Question

Melilea Limited "Melilea") is a company listed on the Hong Kong Stock Exchange. It has a financial year end at 31 December. The following financial information has been summarized from the books of Melilea on 31 December 2016: Debit Credit 800,000 Sales 430,000 Cost of sales 12,670 Tax expense 82,700 Selling and distribution expenses 56,900 General and administrative expenses 13,000 Finance costs 290,000 Cash and bank balances 57.400 Retained profits at 1 January 2016 80,000 Revaluation surplus at 1 January 2016 Share capital (70 million shares) 700,000 228,000 Accounts receivables 13,200 Provision for bad debts at 1 January 2016 420,000 Inventory 1,402,000 Plant, property and equipment Accumulated depreciation at 1 January 2016 Accounts payables 415,000 165,000 7,670 Tax payables Deferred tax liability Long-term bank loans 7,000 290,000 935,270 2,935,270 The above financial data has not taken into consideration the following items: From past experience, the management estimated that 7% of trade receivables was (i) uncollectible. (ii) Property, plant and equipment are to be depreciated at 10% on cost based on the year-end figures. Depreciation expense is regarded as part of cost of sales (iii) Property was measured using the revaluation model. In February 2017, Melilea received confirmation that the fair value of the property was higher than its carrying amount by $50,000 million at 31 December 2017. The tax effect associated with this asset revaluation surplus was $10,000 million. (iv) Melilea had 68 million fully paid-up ordinary shares on 1 January 2016. 2 million ordinary shares were issued at full market price on 1 July 2016 (this transaction has been accounted for in the books). On 16 January 2017, Melilea declared a bonus dividend of1 for every 7 existing shares held at that date. The bonus issue was financed by capitalizing $200,000 retained profits. Required: Prepare the following financial statements for Melilea in accordance with the requirements of HKAS 1 Presentation of financial statements: Statement of profit or loss and other comprehensive income for the year (a) ended 31 December 2016 Statement of financial position as at 31 December 2016. (b)

Answer 1

STATEMENT OF PROFIT AND LOSS
Description	Amount
Sales	800000
Total Revenue	800000
Cost of Sales	430000
Depreciation	140200
Gross Margin	229800
Selling and Distribution Expenses	82700
General and Administrative Expenses	56900
Finance Cost	13000
Bad Debts	15960
Tax on Revaluation of Asset	10000
Total Expenses	178560
Tax Expense	12670
Profit for the Year	38570

STATEMENT OF FINANCIAL POSITION
ASSETS		Amount
Current Assets
Cash and Bank		290000
Accounts Receivables	228000
Less: Opening Provision	13200
	214800
Less: Closing Provision	15960	198840
Inventory		420000
Fixed Assets
Property Plant and Equipment	1402000
Less: Current Depreciation	140200
Less: Accumlated Depreciation	415000
Add: Revaluation	40000	886800
Total Assets		1795640
LIABILITIES		Amount
Current Liabilities
Accounts Payable		165000
Deferred Tax Liability		7000
Tax Payable		7670
Non Current Liabilites
Long Term Bank Loans		290000
Share Capital
Issued and Paid up	700000
Add: Bonus Dividend	100000
Add: Other Reserve	100000	900000
Retained Earnings
Opening	457400
Less: Bonus Dividend	200000
Add: Profit for Current Year	38570	295970
Revaluation Reserve
Opening	80000
Add: Additional	50000	130000
Total Liabilities and Shareholders Equity		1795640