000
Depreciation expense 4,000 4,000
Rent expense 24,000 24,000
Prepaid insurance 2,400 2,400
Insurance expenses 3,600 2,400 1,200
Salaries expense 35,000 4,000 39,000
Salaries payable 4,000 4,000
Administrative salaries expense 12,000 12,000
Interest expense 1,500 1,500
Interest payable 1,500 1,500
Tax expense 6,000 6,000
Tax payable 6,000 6,000
Deferred income 48,000 36,000 12,000
Bank loan 30,000 30,000
Share capital 80,000 80,000
Dividends 10,000 10,000
Revenue 80,000 36,000 116,000
Total 238,000 238,000 53,900 53,900 253,500 253,500
  1. SoPL
FitLife Ltd
Statement of Profit and Loss for the year ended 31 Mar 20x6
CU
Revenue 116,000
Operating expenses:
    Salaries expense 39,000
    Administrative salaries 12,000
    Rent expense 24,000
    Insurance expense 1,200
    Depreciation expense 4,000 (80,200)
Operating profit 35,800
Interest (1,500)
Profit after interest 34,300
Tax (6,000)
Profit for the year 28,300
  1. SoFP
FitLife Ltd
Statement of Financial Position as at 31 Mar 20x6
CU
Non-current assets
Equipment 20,000
Less: Accumulated depreciation (4,000)
Net book value 16,000
 
Current assets
Cash 128,400
Accounts receivable 5,000
Prepaid insurance 2,400
135,800
Total assets 151,800
 
Equity and liabilities
Share capital 80,000
Retained earnings (28,300 – 10,000 dividends) 18,300
98,300
 
Non-current liabilities
Bank loan 30,000
 
Current liabilities
Deferred income 12,000
Salaries payable 4,000
Interest payable 1,500
Tax payable 6,000
23,500
Total equity and liabilities 151,800

Question 17: FreshMart

Answer
  1. Journal entries
1 Owner investment Dr Cr
Cash 120,000
Share capital 120,000
 
2 Inventory purchases on credit
Purchases 80,000
Accounts payable 80,000
 
3 Payment to suppliers
Accounst payable 50,000
Cash 50,000
 
4 Cash sales
Cash 190,000
Sales 190,000
 
5 Wages paid
Wages expense 45,000
Cash 45,000
 
6 Rent paid
Rent expense 24,000
Cash 24,000
 
7 Utilities paid
Utilities expense 6,000
Cash 6,000
 
8 Gift cards sold (recognised as deferred income, a liability)
Cash 10,000
Deferred income 10,000
  1. Trial balance
Account Debit (CU) Credit (CU)
Cash 195,000
Purchases 80,000
Wages expense 45,000
Rent expense 24,000
Utilities expense 6,000
Accounts payable 30,000
Deferred income 10,000
Share capital 120,000
Share capital 120,000
Sales 190,000
Total 350,000 350,000
  1. Adjusting entries
Closing inventory Dr Cr
Closing inventory (SoFP) 25,000
Closing inventory (CoGS) 25,000
 
Supplier discount
Accounts payable 2,000
Purchases 2,000
 
Inventory write-down
Inventory write-down expense 800
Inventory (SoFP) 800
 
Cost = 2,000; NRV = 1,200
Therefore, 2,000 − 1,200 = 800 must be written down
 
Gift cards (deferred income)
Deferred income 4,000
Sales 4,000
 
Gift cards sold = 10,000; Unredeemed = 6,000
Therefore, revenue earned = 10,000 − 6,000 = 4,000
 
Tax adjustments
i. Current year's tax
Tax expense 8,000
Tax payable 8,000
 
i. Last year's correction
Tax payable 1,000
Tax expense 1,000
  1. Adjusted trial balance
Trial balance Adjustments Adjusted trial balance
Account Debit (CU) Credit (CU) Debit (CU) Credit (CU) Debit (CU) Credit (CU)
Cash 195,000 195,000
Purchases 80,000 2,000 78,000
Inventory write-down expense 800 800
Closing inventory (SoFP) 25,000 800 24,200
Closing inventory (CoGS) 25,000 25,000
Wages expense 45,000 45,000
Rent expense 24,000 24,000
Utilities expense 6,000 6,000
Accounts payable 30,000 2,000 28,000
Deferred income 10,000 4,000 6,000
Tax expense 8,000 1,000 7,000
Tax payable 1,000 8,000 7,000
Share capital 120,000 120,000
Sales 190,000 4,000 194,000
Total 350,000 350,000 40,800 40,800 380,000 380,000
  1. SoPL
FreshMart Ltd
Statement of Profit and Loss for the year ended 31 Dec 20x9
CU
Sales 194,000
Cost of goods sold:
    Opening inventory 0
    Purchases 78,000
    Closing inventory (25,000) (53,000)
Gross profit 141,000
Operating expenses:
    Wages expense 45,000
    Rent expense 24,000
    Utilities expense 6,000
    Inventory write-down expense 800 (75,800)
Operating profit 65,200
Interest 0
Profit after interest 65,200
Tax (7,000)
Profit for the year 58,200
  1. SoFP
FreshMart Ltd
Statement of Financial Position as at 31 Jan 20x9
CU
 
Non-current assets −
 
Current assets
Cash 195,000
Inventory 24,200
219,200
Total assets 219,200
 
Equity and liabilities
Share capital 120,000
Retained earnings 58,200
178,200
 
Non-current liabilities −
 
Current liabilities
Accounts payable 28,000
Deferred income 6,000
Tax payable 7,000
41,000
Total equity and liabilities 219,200

Question 18: Derma Ltd

Answer
  1. Journal entries
1 Credit sales Dr (m) Cr (m)
Accounts receivable 95
Sales 95
 
2 Cash sales
Cash 25
Sales 25
 
3 Cash received from customers
Cash 92
Accounts receivable 92
 
4 Credit purchases
Purchases 60
Accounts payable 60
 
5 Payment to suppliers
Accounts payable 58
Cash 58
 
6 Wages paid
Wages expense 20
Cash 20
 
7 Insurance paid
Insurance expense 8
Cash 8
 
8 Administrative expenses paid
Administrative expenses 6
Cash 6
 
9 Interest paid
Interest expense 2
Cash 2
 
10 Income tax payment
Tax payable 5
Cash 5
 
11 Dividends paid
Retained earnings 4
Cash 4
  1. Trial balance
Account Debit (m) Credit (m)
Equipment 80
Accumulated depreciation 24
Opening inventory 18
Accounts receivable 19
Loss allowance 1
Cash 34
Prepaid insurance 2
Share capital 70
Retained earnings 6
Bank loan 10
Accounts payable 11
Wages payable 3
Interest payable 1
Tax payable 1
Provision for product returns 2
Sales 120
Purchases 60
Wages expense 20
Insurance expense 8
Administrative expenses 6
Interest expense 2
Total 249 249
  1. Adjusting entries
Inventory write-down Dr (m) Cr (m)
Inventory write-down expense 2
Inventory (SoFP) 2
 
Insurance expense – prepayment adjustment
Prepaid insurance 1
Insurance expense 1
Opening balance = 2; Paid in the year = 8; Closing balance = 3
Insurance expense for the year = 2 + 8 − 3 = 7
Therefore, reduce expense by 1
 
Accured wages
Wages expense 1
Wages payable 1
Opening balance = 3; Paid in the year = 20; Closing balance = 4
Wages expense for the year = 20 − 3 + 4 = 21
Therefore, increase expense by 1
 
Depreciation
Depreciation expense 8
Accumulated depreciation 8
 
Bad debt
Bad debt expense 1
Accounts receivable 1
 
Expected credit losses
Loss allowance (SoFP) 0.1
Expected credit loss expense (SoPL) 0.1
Receivables balance after write-off = 19 − 1 = 18
Required allowance = 18 × 5% = 0.9
Therefore, reduce allowance by 0.1
 
Increase in provision
Provision expense 1
Provision for product return 1
 
Interest payable adjustment
Interest expense 1
Interest payable 1
Opening balance = 1; paid during the year = 2; Closing balance = 2
Interest expense for the year = 2 − 1 + 2 = 3
Therefore, increase interest expense by 1
 
Income tax adjustment
Tax expense 7
Tax payable 7
  1. Adjusted trial balance
Trial balance Adjustments Adjusted trial balance
Account Debit (m) Credit (m) Debit (m) Credit (m) Debit (m) Credit (m)
Equipment 80 80
Accumulated depreciation 24 8 32
Opening inventory 18 18
Accounts receivable 19 1 18
Bad debt expense 1 1
Loss allowance 1 0.1 0.9
Expected credit loss expense 0.1 0.1
Cash 34 34
Prepaid insurance 2 1 3
Accounts payable 11 11
Wages payable 3 1 4
Interest payable 1 1 2
Tax payable 1 7 8
Provision for product returns 2 1 2
Bank loan 10 10
Share capital 70 70
Retained earnings 6 6
Sales 120 120
Purchases 60 60
Wages expenses 20 1 21
Insurance expense 8 1 7
Administrative expenses 6 6
Interest expense 2 1 3
Inventory write-down expense 2 2
Depreciation expense 8 8
Provision expense 1 1
Tax expense 7 7
Closing inventory (SoFP) 15 2 13
Closing inventory (CoGS) 15 15
Total 249 249 37 37 282 282
  1. SoPL
Derma Ltd
Statement of Profit and Loss for the year ended 31 Dec
Year 4
CU (m)
Sales 120
Cost of goods sold:
    Opening inventory 18
    Purchases 60
    Closing inventory (15) (63)
Gross profit 57
Operating expenses:
    Wages expense 21
    Insurance expense 7
    Administrative expense 6
    Inventory write-down expense 2
    Depreciation expense 8
    Bad debt expense 1
    Loss allowance (reduction in allowance) (0.1)
    Provision expense 1 (45.9)
Operating profit 11.1
Interest (3)
Profit after interest 8
Tax (7)
Profit for the year 1.1
  1. SoFP
Derma Ltd
Statement of Financial Position as at 31 Dec Year 4
CU (m)
Non-current assets
Equipment 80
Less: Accumulated depreciation (32)
Net book value 48
 
Current assets
Inventory 13
Accounts receivable 18
Less: loss allowance (0.9)
Net receivables 17.1
Prepaid insurance 3
Cash 34
67.1
Total assets 115.1
 
Equity and liabilities
Share capital 70
Retained earnings (6 + 1.1) 7.1
77.1
 
Non-current liabilities
Bank loan 10
 
Current liabilities
Accounts payable 11
Wages payable 4
Interest payable 2
Tax payable 8
Provision for product returns 3
28
Total equity and liabilities 115.1