Question

Question 2 Answer both parts of the question in this section. The balances below have been extracted from the accounting records of Angel Lights Limited at 31 December 2014: Cr $000s Dr S000s 2.000 5,300 1,060 2,400 960 700 2,095 365 1,100 1,400 100 Freehold land, at cost #2 * Buildings: cost accumulated depreciation at 1.1.14 #4 Fixtures and fittings: cost accumulated depreciation at 1.1.14 Inventory at 1.1.14 # Trade receivables Provision for bad debts Bank Trade payables Ordinary shares of 25c each Preference shares (7%) of $1 each Share premium account 5% loan, 2028 Retained profits at 1.1.14 Prepaid insurance at 1.1.14 Accrued heat and light at 1.1.14 Accrued interest at 1.1.14 Sales Purchases Salaries Light and heat #3 Insurance 3 Administration and distribution expenses Dividend paid 30.9.14 Interest paid Taxation Disposal of fittings 1,350 4,000 195 13,380 9,465 1,370 210 68 390 120 200 15 180 24,353 24,353

Answer 1

(a)
Income Statement
Particulars	Amount	Remarks
Sales	13,380
Profit on sale of furniture and fixtures	19	Difference of 180 and 161
Bad debts written back	10	(Current provision if of 78 and opening is 88) Income of 10
Total Income	13,409
Expenses
Cost of goods sold	9,415
Salaries	1,370
Light and heat	165	(Includes unpaid of 30 for dec 2014)Adding accrued 75 of last year
Insurance	72	(Reducing 16 out of 24 paid for 8 months of next year) (Adding 20 as charge off for CY)
Administration and distribution	390
Interest	300	Adding accrued interest of 100
Depreciation	394
Bad debts written off	145
Total Expenses	12,251
PBT	1,158
Taxation of earlier years	15
Current tax	287
PAT	856

Statement of financial position as at 31 December 2014
Liabilities	Amount	Assets	Amount
Equity		Non Current Assets
Share Capital
Equity share capital	2,100	Freehold land	3,800
Preference share capital	100	(after revaluation)
Reserves and surplus		Building	4,134
Share Premium account	1,350	(Reduced accumulated depreciation of 1060 and depreciation of 2% on 5300)
Retained profits	424	Fixtures and fittings	991
		(Reduced accumulated depreciation of 960, sale of 161, depreciation of 20% 0n 1440)
Revaluation Reserve	1,800
5% loan, 2028	4,000	Current Assets
Dividend Payable	7	Inventory	750
Tax provision	287	Prepaid Insurance	16
Outstanding for heat and light	30	Trade Receivables	1,872
Trade Payables	1,100	(Reduced to bad debt provision of 78, bad debts written off of 145)
Bank Overdraft	365
	11,563		11,563

(b) Financial statements should show a true and fair view and therefore a fair valuation of asset is important. We have to revalue the assets as at the given date for a true picture and better disclosures.