Corporation tax for the tax years 20X7, 20X8, and 20X9 was 40 per cent and income tax for each year was 20 per cent.

(A) Skim Ltd’s draft profit and loss account for the year ended 31 December 20X8 shows a net trading profit from operations of £1.2 million. This figure is before taking into account (B) and (C1) and (C2).

(B) Debenture interest paid on 5 December 20X8 (gross) was £200,000. Ignore accruals.

(C1) Fixed rate interest received is £60,000 (net). Date received 9 November 20X8. Ignore accruals.

(C2) A dividend of £2,000 was received from Beef Ltd on 1 October.

(D) Depreciation was £180,000. This compares with £260,000 capital allowances given by the Inland Revenue. There is to be full provision for all timing differences for 20X8.

(E) The income tax bill (net) in respect of (B) and (C1) was paid on 19 December 20X8.

(F) Preference dividend paid on 6 July 20X8 £32,000.

(G) Ordinary interim dividend paid 8 August 20X8 £180,000.

(H) Proposed final ordinary dividend for 20X8 (paid in 20X9) was £300,000.

(I) Proposed final ordinary dividend for 20X7 (paid 10 March 20X8) was £240,000.

(J) There was a credit balance on deferred taxation account at 31 December 20X7 of £170,000.

(K) Tax for 20X7 had been provided for at £280,000 but was finally agreed at £272,000 (paid on 6 October 20X8).

(L) Corporation tax for 20X8 is estimated to be £340,000. 

You are required to enter up the following accounts for the year ended 31 December 20X8 for Skim Ltd: Deferred tax; Income tax; Interest receivable; Debenture interest; Investment income; Corporation tax; Tax on profit on ordinary activities; Preference dividends; Ordinary dividends; Profit and loss account extract. Also prepare the relevant balance sheet extracts as at 31 December 20X8.