Hafeni Limited changed its inventory valuation method from weighted average method to FIFO as… 1 answer below »

Hafeni Limited changed its inventory valuation method from weighted average method to FIFO as this will result in fairer presentation as the matching of revenue and expenses will be improved.

The effect of the change is as follows:

Year-end inventory balances 2015

N$ 2014

N$ 2013

N$ 2012

N$

Weighted average method (old method)

15 000

14 000

12 000

10 000

FIFO method (new method)

18 000

15 000

14 000

11 000

The draft financial statements before the change in accounting policy are as follows:

HAFENI LIMITED

DRAFT STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2015

2015

N$ 2014

N$

Revenue

1 200 000

900 000

Cost of sales

(420 000)

(350 000)

Gross profit

780 000

550 000

Other costs

(220 000)

(200 000)

Profit before tax

560 000

350 000

Income tax expense

(235 200)

(136 500)

Profit for the year

324 800

213 500

Other comprehensive income for the year

Total comprehensive income for the year

324 800

213 500

HAFENI LIMITED

DRAFT STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2015

Retained earnings

N$

Balance: 1/1/2014

67 500

Total comprehensive income: 2014

213 500

Balance: 31/12/2014

281 000

Total comprehensive income: 2015

324 800

Balance : 31/12/2015

605 800

REQUIRED

Prepare the statement of profit or loss and other comprehensive income, statement of changes in equity, statement of financial position and the relevant notes of Hafeni Limited for the year ended 31 December 2015 in accordance with International Financial Reporting Standards.

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