Practice Activity 9.32 Preparing a company’s statement of profit or loss

The following information was extracted from the books of accounts pertaining to Amaco Company Limited for the year ended 31 December 2019.

More information gathered from the accounting records are:

1. It is the policy of Amaco Company Limited to charge depreciation on Property, Plant, and Equipment as follows:

Buildings 20% using the reducing balance method

Equipment 25% using the reducing balance method

2. On 30 December 2019, the Company placed an order for a Toyota Camry car which costs ₦5 million from Exquisite Limited. At that date, the model was not in stock. The invoice was yet to be raised for the order by the supplier.

3. At the close of the accounting period, the cost of inventory was ₦20.75 million, while the net realisable value was ₦32.5 million.

4. Tax is 35% of profits.

5. As of 31 December 2019, the Company’s policy is to provide 7% for doubtful debts.

6. The opening balance of equity share capital is ₦25 million.

Required: Prepare the statements of:

i. Profit or loss for the year ended 31 December 2019; and

ii. Financial position as at the same date.

See a suggested solution to practice activity 9.32 here.

Suggested solution to practice activity 9.32