Question 2 35 Marks Hafeni Limited changed its inventory valuation method from weighted average…
Question 2 35 Marks
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
