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You are presented with the following trial balance of Winnie Investment Holdings...

Oct 6, 2024

You are presented with the following trial balance of Winnie Investment Holdings Limited, a limited liability company, as at 31 October 2024. Dr. Cr. '000 '000 Sales - 1,170,828 Sales return 22,410 - Inventory as at 1 November 2023 78,300 - Purchases 680,040 - Distribution costs 67,500 - Administrative expenses 267,030 - Finance costs 6,480 - Land at cost 108,000 - Trade receivables 248,400 - Cash 23,418 - Trade payables - 76,500 Bank overdraft - 16,020 Bank loan - 76,680 Share capital - 78,300 Retained earnings as at 1 November 2023 - 83,250 1,501,578 1,501,578Additional information as at 31 October 2024: 1. Inventory as at 31 October 2024 was valued at 82,818,000. 2. Land was revalued as at 31 October 2024 to 139,500,000. 3. Tax of $5,580,000 is to be provided for the year. 4. The bank loan was to be repaid more than 12 months.b. Comment how the separation of ownership and control leads to problem in terms of corporate governance. (6 Marks) c. Strong governance can be an important component in building corporate value. Comment on this statement with reference to economic benefits of strong governance.

It looks like you have a detailed question regarding a trial balance and some aspects of corporate governance. Let's break it down step by step. For part b, regarding the separation of ownership and control, this often leads to issues in corporate governance because the owners (shareholders) and the managers (executives) may have different interests. Shareholders typically want to maximize their returns, while managers might prioritize their own job security or personal benefits. This misalignment can lead to decisions that do not necessarily reflect the best interests of the shareholders, such as excessive spending on perks or pursuing projects that enhance their own status rather than the company's profitability. For part c, the statement about strong governance being important for building corporate value is quite valid. Strong governance frameworks ensure that there are checks and balances in place, which can lead to better decision-making and risk management. This can enhance investor confidence, attract more capital, and ultimately lead to higher valuations. Additionally, companies with strong governance practices are often more resilient in times of crisis, which can provide economic benefits in the long run. If you have any specific points you want to discuss further or need clarification on, feel free to ask!

You are presented with the following trial balance of Winnie Investment Holdings Limited, a limited liability company, as at 31 October 2024. Dr. Cr. '000 '000 Sales - 1,170,828 Sales return 22,410 - Inventory as at 1 November 2023 78,300 - Purchases 680,040 - Distribution costs 67,500 - Administrative expenses 267,030 - Finance costs 6,480 - Land at cost 108,000 - Trade receivables 248,400 - Cash 23,418 - Trade payables - 76,500 Bank overdraft - 16,020 Bank loan - 76,680 Share capital - 78,300 Retained earnings as at 1 November 2023 - 83,250 1,501,578 1,501,578Additional information as at 31 October 2024: 1. Inventory as at 31 October 2024 was valued at 82,818,000. 2. Land was revalued as at 31 October 2024 to 139,500,000. 3. Tax of $5,580,000 is to be provided for the year. 4. The bank loan was to be repaid more than 12 months. Required: a. Prepare a statement of profit or loss and other comprehensive income for the year ended 31 October 2024 and a statement of financial position as at 31 October 2024 of Winnie Investment Holdings Limited in accordance with "HKAS 1 Presentation of Financial Statements". b. Comment how the separation of ownership and control leads to problem in terms of corporate governance. c. Strong governance can be an important component in building corporate value. Comment on this statement with reference to economic benefits of strong governance.

It looks like you have a comprehensive question regarding the financial statements and corporate governance issues related to Winnie Investment Holdings Limited. Let's tackle each part step by step. a. Statement of Profit or Loss and Other Comprehensive Income To prepare the statement of profit or loss, we need to calculate the total revenue, cost of goods sold (COGS), and expenses. 1. Sales Revenue: - Total Sales: 1,170,828 - Less: Sales Returns: 22,410 - Net Sales: 1,170,828 - 22,410 = 1,148,418 2. Cost of Goods Sold (COGS): - Opening Inventory: 78,300 - Add: Purchases: 680,040 - Less: Closing Inventory: 82,818 - COGS: 78,300 + 680,040 - 82,818 = 675,522 3. Gross Profit: - Gross Profit = Net Sales - COGS = 1,148,418 - 675,522 = 472,896 4. Operating Expenses: - Distribution Costs: 67,500 - Administrative Expenses: 267,030 - Finance Costs: 6,480 - Total Operating Expenses: 67,500 + 267,030 + 6,480 = 341,010 5. Profit Before Tax: - Profit Before Tax = Gross Profit - Total Operating Expenses = 472,896 - 341,010 = 131,886 6. Tax Expense: 5,580 7. Profit for the Year: - Profit for the Year = Profit Before Tax - Tax = 131,886 - 5,580 = 126,306 Statement of Financial Position as at 31 October 2024 1. Assets: - Non-Current Assets: - Land (revalued): 139,500 - Trade Receivables: 248,400 - Cash: 23,418 - Current Assets: - Inventory: 82,818 - Total Assets: 139,500 + 248,400 + 23,418 + 82,818 = 494,136 2. Liabilities: - Current Liabilities: - Trade Payables: 76,500 - Bank Overdraft: 16,020 - Non-Current Liabilities: - Bank Loan: 76,680 - Total Liabilities: 76,500 + 16,020 + 76,680 = 169,200 3. Equity: - Share Capital: 78,300 - Retained Earnings: 83,250 + 126,306 (current year profit) = 209,556 - Total Equity: 78,300 + 209,556 = 287,856 b. Separation of Ownership and Control The separation of ownership and control can lead to several problems in corporate governance: - Agency Problem: Shareholders (owners) may not have the same interests as the managers (controllers). Managers may prioritize personal benefits over shareholder value, leading to inefficiencies. - Lack of Accountability: Managers may not be held accountable for their decisions, which can result in poor performance and mismanagement of resources. - Information Asymmetry: Managers typically have more information about the company's operations than shareholders, which can lead to decisions that are not in the best interest of the owners. c. Economic Benefits of Strong Governance Strong governance is crucial for building corporate value for several reasons: - Trust and Credibility: Good governance practices enhance the trust of investors and stakeholders, which can lead to increased investment and support. - Risk Management: Effective governance frameworks help in identifying and managing risks, leading to better decision-making and sustainability. - Long-term Performance: Companies with strong governance are often more resilient and perform better over the long term, as they are more likely to align their strategies with stakeholder interests. If you have any specific areas you want to delve deeper into or need further clarification, feel free to ask!