Question

Question 19.2 Warwick Ltd Trial Balance as at 31 December 2013 Dr 2,800,000 1,500,000 620,000 224,000 450,000 186,000 6,105,800 3,160,400 280,100 135,000 Buildings - Cost Machinery - Cost Motor Vehicles - Cost Accumulated Depreciation as ar 31 December 2012: Buildings Machinery Motor Vehicles Revenue Purchases Inventory as at 1 January 2013 Purchases returns Sales returns Manufacturing wages Administration costs Administration wages Auditors fee Directors fees Motor Expenses Bad Debts Allowance for bad debts Finance cost Ordinary Share Capital El each Share Premium Retained Earnings as at 31 December 2012 7% Loan (repayable in 2017) Trade Receivables Bank Trade Payables 198,000 435,000 285,900 306,200 15,000 189,000 220,000 10,500 6,500 14,000 500,000 450,000 1,364,100 900,000 518,000 168,700 399,400 10,720,800 10,720,800 Additional information is available: 1. The inventory on hand as at 31 December 2013 is valued at €346,200. 2. The estimate of the tax charge for the year ended 31 December 2013 is €294,280. 3. Management feel an allowance for bad debts is required at a level of 3% of trade receivables. 4. The loan was taken out on 1 January 2013. 5. Depreciation is to be charged as follows: Buildings -2% on a straight line basis charged to administration costs Machinery - 10% on a straight line basis charged to cost of sales Motor vehicles -15% on a straight line basis charged to selling and distribution expenses.

Answer 1

5,907,800 Warwick Ltd. Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 31 December 2013 Revenue 6,105,800 Less Sales Returns 198,000 Net Revenue Less Cost of Goods Sold Inventory as on 1st Jan.2013 280,100 Add Purchases 3,160,400 Less Purchases Returns (135,000) Add Manufacturing Wages 435,000 Depreciation on Machinery (1500000*10%) 150,000 Less Ending Inventory (346,200) Cost of Goods Sold Gross Profit Operating Expenses Adminstration Costs 285,900 Adminstration Wages 306,200 Auditors Fee 15,000 Directors Fees 189,000 Motor Expenses 220,000 Bad Debts 10,500 Add New Allowance (518000*3%) 15,540 Less Old Allowance for Bad Debts (6,500) Finance Cost 14,000 3,544,300 2,363,500

56,000 93,000 Depreciation on Buildings (2800000*2%) Depreciation on Motor Vehicles (620000*15%) Total Operating Expenses Operating Income Interest expense on Loan (900000*7%) Profit Before Tax Tax expense Net Income 1,198,640 1,164,860 63,000 1,101,860 294,280 807,580

168,700 518,000 (15,540) 346,200 Warwick Ltd. Statement of Financial Position As on 31 December 2013 Assets Bank Trade Receivables Less Allowance for Bad Debts Inventory Total Current Assets Property,Plant & Equipment Buildings Less Accumulated Depreciation - Buildings (224000+56000) Machinery Less Accumulated Depreciation - Machinery(450000+150000) Motor Vehicles Less Accumulated Depreciation - Motor Vehicles(186000+93000) Total Assets 1,017,360 2,800,000 (280,000) 1,500,000 (600,000) 620,000 (279,000) 3,761,000 4,778,360

399,400 63,000 294,280 Liabilities and Shareholder's Equity Trade Payable Interest Payable Income Tax Payable Total Current Liabilities 7% Loan Total Liabilities Shareholder's Equity Ordinary Share Capital Share Premium Retained Earnings (1364100+807580) Total Sharholder's Equity Total Liabilities and Shareholder's Equity 756,680 900,000 1,656,680 500,000 450,000 2,171,680 3,121,680 4,778,360 105 106