After preparing a draft statement of profit or los

s for the year ended 30 September 2014 and adding the year’s profit (before any adjustments required by notes (i) to (iii) below) to retained earnings, Kandy as at 30 September 2014 is:

The following notes are relevant:

(i)The loan note was issued on 1 October 2013 and incurred issue costs of $1 million which were charged to profit or loss. Interest of $1·8 million ($30 million at 6%) was paid on 30 September 2014. The loan is redeemable on 30 September 2018 at a substantial premium which gives an effective interest rate of 9% per annum. No other repayments are due until 30 September 2018.

(ii)Non-current assets:
The price of property has increased significantly in recent years and on 1 October 2013, the directors decided to revalue the land and buildings. The directors accepted the report of an independent surveyor who valued the land at $8 million and the buildings at $39 million on that date. The remaining life of the buildings at 1 October 2013 was 15 years. Kandy does not make an annual transfer to retained profits to reflect the realisation of the revaluation gain; however, the revaluation will give rise to a deferred tax liability. The income tax rate of Kandy is 20%.

Plant and equipment is depreciated at 121⁄2% per annum using the reducing balance method.

No depreciation has yet been charged on any non-current asset for the year ended 30 September 2014.

(iii)A provision of $2·4 million is required for current income tax on the profit of the year to 30 September 2014. The balance on current tax in the trial balance is the under/over provision of tax for the previous year. In addition to the temporary differences relating to the information in note (ii), Kandy has further taxable temporary differences of $10 million as at 30 September 2014.

Required:

(a) Prepare a schedule of adjustments required to the retained earnings of Kandy as at 30 September 2014 as a result of the information in notes (i) to (iii) above.

(b) Prepare the statement of financial position of Kandy as at 30 September 2014.