Duck Co. was formed on 1 January 20X0 with 10,000 issued A1 ordinary shares. The same day it obtained a 12 per cent loan of A8,000 and bought fixed assets for A9,000.

During 20X0, the purchases and sales of widgets were as given in Table 16.6.

You are also told that:

(a) purchases and sales were all paid for in cash;

(b) the loan interest was paid early in 20X1;

(c) the buying price of widgets changed on 1 March, 1 June, 1 September and 1 December (when it was 100);

(d) the fixed assets are to be depreciated at 10 per cent per annum, and at 31 December 20X0 their replacement price was A12,600;

(e) general expenses during the year were A13,200.

Prepare a balance sheet as at 31 December 20X0, together with an income statement for the year to 31 December 20X0, on replacement cost lines. What are holding gains? In what circumstances are they distributable?

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Table 16.5 Transactions by P Date Event relating to trading in computers 1/1/X0 2/1/X0 1/5/X0 1/9/X0 1/10/X0 31/12/X0 3/3/X1 1/10/X1 1/11/X1 31/12/X1 Set up business with 10,000 in the bank Buy six computers for 1,000 each Sell two computers for 1,500 each (replacement cost 1,100) Buy two computers for 1,200 each Pay annual rent of 600 Financial year end. Pay tax of 200 Sell two computers for 1,800 each (replacement cost 1,300 each) Pay annual rent of 700 Buy two computers for 1,400 each Financial year end. Pay tax of 450 Table 16.6 Duck Co.'s widget transactions in 20X0 'Wealth' Computers Cash balance () 10,000 9. 4,000 4666 7,000 4,600 4,000 3,800 4466 7,400 6,700 3,900 3,450 Purchases Sales 3 January 100 at 80 8,000 1 February 60 at 120 7,200 1 April 110 at 75 8,250 1 May 90 at 120 10,800 1 July 100 at 85 8,500 1 August 130 at 120 15,600 1 October 120 at 90 10,800 1 November 110 at 130 14,300