CHAPTER 6 Statement of profit or loss and statement of changes in equity 255- equipment depreciation expense of $5200
- cash received for applications not yet developed of $4000
- an annual insurance premium of $1500 paid to the Insure Company on 1 January.
Required
For each item analyse:
a. the nature of the adjustment that needs to be made (e.g. prepaid expense, accrued income,
income received in advance or accrued expense)
b. whether the profit for the reporting period would have been under- or overstated without the
adjustment occurring.
6.27 LO4, 9
Myer shares slumped when the department store posted a 23.1 per cent slide in profit for the first
half of the 2014/2015 year. Myer’s profit was mostly hit by a 24-basis-point fall in gross profit
margin and a 6.2 per cent increase in the cash cost of doing business. Myer’s capital expenditure
increased almost 36 per cent due to investment in new stores and refurbishment, ongoing investment
in its website and other initiatives.
Source: Janda, M & Morgan, E 2015, ‘Myer management defends lack of warning on surprise 23pc profit slump’,
ABC News, 19 March.a. Explain how capital expenditure can contribute to the drop in after-tax profit.
b. Discuss the reasons for a gross profit margin decreasing and the cash cost of doing business
increasing.
c. Discuss if Myer’s profit performance improved in the second half of the year.6.28 LO4, 8
The following information was obtained from the financial records of Bulmer Ltd for the year
ended 30 June 2015. Prepare the statement of profit or loss for the year ended 30 June 2015.
$’000
Retained earnings 1 July 2014
Sales revenue from continuing operations for the year
Finance costs
Estimated income tax expense for year ended 30 June 2015
Interim dividends paid (ordinary shares)
Provision for final dividend on ordinary shares
Transfer retained earnings to general reserve
Amortise goodwill
Write off research and development costs
Share capital (1 million $1 shares)
General reserve (1 July 2014)
Expenses from ordinary activities (excluding finance costs)180
1 200
49
101
40
62
12
12
8
1 000
80
5006.29 LO4, 8
A list of account balances for Mr Zheng’s business (Futronics) at the end of the 30 June 2017
reporting period is shown below. Prepare the statement of profit or loss for the reporting period,
and the equity balance at the end of the year.$’000
Cash
Receivables
Office supplies
Prepaid insurance
Plant and equipment
Accumulated depreciation — plant and equipment
Accounts payable
Salaries payable26 000
14 000
1 200
650
125 000
29 300
20 600
6 000
(continued)