Question

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The following details are taken from the accounting records of Alanna Ltd as at 30 June 2018: DR S CR S Sales Revenue 1,425,000 15,000 37,500 Gain on Sale of Plant and Equipment Interest Revenue Cost of Goods Sold 900,000 45,000 30,000 45,000 22,500 112,500 Distribution Expenses Selling Expenses Administration Expenses Interest Expense Income Tax Expense Share Capital ( as at 1 July 2017) Retained Earnings ( as at 1 July 2017) Asset Revaluation Reserve (as at 1 July 2017) 600,000 510,000 50,000 General Reserve 80,000 Additional information: 1. The company follows the revaluation method ofaccounting for its PPE. During the year the following asset was revalued: Land was revalued upwards during the year by $30,000. 2. 100,000 shares were issued during the year at a price of $1 per share 3. The company directors declared and paida dividend of $75,000 during the year 4. There was a transfer of $15,000 from Retained Earnings to General Reserve during the year. 5. Alanna Ltd uses the single statement format for the Statement of Profit or Loss and Other Comprehensive income and classifies expenses by function. 6. Income tax rate is 30%. Required: i. Prepare the Statement of Profit or Loss and Other Comprehensive Income for Alanna Ltd for the year ended 30 June 2018. (7 marks) ii. Prepare the Statement of Changes in Equity for Alanna Ltd for the year ended 30 June 2018. (6 marks)

Answer 1

	Income Statement
	Sales Revenue				$ 1,425,000.00
	Interest Revenue				$        37,500.00
	Total Revenue				$ 1,462,500.00
Less:	Cost of goods sold				$      900,000.00
			Gross Margin		$      562,500.00
Less:	Expenses
	Administrative Expense			$ (45,000.00)
	Selling Expense			$ (30,000.00)
	Distribution Expense			$ (45,000.00)
	Interest Expense			$ (22,500.00)	$   (142,500.00)
Add:	Gain on sale of P&E				$        15,000.00
	Operating Income				$      435,000.00
Less:	Income Tax				$   (112,500.00)
			Net Income		$      322,500.00

Statement of Changes in Equity
Revaluation Surplus
Balance at beginning of period				$    50,000.00
Upward Revaluation				$    30,000.00
Balance at the end of period				$    80,000.00
Retained Earnings
Balance at beginning of period				$ 510,000.00
Profit for the period				$ 322,500.00
Dividend paid				$ (75,000.00)
Transfer to Gen. Reserve				$ (15,000.00)
Balance at the end of period				$ 742,500.00
Share Capital
Balance at beginning of period				$ 600,000.00
Shares issued				$ 100,000.00
Balance at the end of period				$ 700,000.00
General Reserve
Balance at beginning of period				$    80,000.00
Transfer from Retained Earnings				$    15,000.00
Balance at the end of period				$    95,000.00