Topic: Inventory

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  • 10 Marks

FA – Nov 2024 – L1 – Q5a – Inventory Loss and Statement of Profit or Loss

Compute inventory loss due to fire and prepare a statement of profit or loss for a sole trader.

Mawulolo Enterprise is a retail business that prepares its accounts on 31 March each year. The business maintains a standard gross profit margin of 30% on sales.

The following financial information was extracted from its records as at 31 March 2024:

Item GH¢
Inventory at 1 April 2023 254,000
Operating Expenses 378,000
Finance Cost 58,000
Purchases 1,306,000
Sales 1,900,000
Inventory in good standing at 31 March 2024 192,000

On 31 March 2024, a fire outbreak in the warehouse destroyed some of the inventory records and goods.

The tax charge for the year is estimated at GH¢30,000.

Required:

i)Calculate the amount of inventory lost.

ii) Prepare the Statement of Profit or Loss for the year ended 31 March 2024

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  • 5 Marks

FA – Nov 2021 – L1 – SB – Q5d – Inventory

This question involves calculating the total cost of raw materials and determining the cost per unit for a finished product.

Ebuka and Sons Enterprises is a manufacturing business entity that imports some of its raw materials from overseas. The business recently took delivery of some materials as detailed below:

  1. 2,000kg of materials at ₦625 per kg subject to a trade discount of 5%.
  2. Import duties and other non-recoverable taxes paid amounted to ₦266,000.
  3. A 3% early payment discount allowance enjoyed by the enterprise amounted to ₦37,500.
  4. Delivery cost on materials imported from the custom warehouse to the production plant is ₦125,000.
  5. 3,500kg of local materials at ₦250 per kg subject to a trade discount of ₦50,000.
  6. Carriage inwards on local materials purchased was ₦205,000.
  7. Special toll fare paid to the commodity board for local materials purchased was ₦25,000.

Required:
i. Calculate the total cost of inventory of raw materials. (3 Marks)
ii. It is estimated that these materials can produce 5,000 units of the finished product. Calculate the material cost per unit of the finished product. (2 Marks)

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  • 4 Marks

FA – Nov 2021 – L1 – SB – Q5c – Inventory

This question identifies costs that should be excluded when measuring the value of inventories.

Identify any costs which should be excluded when measuring the value of inventories

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  • 8 Marks

FA – Nov 2021 – L1 – SB – Q5b – Inventory

This question asks for an explanation of the costs that should be included when measuring the value of inventories.

Explain the costs which should be included when measuring the value of inventories.

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  • 3 Marks

FA – Nov 2021 – L1 – SB – Q5a -Inventory

This question asks for the explanation of the term "inventories" as defined by IAS 2.

Explain the term “inventories” as defined by IAS 2 – Inventory.

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  • 1 Marks

FA – Nov 2021 – L1 – SA – Q9 – Inventory

This question tests knowledge of costs included in inventory valuation as per IAS 2.

According to IAS 2-Inventories, which of the following costs should be included in determining the value of inventories of a manufacturing company?
A. Carriage inwards
B. Carriage outwards
C. General administrative overheads
D. Depreciation of land and building
E. Discount allowed

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  • 20 Marks

FA – Mar 2023 – L1 – Q1 – Double entry bookkeeping | Inventory | The IASB’s Conceptual Framework

Explains going concern assumption, inventory valuation, faithful representation, and prepares various day books and cash book.

a) The Conceptual Framework for Financial Reporting is a set of principles which underpin the foundation of financial accounting. The Conceptual Framework sets out the going concern concept as one of the important underlying assumptions for the preparation of financial statements.

Required:
Explain what is meant by ‘the assumption that an entity is operating under the going concern concept’. Support your answer with a suitable example. (3 marks)

b) A trader who trades in Machines commences business on 1 Jan 2021 and buys 200 machines, each costing GH¢50,000. During the year, he sells 150 machines at GH¢60,000 each.

Required:
How should the remaining machines be valued at the end of the year if:
i) He is forced to close down his business at the end of the year and the remaining machines will realise only GH¢30,000 each in a forced sale. (2 marks)
ii) He intends to continue the business into the next year. (2 marks)

c) One of the fundamental qualitative characteristics of useful financial information in the Conceptual Framework for Financial Reporting is ‘faithful representation’.

Required:
Explain what is meant by ‘faithful representation’. (3 marks)

d) Davidco is a trader who commenced business on January 1, 2021. He introduced capital of GH¢50,000. He bought Vehicle worth GH¢30,000 out of the capital introduced. The following transaction took place in the month of January (Jan) 2021:

  • Jan 5: Davidco bought goods on credit from the following:
    • Tradco: GH¢2,500, Trade Discount 10%
    • Vamco: GH¢8,000, Trade Discount 10%
  • Jan 8: Davidco Sold goods on credit to the following:
    • Markcom: GH¢5,000, Trade Discount 20%
    • Kathrine: GH¢2,000, Trade Discount 5%
  • Jan 12: Davidco returned defective goods worth GH¢200 to Tradco.
  • Jan 15: Davidco paid all amounts outstanding to Tradco and Vamco less cash discount of 5%.
  • Jan 22: Kathrine returned spoiled goods worth GH¢300.
  • Jan 24: Davidco received payment from Markcom and Kathrine of all outstanding debt less cash discount of 5%.

Required:
Prepare the following:
i) Sales day book
ii) Purchase day book
iii) Cash book
iv) Purchase returns
v) Sales returns

(10 marks)

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  • 20 Marks

FA – Dec 2023 – L1 – Q4 – Inventory | Preparation of limited liability company financial statements

Prepares the Statement of Profit and Loss and the Statement of Financial Position for a limited liability company based on a trial balance and additional information.

The trial balance for Odum Ltd. as at 31 December 2021 is as follows:

Account Dr (GHȼ) Cr (GHȼ)
Sales revenue 377,615
Purchases 130,006
Inventory as at 1 January 2021 60,890
Insurances 5,678
Salaries 61,600
Electricity 4,250
General expenses 8,663
Allowance for receivables 540
Land and Buildings at cost 80,000
Buildings accumulated depreciation 21,500
Machinery at cost 65,000
Machinery accumulated depreciation 12,400
Fixtures and fittings at cost 24,000
Fixtures and fittings accumulated depreciation 9,600
Trade receivables 64,500
Trade payables 14,062
Bank 20,110
Ordinary shares 50,000
Retained earnings as at 1 January 2021 15,480
10% Loan 25,000
Loan interest 1,500

(Dr Total: 526,197 GH¢ / Cr Total: 526,197 GH¢)

Additional Information:

  1. Inventory at 31 December 2021 amounted to GHȼ80,000. Some goods sent out on a sale or return basis have been treated as credit sales. These goods cost GHȼ6,000 and had been invoiced to the customer for GHȼ7,500. The customer has informed the company that it now intends to return these goods.
  2. The balance shown for salaries covers the 11 months to 30 November 2021. Salaries for December 2021 are due and unpaid. There have been no salary increases over the previous 12 months, and an equal amount is paid each month.
  3. Insurances include GHȼ660 for the half-year ended on 31 March 2022.
  4. Dividends paid during the year of GHȼ2,700 have been credited to bank and debited to General expenses.
  5. The loan was obtained in August 2018 and is repayable in full during the financial year ended 31 December 2023.
  6. Depreciation is to be provided on all machinery at 15% per annum using the reducing balance method. Machinery costing GHȼ15,000 was purchased on 1 July 2021, and this is included in the balance shown for machinery. Depreciation is calculated for each proportion of the year for which machinery is held. There were no disposals of machinery during the year.
  7. All the fixtures and fittings were purchased for GHȼ24,000 on 1 January 2019. Depreciation is to be charged using the straight-line method.
  8. Buildings are to be depreciated by GHȼ3,500 for the year. Land is not depreciated.
  9. Allowance for receivables is to be provided as GHȼ2,400 for a specific debt, plus 4% on the remainder of receivables.
  10. Taxation for the year is estimated as GHȼ42,012.

(Note: Revenue and expenses are deemed to accrue evenly throughout the year)

Required:
Prepare, for Odum Ltd, the following statements in accordance with International Financial Reporting Standards (IFRS).

a) The Statement of Profit and Loss for the year ended 31 December 2021. (10 marks)
b) The Statement of Financial Position as at 31 December 2021. (10 marks)

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  • 20 Marks

FA – Nov 2021 – L1 – Q4 – Bad and doubtful debt | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, inventory, and receivables.

Additional Information:
i) The inventory count on 30 June 2019 showed closing inventory valued at GHȼ34,380.
ii) A review of receivables as at 30 June 2019 showed that a further GHȼ2,300 was to be written off as an irrecoverable debt. Therefore, it was decided that the closing allowance for receivables was 10% of the outstanding receivables balance as at 30 June 2019.
iii) On 30 June 2019, Sintim received a cheque of GHȼ1,680 in relation to an irrecoverable debt previously written off.
iv) A supplier of Sintim has charged an interest of GHȼ1,490 on a payable balance that has been outstanding for over 200 days.
v) GHȼ16,000 of insurance in the trial balance above relates to 1 January 2019 to 31 December 2019.
vi) Allowance to be made for depreciation is as follows:

  • Land: Not depreciated.
  • Delivery van: 10% straight line basis.
    vii) Upon investigation, it was revealed that the balance in the suspense account relates to a cash receipt from a customer of GHȼ800 that was credited to the bank account in error.

Required:
a) Prepare the statement of Profit or Loss for the year ended 30 June 2019.
(12 marks)
b) Prepare the statement of Financial Position as at that date.
(8 marks)

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  • 20 Marks

FA – May 2021 – L1 – Q4 – Inventory | Non-current assets and depreciation | Preparation of limited liability company financial statements

Preparation of financial statements for a limited liability company, including adjustments for inventory, prepayments, accruals, depreciation, and allowance for receivables.

The following is the trial balance of Poloo Ltd as at 31 December 2020:

Account Debit (GH¢) Credit (GH¢)
Authorised, issued, and called-up capital:
– 500,000 equity shares of GH¢1 each 500,000
– 60,000 7% redeemable preference shares of 50p each 30,000
Equipment: cost 350,000
Equipment: accumulated depreciation 75,000
Motor vehicle: cost 160,000
Motor vehicle: accumulated depreciation 25,650
Premises 220,000
Inventory as at 1 January 2020 51,980
Bank 10,050
Sales 508,420
Purchases 225,000
Trade receivables 130,010
Trade payables 10,200
Distribution costs 80,400
Administrative expenses 45,240
Irrecoverable debts 1,250
Allowance for receivables 14,360
Rent received 8,500
Income from investments 17,040
Interim dividend on equity shares 7,420
Retained earnings 51,760
General reserve 40,420
Total 1,281,350 1,281,350

Additional information:
i) Inventories as at 31 December 2020 are valued at GH¢85,420.
ii) Insurance includes GH¢840 for one and half years ending 30 June 2021. Insurance is included in administrative expenses.
iii) Rent received includes an amount of GH¢2,400 paid in advance as at 31 December 2020.
iv) Distribution costs of GH¢750 were prepaid, and administrative expenses of GH¢800 were owing as at 31 December 2020.
v) The total trade receivables balance of GH¢130,010 includes a balance of GH¢1,010 which has been outstanding for ten months. Poloo Ltd has decided to write off this balance.
vi) Poloo Ltd’s policy is to allow for receivables on the basis of the length of time the debt has been outstanding. The aged analysis of trade receivables at 31 December 2020 and the required allowance are shown below:

Age of Debt Balance (GH¢) Allowance Required
0 – 30 days 80,000 Nil
31 – 60 days 40,000 20% of balances
Over 60 days 10,010 85% of balances

vii) On 15 January 2020, Poloo Ltd purchased premises at a cost of GH¢105,000. This cost included GH¢3,500 relating to legal costs. The legal costs of GH¢3,500 had been included in administrative expenses and not in the cost of premises. Premises are not depreciated.
viii) On 1 April 2020, Poloo Ltd purchased equipment that cost GH¢50,000. This transaction was entered in the accounts on 1 April 2020.
ix) Depreciation is to be provided as follows:

  • Equipment: 20% per annum on cost
  • Motor vehicles: 20% per annum reducing balance basis
    x) Depreciation on equipment is apportioned 20% to administrative expenses and 80% to distribution costs. Depreciation is charged for each month of use. Depreciation of motor vehicles is treated as a distribution cost.

Required:
Prepare, for Poloo Ltd, the following statements in accordance with International Financial Reporting Standards (IFRS):
a) Statement of Profit or Loss for the year ended 31 December 2020.
(10 marks)
b) Statement of Financial Position as at 31 December 2020.
(10 marks)

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  • 10 Marks

FA – Nov 2024 – L1 – Q5a – Inventory Loss and Statement of Profit or Loss

Compute inventory loss due to fire and prepare a statement of profit or loss for a sole trader.

Mawulolo Enterprise is a retail business that prepares its accounts on 31 March each year. The business maintains a standard gross profit margin of 30% on sales.

The following financial information was extracted from its records as at 31 March 2024:

Item GH¢
Inventory at 1 April 2023 254,000
Operating Expenses 378,000
Finance Cost 58,000
Purchases 1,306,000
Sales 1,900,000
Inventory in good standing at 31 March 2024 192,000

On 31 March 2024, a fire outbreak in the warehouse destroyed some of the inventory records and goods.

The tax charge for the year is estimated at GH¢30,000.

Required:

i)Calculate the amount of inventory lost.

ii) Prepare the Statement of Profit or Loss for the year ended 31 March 2024

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  • 5 Marks

FA – Nov 2021 – L1 – SB – Q5d – Inventory

This question involves calculating the total cost of raw materials and determining the cost per unit for a finished product.

Ebuka and Sons Enterprises is a manufacturing business entity that imports some of its raw materials from overseas. The business recently took delivery of some materials as detailed below:

  1. 2,000kg of materials at ₦625 per kg subject to a trade discount of 5%.
  2. Import duties and other non-recoverable taxes paid amounted to ₦266,000.
  3. A 3% early payment discount allowance enjoyed by the enterprise amounted to ₦37,500.
  4. Delivery cost on materials imported from the custom warehouse to the production plant is ₦125,000.
  5. 3,500kg of local materials at ₦250 per kg subject to a trade discount of ₦50,000.
  6. Carriage inwards on local materials purchased was ₦205,000.
  7. Special toll fare paid to the commodity board for local materials purchased was ₦25,000.

Required:
i. Calculate the total cost of inventory of raw materials. (3 Marks)
ii. It is estimated that these materials can produce 5,000 units of the finished product. Calculate the material cost per unit of the finished product. (2 Marks)

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  • 4 Marks

FA – Nov 2021 – L1 – SB – Q5c – Inventory

This question identifies costs that should be excluded when measuring the value of inventories.

Identify any costs which should be excluded when measuring the value of inventories

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  • 8 Marks

FA – Nov 2021 – L1 – SB – Q5b – Inventory

This question asks for an explanation of the costs that should be included when measuring the value of inventories.

Explain the costs which should be included when measuring the value of inventories.

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  • 3 Marks

FA – Nov 2021 – L1 – SB – Q5a -Inventory

This question asks for the explanation of the term "inventories" as defined by IAS 2.

Explain the term “inventories” as defined by IAS 2 – Inventory.

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  • 1 Marks

FA – Nov 2021 – L1 – SA – Q9 – Inventory

This question tests knowledge of costs included in inventory valuation as per IAS 2.

According to IAS 2-Inventories, which of the following costs should be included in determining the value of inventories of a manufacturing company?
A. Carriage inwards
B. Carriage outwards
C. General administrative overheads
D. Depreciation of land and building
E. Discount allowed

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  • 20 Marks

FA – Mar 2023 – L1 – Q1 – Double entry bookkeeping | Inventory | The IASB’s Conceptual Framework

Explains going concern assumption, inventory valuation, faithful representation, and prepares various day books and cash book.

a) The Conceptual Framework for Financial Reporting is a set of principles which underpin the foundation of financial accounting. The Conceptual Framework sets out the going concern concept as one of the important underlying assumptions for the preparation of financial statements.

Required:
Explain what is meant by ‘the assumption that an entity is operating under the going concern concept’. Support your answer with a suitable example. (3 marks)

b) A trader who trades in Machines commences business on 1 Jan 2021 and buys 200 machines, each costing GH¢50,000. During the year, he sells 150 machines at GH¢60,000 each.

Required:
How should the remaining machines be valued at the end of the year if:
i) He is forced to close down his business at the end of the year and the remaining machines will realise only GH¢30,000 each in a forced sale. (2 marks)
ii) He intends to continue the business into the next year. (2 marks)

c) One of the fundamental qualitative characteristics of useful financial information in the Conceptual Framework for Financial Reporting is ‘faithful representation’.

Required:
Explain what is meant by ‘faithful representation’. (3 marks)

d) Davidco is a trader who commenced business on January 1, 2021. He introduced capital of GH¢50,000. He bought Vehicle worth GH¢30,000 out of the capital introduced. The following transaction took place in the month of January (Jan) 2021:

  • Jan 5: Davidco bought goods on credit from the following:
    • Tradco: GH¢2,500, Trade Discount 10%
    • Vamco: GH¢8,000, Trade Discount 10%
  • Jan 8: Davidco Sold goods on credit to the following:
    • Markcom: GH¢5,000, Trade Discount 20%
    • Kathrine: GH¢2,000, Trade Discount 5%
  • Jan 12: Davidco returned defective goods worth GH¢200 to Tradco.
  • Jan 15: Davidco paid all amounts outstanding to Tradco and Vamco less cash discount of 5%.
  • Jan 22: Kathrine returned spoiled goods worth GH¢300.
  • Jan 24: Davidco received payment from Markcom and Kathrine of all outstanding debt less cash discount of 5%.

Required:
Prepare the following:
i) Sales day book
ii) Purchase day book
iii) Cash book
iv) Purchase returns
v) Sales returns

(10 marks)

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  • 20 Marks

FA – Dec 2023 – L1 – Q4 – Inventory | Preparation of limited liability company financial statements

Prepares the Statement of Profit and Loss and the Statement of Financial Position for a limited liability company based on a trial balance and additional information.

The trial balance for Odum Ltd. as at 31 December 2021 is as follows:

Account Dr (GHȼ) Cr (GHȼ)
Sales revenue 377,615
Purchases 130,006
Inventory as at 1 January 2021 60,890
Insurances 5,678
Salaries 61,600
Electricity 4,250
General expenses 8,663
Allowance for receivables 540
Land and Buildings at cost 80,000
Buildings accumulated depreciation 21,500
Machinery at cost 65,000
Machinery accumulated depreciation 12,400
Fixtures and fittings at cost 24,000
Fixtures and fittings accumulated depreciation 9,600
Trade receivables 64,500
Trade payables 14,062
Bank 20,110
Ordinary shares 50,000
Retained earnings as at 1 January 2021 15,480
10% Loan 25,000
Loan interest 1,500

(Dr Total: 526,197 GH¢ / Cr Total: 526,197 GH¢)

Additional Information:

  1. Inventory at 31 December 2021 amounted to GHȼ80,000. Some goods sent out on a sale or return basis have been treated as credit sales. These goods cost GHȼ6,000 and had been invoiced to the customer for GHȼ7,500. The customer has informed the company that it now intends to return these goods.
  2. The balance shown for salaries covers the 11 months to 30 November 2021. Salaries for December 2021 are due and unpaid. There have been no salary increases over the previous 12 months, and an equal amount is paid each month.
  3. Insurances include GHȼ660 for the half-year ended on 31 March 2022.
  4. Dividends paid during the year of GHȼ2,700 have been credited to bank and debited to General expenses.
  5. The loan was obtained in August 2018 and is repayable in full during the financial year ended 31 December 2023.
  6. Depreciation is to be provided on all machinery at 15% per annum using the reducing balance method. Machinery costing GHȼ15,000 was purchased on 1 July 2021, and this is included in the balance shown for machinery. Depreciation is calculated for each proportion of the year for which machinery is held. There were no disposals of machinery during the year.
  7. All the fixtures and fittings were purchased for GHȼ24,000 on 1 January 2019. Depreciation is to be charged using the straight-line method.
  8. Buildings are to be depreciated by GHȼ3,500 for the year. Land is not depreciated.
  9. Allowance for receivables is to be provided as GHȼ2,400 for a specific debt, plus 4% on the remainder of receivables.
  10. Taxation for the year is estimated as GHȼ42,012.

(Note: Revenue and expenses are deemed to accrue evenly throughout the year)

Required:
Prepare, for Odum Ltd, the following statements in accordance with International Financial Reporting Standards (IFRS).

a) The Statement of Profit and Loss for the year ended 31 December 2021. (10 marks)
b) The Statement of Financial Position as at 31 December 2021. (10 marks)

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  • 20 Marks

FA – Nov 2021 – L1 – Q4 – Bad and doubtful debt | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, inventory, and receivables.

Additional Information:
i) The inventory count on 30 June 2019 showed closing inventory valued at GHȼ34,380.
ii) A review of receivables as at 30 June 2019 showed that a further GHȼ2,300 was to be written off as an irrecoverable debt. Therefore, it was decided that the closing allowance for receivables was 10% of the outstanding receivables balance as at 30 June 2019.
iii) On 30 June 2019, Sintim received a cheque of GHȼ1,680 in relation to an irrecoverable debt previously written off.
iv) A supplier of Sintim has charged an interest of GHȼ1,490 on a payable balance that has been outstanding for over 200 days.
v) GHȼ16,000 of insurance in the trial balance above relates to 1 January 2019 to 31 December 2019.
vi) Allowance to be made for depreciation is as follows:

  • Land: Not depreciated.
  • Delivery van: 10% straight line basis.
    vii) Upon investigation, it was revealed that the balance in the suspense account relates to a cash receipt from a customer of GHȼ800 that was credited to the bank account in error.

Required:
a) Prepare the statement of Profit or Loss for the year ended 30 June 2019.
(12 marks)
b) Prepare the statement of Financial Position as at that date.
(8 marks)

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  • 20 Marks

FA – May 2021 – L1 – Q4 – Inventory | Non-current assets and depreciation | Preparation of limited liability company financial statements

Preparation of financial statements for a limited liability company, including adjustments for inventory, prepayments, accruals, depreciation, and allowance for receivables.

The following is the trial balance of Poloo Ltd as at 31 December 2020:

Account Debit (GH¢) Credit (GH¢)
Authorised, issued, and called-up capital:
– 500,000 equity shares of GH¢1 each 500,000
– 60,000 7% redeemable preference shares of 50p each 30,000
Equipment: cost 350,000
Equipment: accumulated depreciation 75,000
Motor vehicle: cost 160,000
Motor vehicle: accumulated depreciation 25,650
Premises 220,000
Inventory as at 1 January 2020 51,980
Bank 10,050
Sales 508,420
Purchases 225,000
Trade receivables 130,010
Trade payables 10,200
Distribution costs 80,400
Administrative expenses 45,240
Irrecoverable debts 1,250
Allowance for receivables 14,360
Rent received 8,500
Income from investments 17,040
Interim dividend on equity shares 7,420
Retained earnings 51,760
General reserve 40,420
Total 1,281,350 1,281,350

Additional information:
i) Inventories as at 31 December 2020 are valued at GH¢85,420.
ii) Insurance includes GH¢840 for one and half years ending 30 June 2021. Insurance is included in administrative expenses.
iii) Rent received includes an amount of GH¢2,400 paid in advance as at 31 December 2020.
iv) Distribution costs of GH¢750 were prepaid, and administrative expenses of GH¢800 were owing as at 31 December 2020.
v) The total trade receivables balance of GH¢130,010 includes a balance of GH¢1,010 which has been outstanding for ten months. Poloo Ltd has decided to write off this balance.
vi) Poloo Ltd’s policy is to allow for receivables on the basis of the length of time the debt has been outstanding. The aged analysis of trade receivables at 31 December 2020 and the required allowance are shown below:

Age of Debt Balance (GH¢) Allowance Required
0 – 30 days 80,000 Nil
31 – 60 days 40,000 20% of balances
Over 60 days 10,010 85% of balances

vii) On 15 January 2020, Poloo Ltd purchased premises at a cost of GH¢105,000. This cost included GH¢3,500 relating to legal costs. The legal costs of GH¢3,500 had been included in administrative expenses and not in the cost of premises. Premises are not depreciated.
viii) On 1 April 2020, Poloo Ltd purchased equipment that cost GH¢50,000. This transaction was entered in the accounts on 1 April 2020.
ix) Depreciation is to be provided as follows:

  • Equipment: 20% per annum on cost
  • Motor vehicles: 20% per annum reducing balance basis
    x) Depreciation on equipment is apportioned 20% to administrative expenses and 80% to distribution costs. Depreciation is charged for each month of use. Depreciation of motor vehicles is treated as a distribution cost.

Required:
Prepare, for Poloo Ltd, the following statements in accordance with International Financial Reporting Standards (IFRS):
a) Statement of Profit or Loss for the year ended 31 December 2020.
(10 marks)
b) Statement of Financial Position as at 31 December 2020.
(10 marks)

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