Accounting Business Reporting for Decision Making

CHAPTER 6 Statement of profit or loss and statement of changes in equity 259

h. Games Pty Ltd tendered for work totalling $40 000 in November 2015. It has been advised that

its tender is one of three being considered.

i. One of Games Pty Ltd’s clients was placed into liquidation in December 2015. This client owes

Games Pty Ltd $6200.

j. Games Pty Ltd has a property with a carrying value of $120 000. An assessment has determined

that its recoverable amount is $90 000.

6.37 Preparing a statement of profit or loss   LO4

Jessica Windmere had prepared the financial statements for her business, a sole proprietorship,

to take to her accountant. Unfortunately, she has misplaced the statement of profit or loss. Her

accountant assures her that the profit or loss for the period can be determined so long as she has

her balance sheets for the previous and current reporting period. These are presented below.

Jessica Windmere Business

Balance sheet

As at

30 June 2017

As at

30 June 2016

Cash

Receivables

Inventory

Prepayments

$ 6 700

10 400

30 200

3 510

$ 3 800

10 000

37 800

2 100

Total current assets 50 810 53 700

Land

Plant and equipment

34 600

21 600

33 500

29 200

Total non-current assets 56 200 62 700

Total assets 107 010 116 400

Bank overdraft

Accounts payable

Accrued expenses

—

14 000

4 000

9 700

16 200

3 300

Total current liabilities 18 000 29 200

Loan 23 800 28 100

Total liabilities 41 800 57 300

Equity $ 65 210 $ 59 100

In addition, Jessica Windmere tells her accountant that she has made drawings totalling $27 000

during the reporting period.

Required

Analysing the information provided, determine the profit or loss for Jessica Windmere for the year

ended 30 June 2017.

6.38 Accounting judgements and estimation uncertainty   LO3

Note 2(a) of JB Hi-Fi Ltd’s 2015 Notes to the financial statements states:

The Company makes estimates and assumptions concerning the future. The resulting accounting

estimates will, by definition, seldom equal the related actual results. The estimates and assump-

tions that have a significant risk of causing a material adjustment to the carrying amounts of assets

and liabilities within the next financial year are discussed below.

Source: JB Hi-Fi Ltd 2015, preliminary final report, p. 71.

Required

a. Identify the critical accounting estimates and assumptions noted by JB Hi-Fi Ltd.

b. Note 2(a) of JB Hi-Fi Ltd’s 2015 Notes to the financial statements refer to critical judge-

ments in applying the entity’s accounting policies. Identify the accounting areas noted by