The balance sheet of KQV plc at 31st May, 19_5, is expected to be:

Additional information:
(1) The company manufactures and sells a single product, the selling price of which during the year to 31st May, 19_6 is expected to be £100.
During this year, it is forecast that 120 000 units will be sold and 121 000 units manufactured. Sales should be spread evenly throughout the year.
(2) Work-in-progress should remain unchanged in value during the year.
(3) In manufacturing one unit of product, 2 lbs of material and 3 hours of labour are required. It is expected that the material price per Ib. will be £10, and the wage rate per hour, £4. Purchases of materials should be made eventy throughout the year.
(4) During the year to 31st May 19_6, the following overhead expenses should be paid in cash:

(5) Depreciation of fixed assets is at the rate of 10% per annum of cost, and the depreciation charge for the year is to be divided between manufacturing, administration and distribution in the ratio of 8:1:1.
No fixed assets are likely to be purchased during the coming year.
(6) The stock of materials at 31st May, 19_6 is planned to be 25 000 lbs.
(7) The stock of finished goods is to be valued at forecast manufacturing cost, which includes the cost of materials, wages and manufacturing overhead (including the proportion of depreciation), but does not include administration or distribution expenses.
(8) All sales and purchases of materials are on credit. Debtors are required to pay their accounts in the month following the month of sale, and the company is required to pay creditors’ accounts within a similar period of time.
(9) During the year to 31st May, 19_6 the existing liabilities for corporation tax and proposed dividend will be paid, and at the year end provision should be made for corporation tax at the rate of 50%
of the net profit for the year, and for a dividend of 10% on the ordinary share capital. It is not proposed to issue any share or loan capital, or to repay any, during the year.
Required:

(a) a forecast profit and loss account of KQV plc for the year to 31st May, 19_6; and

(b) a forecast balance sheet at that date.

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Fixed assets, at cost Less depreciation provision Current assets: Materials stock (27 000 lbs) 000 000 000 6 000 900 5 100 270 Work-in-progress 30 Finished goods stock (9 000 units) 450 Debtors 660 Cash at bank Less creditors payable within one year: Creditors for materials 10 1 420 300 Corporation tax Proposed dividend 165 105 570 850 5 950 Ordinary shares of 1 each, full paid Reserves: Retained profit 700 5 250 5 950