FINANCIAL REPORTING – PROFIT OR LOSS ACCOUNTS

The following trial balance relate to Lubuto company at 31 March 2022
Plant and Equipment at cost (iii) 155,500
Accumulated amortisation/ depreciation at 1 April 2021
Right of use asset 25,000
Plant and Equipment 43,500
Right of use – leased property at cost 100,000
Bank interest 900
Administration expenses 36,800
Distribution costs 33,500
Cost of sales 290,600
Loan note interest and dividends paid (notes(iv) and(v) 13,380
Revenue 490,000
Inventories at 31st March 2022 61,000
Trade received 63,000
Trade payables 32,200
Bank 5,500
Equity shares of 25ngwee each (notes ii) 56,000
Share premium 25,000
Retained earnings at 1 April 2021 26,080
5% convertible loan note (note iv) 50,000
Current tax note (vi) 3,200
Deferred tax (note (vi) 4,600
757,880 757,880
The following notes are relevant:
(i) Revenue includes and amount of K20 million for cash sales made through Lubuto
co’s retail outlets during the year on behalf of francis. lubuto Co, acting as agent, is
entitled to a commission of 10% of the selling price of these goods. By 31st March
2022, Lubuto Co had remitted to Francis K15million ( of the K20 million sales) and
recorded this amount in cost of sales
(ii) On 1st August 2021, Lubuto Co made a fully subscribed rights issue of equity share
capital based on two new shares at 60 ngwee each for every five shares held. The
issue has been fully recorded in the trial balance figures.
(iii) Plant and equipment is depreciated at 12.5% per annum on the reducing balance
basis. All amortisation and depreciation of non-current assets is charged to cost of
sales.
(iv) On 1 April 2021, Lubuto co issued a 5% K50 million convertible loan note at par.
Interest is payable annually in arears on 31 March each year. The loan note is
redeemable at par or convertible into equity shares at the option of the loan note
holders on 31 March 2024. The interest on an equivalent loan note without the
conversion rights would be 8% per annum. The present values of K1 received at the
end of each year, based on discount rates of 5% and 8% are:
5% 8%
End of year 1 0.95 0.93
2 0.91 0.86
3 0.86 0.79
(v) An equity dividend of 4ngwee per share was paid on 30 May 2021 and, after the
rights issue, a further dividend of 2 ngwee per share was paid on30th November
2021.
(vi) The balance on current tax represent represents the under/over provision of the tax
liability for the year ended 31st March 2021. A provision of K28 million is required
for current tax for the year ended 31st March 2022 and at this date the deferred tax
liability was assessed at K8.3 million.
Required
(a) Prepare tha statement of profit or loss for Lubuto for the year ended 31st March 2022.
(12marks)
(b) Prepare the statement of financial position for; Lubuto for the year ended 31 March 2022,
(18 marks)