Question

You have been provided with the following trial balance as at 31 December 2005 for a limited liability company called Sand Ltd. Debit $000 Credit $000 1,000 700 500 100 1,890 1,000 6,450 480 600 600 800 1,000,000 Ordinary shares of $1 each Other reserve Revaluation reserve, at 1 January 2005 General reserve, at 1 January 2005 Retained profit, at 1 January 2008 8% Debentures, repayable on 31 March 2008 Freehold land, at 1 January 2005 (at valuation) Fixtures and fittings, at 1 January 2005 (cost $600,000) Motor vehicles, at 1 January 2005 (cost $800,000) Inventory Trade receivable and payables Allowances for doubtful debts, at 1 January 2005 Bank overdraft Purchases and sales Debenture interest (half-year paid) Interim dividends on ordinary shares Directors' remuneration Rent and rates Heating and lighting Administrative salaries Selling expenses Discounts allowed and received Bad Debts 400 40 200 12,090 6,725 40 200 300 600 340 400 200 170 70 17,975 55 17,975

Answer 1

Statement of Profits and losses
Revenue	12090
Cost of sales	6943
Gross Profit	5147
Distribution costs	630
Administrative expenses	1563
Finance costs	80
Profit Before tax	2874
Income tax expense	100
Profit for the year	2774
Less: dividend proposed/paud	250
	2524
Other comprehensive income for the year
Gain on revalutaion of land	1550
Total comprehensive income	4074

Inventory is valued at lower of Costs or net realisable value. Hence effect of revaluation not provided for

Administrative salaries $ 10 unaccounted are accounted for now

Statement of changes in equity
	Share capital	Other reserve	Retained profit	Proposed dividends	General reserve	Revaluation reserve	Total
At Jan1,05	1000	700	1890	-200	100	500	3990
Changes in equity							0
Dividends Paid/Proposed				-50			-50
Total comprehensive income for the year					2524	1550	4074
Transfer to general reserve
	1000	700	1890	-250	2624	2050	8014

Furniture & Fixtures
Cost	600000
Depreciation	20%
Method	Straight Line
Depreciation	= 20% of cost
	=20% of 600000
	=0.20 *600000
	120000
Opening Jan1,05	480
Less: Depreciation	120
Balance Dec 31,05	360
Motor Vehicle
Cost	800000
Depreciation	25%
Method	Straight Line
Depreciation	= 25% of cost
	=25% of 800000
	=0.25 *800000
	200000
Opening Jan1,05	600
Less: Depreciation	200
Balance Dec 31,05	400
Land
Opening	6450
Gain on land revalutaion	1550
Fair value of land	8000

Administrative expenses
Depreciation on Furniture & fixtures	120
Less: Discount received	55
Add: Directors' remuneration	140
Rent and rates	588
Heating and lighting	340
Administrative salaries	400
Audit fees	20
Accrued administrative salaries	10
	1563
Distribution costs
Depreciation on Motor Vehicle	200
Add:discount allowed	170
Add: Directors' remuneration	60
Selling expense	200
	630
Rent and Rates
Balance	600
Less: Pre-paid	12
Net Balance	588
Cost of Goods sold
Opening	0
Add: Purchases	6725
Ad: Adjustment to doubtful debt	48
Add: Directors' remuneration	100
Add: bad debts	70
	6943
Audit Fees
Balance	0
Estimated	20
Audit Fee expense	20
Income Tax
Balance	0
Provision	100
Income Tax balance	100
Finance costs
Debenture interest paid	40
Debenture interest payable	40
	80