The following trial balance has been extracted from the books of Keith Ltd as at 30 June
Question:
The following trial balance has been extracted from the books of Keith Ltd as at 30 June 2006:
Additional information:
1 Stock at 30 June 2006 valued at cost amounted to £155 000.
2 Depreciation is to be provided on machinery and vehicles at a rate of 20 per cent and 25 per cent respectively on cost.
3 Provision is to be made for auditors’ remuneration of £12000.
4 Insurance paid in advance at 30 June 2006 amounted to £3000.
5 The provision for bad and doubtful debts is to be made equal to 5 per cent of outstanding trade debtors as at 30 June 2006.
6 Corporation tax owing at 30 June 2006 is estimated to be £60 000.
7 An ordinary dividend of 10p per share is proposed.
8 The investments had a market value of £30000 at 30 June 2006.
9 The company has an authorized share capital of 600 000 ordinary shares of £0.50 each and of 50000 8% cumulative preference shares of £1 each.
Required:
(a) Prepare Keith Ltd’s trading and profit and loss account for the year to 30 June 2006 and a balance sheet as at that date.
(b) Explain why shareholders of Keith Ltd would not necessarily have been able to sell the business for its balance sheet value as at 30 June 2006.
Step by Step Answer:
