Blunt (Pty Ltd provided the following information that was extracted from the financial records for the year ended 31 December 2021. Relevant financial information from the statement of profit and loss and other comprehensive income and the statement of financial position with comparative figures are shown below. Extract of items shown on the statement of profit and loss and other comprehensive income for the year ended 31 December 2021: R Interest income on fixed deposit Depreciation Loss on sale of equipment Interest on long term borrowings Income tax expense Profit for the year 30 000 20800 1000 32 000 86 000 141 000 Information from the statement of financial position as at 31 December: 2021 2020 R Land and buildings at cost 620000 520 000 Equipment at carrying amount 268 000 343 000 Coot 354 000 441 000 Accumulated depreciation 86000 98000 Fixed deposits 70000 100000 Inventory 66000 100000 Debtors control 64000 70000 Bank favourable (debit) balance 86 000 Prepaid expense Rent 6000 Creditors control 26 000 48000 Bank overdraft credit balance 6000 SARS-tax payable 22 000 18000 Shareholders dividends payable 30000 75000 Interest payable 10000 12000 Ordinary share capital 850 000 750000 Retained earnings 96000 30000 Long term borrowings 140000 200000 Page 7 of 8 Additional information: 1.Inventory is disclosed at cost. 2. Land has not been revalued in the current financial year 3. An extension was added to the building and completed in the current financial year. All building costs were paid for in cash. Buildings are not depreciated. 4. Interest on the long term loan is not capitalised. 5. No equipment was sold during the current financial year. Some equipment was sold during the year for cash. 6. Dividends for the year as shown in the statement of changes in equity was R75 000. Required: Prepare the statement of cash flows of Blunt (Pty Ltd for the year ended 31 December 2021 to comply with the International Financial Reporting Standards (IFRS) in as much as possible.Use the indirect method. Comparative figures are not required
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The following adjusted revenue and expense accounts appeared in the accounting records of Pashi, Inc., an accrual basis taxpayer, for the year ended December 31, Year 2. Revenues Net sales: $3,000,000 Interest: $18,000 Gains on sales of stock: $5,000 Key-man life insurance proceeds: $100,000 Subtotal: $3,123,000 Costs and Expenses Cost of goods sold: $2,000,000 Salaries and wages: $500,000 Bad debt expense: $13,000 Taxes, other than federal income: $62,000 Interest: $12,000 Contributions: $5,000 Depreciation: $60,000 Other: $40,000 Federal income taxes: $120,000 Subtotal: $2,812,000 Net Income: $311,000 The following additional information is provided: 1. Interest revenue consists of: Corporate bonds: $15,000 Municipal bonds: $3,000 2. Gains on sales of stock consist of the following unrelated corporations: Ral Corp. (bought in May Year 1, sold in June Year 2): $1,000 Blu, Inc. (bought in November Year 1, sold in September Year 2): $4,000 3. Pashi, Inc. owned the key-man life insurance policy, paid the premiums, and was the direct beneficiary. The proceeds were collected on the death of the corporation's treasurer. 4. Bad debt expense represents a reasonable addition to Pashi, Inc.'s allowance for uncollectible accounts, under the method consistently used. Actual accounts written off in Year 2 amounted to $4,000. 5. Taxes, other than federal income, consist of: Payroll taxes: $40,000 Property taxes: $20,000 Penalty for late payment of taxes: $2,000 6. Interest expense consists of $11,000 interest on funds borrowed for working capital and $1,000 interest on funds borrowed to buy the municipal bonds. 7. Contributions were all paid in Year 2 to State University, specifically designated for the purchase of laboratory equipment. 8. Depreciation per books is straight-line. For tax purposes, depreciation amounted to $85,000. 9. Other expenses include premiums of $5,000 on the key-man life insurance policy covering the treasurer, who died in December Year 2. 10. Federal income tax paid in Year 2 amounted to $105,000. The difference between the income tax provision and income tax paid is the result of temporary differences. In the associated cells in column C, enter the appropriate amount for the item you selected in column B. Note that not all areas of the M-1 form are presented here.
Akash M.
The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2021 ($ in thousands): sales revenue, $15,700; cost of goods sold, $6,400; selling expenses, $1,320; general and administrative expenses, $820; interest revenue, $80; interest expense, $200. Income taxes have not yet been recorded. The company’s income tax rate is 25% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2021 ($ in thousands). All transactions are material in amount. Investments were sold during the year at a loss of $240. Schembri also had an unrealized gain of $360 for the year on investments in debt securities that qualify as components of comprehensive income. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,400. During the year, Schembri completed the sale of one of its operating divisions that qualifies as a component of the entity according to GAAP. The division had incurred a loss from operations of $580 in 2021 prior to the sale, and its assets were sold at a gain of $1,440. In 2021, the company’s accountant discovered that depreciation expense in 2020 for the office building was understated by $220. Negative foreign currency translation adjustment for the year totaled $260. Required: Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for 2021, including earnings per share disclosures. One million shares of common stock were outstanding at the beginning of the year and an additional 400,000 shares were issued on July 1, 2021. Prepare a separate statement of comprehensive income for 2021.
Supreeta N.
Reit Ltd is reviewing its deferred tax for the year. In each of the following situations, prepare the end-of-period adjustment journal entries to account for income tax on the initial appearance or reversal of any temporary differences. Explain in each case why particular accounts are affected. 1. The company purchased a depreciable asset at the beginning of the year for $200,000. For accounting purposes, an annual depreciation rate of 20% straight-line is used, whereas for taxation the rate is 30% straight-line. 2. The company's provision for long-service leave at the beginning and end of the year are $140,000 and $125,000 respectively. In the current year, $15,000 in long-service leave was paid to a long-standing employee. 3. In calculating taxable income, the company has deducted $40,000 of development expenditure incurred at the beginning of the year. For accounting purposes, the $40,000 has been capitalized as an asset and is amortized on a straight-line basis over 5 years. The company is not entitled to any additional deduction above the 100% of costs incurred. 4. The company has an allowance for doubtful debts of $4,000 at the end of the year. The balance of the allowance account at the beginning of the year was $7,000. In the current period, $12,000 was written off as being uncollectible. The gross amount of accounts receivable at the beginning and end of the year are $65,000 and $60,000 respectively. 5. The company has interest receivable of $20,000 at the end of the year. No interest was receivable at the beginning of the year. Interest income is included in taxable profit only when received.
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