Question ThreeABC sells goods to the building industry and carries out construction contracts for clients.ABC’s trial balance at 30 September 2011 is shown below:Notes $000 $000Administrative expenses 1,020Cash and cash equivalents 440Cash received on account from construction contract clients during year to30 September 2011 – contract 1 (i) 4,000Cash received on account from construction contract clients during year to30 September 2011 – contract 2 (i) 1,800Cash received on disposal of plant and equipment (iii) 15Construction contract 1 - work in progress for year to 30 September 2011 (i) 3,750Construction contract 2 - work in progress for year to 30 September 2011 (i) 2,250Distribution costs 590Equity dividend paid (viii) 250Equity Shares $1 each, fully paid at 30 September 2011 2,500Income tax (v) 15Interest paid – half year to 31 March 2011 58Inventory at 30 September 2011 (excluding construction contracts) 310Long term borrowings (redeemable 2021) (iv) 2,300Plant and equipment at cost 30 September 2011 (iii) 4,930Property at valuation 30 September 2010 (ii) 11,000Provision for deferred tax at 30 September 2010 (vi) 250Provision for plant and equipment depreciation at 30 September 2010 (iii) 2,156Provision for property depreciation at 30 September 2010 (ii) 3,750Cost of goods sold (excluding construction contracts) 3,210Retained earnings at 30 September 2010 627Sales revenue 9,500Share premium at 30 September 2011 1,500Trade payables 235Trade receivables (vii) 81028,633 28,633Additional information provided:(i) At 30 September 2011 ABC had two construction contracts in progress.Contract 1 Contract 2Contract length 3 years 2 yearsDate commenced 1 October 2010 1 April 2011Fixed contract value $11,000,000 $8,000,000Financial Operations 13 November 2011 Contract detail for year ended 30 September 2011Both contracts use the value of work completed method to recognise attributableprofit for the year.(ii) Property consists of land $3,500,000 and buildings $7,500,000. Buildings aredepreciated at 5% per year on the straight line basis. No buildings were fullydepreciated at 30 September 2011.(iii) Plant and equipment is depreciated at 25% per year using the reducing balancemethod. During the year to 30 September 2011 ABC sold obsolete plant for$15,000. The plant had cost $75,000 and had been depreciated by $65,000. Alldepreciation is considered to be part of cost of sales. ABC’s policy is to charge a fullyear’s depreciation in the year of acquisition and no depreciation in the year ofdisposal.(iv) The long term borrowings incur annual interest at 5% paid six monthly in arrears.(v) The income tax balance in the trial balance is a result of the under provision of taxfor the year ended 30 September 2010. The directors estimate the income taxcharge on the profit of the year to 30 September 2011 at $910,000.(vi) The deferred tax provision is to be increased by $19,000.(vii) On 1 August 2011, ABC was informed that one of its customers, EF, had ceasedtrading. The liquidators advised ABC that it was very unlikely to receive payment ofany of the $25,000 due from EF at 30 September 2011.(viii) ABC made no new share issues during the year. ABC paid a final dividend for theyear to 30 September 2010.Section C continues on page 14TURN OVERContract 1 Contract 2Proportion of work certified as completed 40% 25%$000 $000Construction contract work in progress 3,750 2,250Estimated cost to complete contract 5,400 6,750Cash received on account from construction contract clientsduring year4,000 1,800Required:Prepare ABC’s statement of comprehensive income and statement of changes in equityfor the year to 30 September 2011 AND a statement of financial position at that date inaccordance with the requirements of International Financial Reporting Standards.Notes to the financial statements are not required, but all workings must be clearly shown. Donot prepare a statement of accounting policies.

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