Manukau Manufacturing Limited - Case Study - Accounting and Finance Assignment Help

Assignment Task:

Task:

The following information has been extracted from the financial records of Manukau Manufacturing Limited at 31 March 2020.

2020 2019
Debit Credit Debit Credit
Accounts Payable 75,000 88,000
Accounts Receivable 82,000 78,000
Advisory Services 25,000
Asset revaluation reserve 100,000 100,000
Audit fee 30,000
Bad debts 6,000
Bank overdraft 32,000
Buildings 320,000 320,000
Accumulated depreciation –
Buildings

120,000 120,000
Cash at bank 25,000
Cash on hand 3,000 5,000
Cost of sales 735,000
Directors fees 22,000
Dividends paid 40,000
Rent received 54,000
Interest paid - mortgage 14,400
Interest paid - overdraft 4,600
Inventory 108,000 86,000
Investment properties 270,000 270,000
Land (at valuation) 300,000 100,000
Lease of Premises 50,000
Mortgage 240,000 280,000
Other expenses 353,000
Issued Capital 440,000 340,000
Plant and machinery (at cost) 640,000 520,000
Accumulated depreciation –
Plant and machinery

270,000 270,000

Proceeds from sale of plant and machinery

40,000
Provisional tax paid 100,000
Retained earnings 185,000 185,000
Sales 1,776,000
Staff wages 250,000

Tax Payable 21,000 21,000
TOTALS $3,353,000 $3,353,000 $1,404,000 $1,404,000

Additional information:
Ignore GST.
The original mortgage of $280,000 was totally repaid on 1 April 2019 and a new mortgage arranged on the same date. The principal repayment of the new mortgage will be fully repaid in equal instalments over the next five years, commencing on 30 September 2020. The new mortgage on the buildings is fixed at 8% per annum. Interest is payable at the end of every three month period.There have been no principal repayments during the past six months. The loan is secured over the buildings.

There is interest outstanding for three months on the new mortgage. The ‘interest paid – mortgage’ included in the information on page 2, is interest paid on the new mortgage.

On 1 April 2019 plant and machinery with an original cost of $90,000 was sold for $40,000 cash. Accumulated depreciation totalled $35,000 at the date of sale. The only entry that has been made to date is the recording of the receipt of the sale proceeds into the Bank account and the Proceeds from Sale of Plant and Machinery account.
New plant and machinery was purchased on 1 April 2019. The buildings are depreciated at the rate of 2% pa cost (straight line). Plant and machinery is depreciated at the rate of 20% pa cost (straight line), including any leased machinery (if applicable). No depreciation entries have yet been made for the year ending 31 March 2020. You are required to make these entries and adjust the appropriate account balances for the current year only.

The directors have decided to follow the cost model for plant and machinery but to adopt the revaluation model for land and buildings. At balance sheet date there were no indicators of impairment relating to plant and machinery.
On 1 April 2019 the company purchased land adjacent to their current buildings for use as a car park – total cost $200,000.
On 29 March 2020 the land was valued by a firm of independent registered valuers. The fair value of the land was considered to be $400,000. The valuer determined that there had been no change in the value of the buildings. No entry has been recorded in the accounts for the revaluation of land.
The registered valuer also determined that the fair value of the Investment Properties were now $300,000.
Issued capital on 1 April 2019 comprises 170,000 ordinary shares issued at a value of $2.00 each. During the year a further 50,000 shares were issued at an issue price of $2.00 each. Raw materials comprise 20 per cent of inventory, work in progress 30 per cent of inventory, while the balance comprises finished goods. Inventory is valued at the lower of cost and net realisable value on a first in, first out cost basis.

One of the employees of the company is currently seeking compensation for wrongful dismissal. The company was notified of the claim on 3 March 2020. The total amount of the claim is $350,000. The company’s solicitor is unable to say whether the employee will be successful or not, but expects that legal costs could range from $10,000 to $35,000.
Taxation is paid at a rate of 28 cents in the dollar. Note: there is no tax payable or deductible for changes in the value of investment properties.
The directors of the company are recommending that the shareholders approve a final dividend of 10 cents per share at the annual general meeting to be held on 20 August 2020.

Required:

Prepare the annual financial statements of Manukau Manufacturing Limited for the year ended 31 March 2020 for presentation to the shareholders. You are NOT required to show the comparative figures for the previous year. You are required to show the minimum that is acceptable under the current law and accounting standards.

Your reports should be presented in the following sequence:
Statement of Comprehensive Income
Statement of Changes in Equity
Balance Sheet
Cash Flow Statement

Statement of Accounting Policies Supporting Notes.
Workings: Please state any assumptions you have made at the back of the assignment.

Statement of Accounting Policies and the supporting notes should include the
notes as follows:

1. Statement of Accounting Policies
2. Revenue
3. Expenses
4. Finance Costs
5. Tax expense
6. Movements in Asset Revaluation Reserve
7. Share Capital
8. Dividends
9. Inventory
10. Property Plant & Equipment
11. Mortgage
12. Contingent Liabilities

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