Burden PLC has an authorised capital of 500,000 ordinary shares of £0.50 each.

(a) At the end of its financial year, 31 May 20X9, the following balances appeared in the company’s books:

The company’s trading and profit and loss accounts had been prepared and revealed a net profit of £58,070. However, this figure and certain balances shown above needed adjustment in view of the following details which had not been recorded in the company’s books.

(i) It appeared that a trade debtor who owed £300 would not be able to pay. It was decided to write his account off as a bad debt.

(ii) An examination of the company’s stock on 31 May 20X9 revealed that some items shown in the accounts at a cost of £1,800 had deteriorated and had a resale value of only £1,100.

(iii) At the end of the financial year some equipment which had cost £3,600 and which had a net book value of £800 had been sold for £1,300. A cheque for this amount had been received on 31 May 20X9.

Required:
1. A statement which shows the changes which should be made to the net profit of £58,070 in view of these unrecorded details.

(b) The directors proposed to pay a final dividend of 10% and to transfer £50,000 to general reserve on 31 May 20X9.

Required:

For Burden PLC (taking account of all the available information)

2. The profit and loss appropriation account for the year ended 31 May 20X9.
3. Two extracts from the company’s balance sheet as at 31 May 20X9, showing in detail:

(i) The current assets, current liabilities and working capital

(ii) The items which make up the shareholders’ funds.

(c) The directors are concerned about the company’s liquidity position.

Required:

4. THREE transactions which will increase the company’s working capital. State which balance sheet items will change as a result of each transaction and whether the item will increase or decrease in value.

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Issued capital: 400,000 shares fully paid Freehold land and buildings at cost Stock in trade 10% debentures Trade debtors Trade creditors Expenses prepaid Share premium General reserve Expenses outstanding Profit and loss account balance (1 June 20X8) Bank overdrawn Fixtures, fittings and equipment at cost provision for depreciation £ 200,000 320,000 17,800 30,000 6,840 8,500 760 25,000 20,000 430 36,200 3,700 54,000 17,500