Thomas pic is a recently established company which manufactures and sells car accessories. The preliminary trial balance for the company at 31 December 1983, the end of the first year of operations is as follows:

Freehold land and buildings at cost Leasehold property at cost Preliminary and formation expenses Plant and equipment, at cost Balance at bank 10% Debenture Office equipment at cost Sales Ordinary share capital Share premium Manufacturing cost, excluding depreciation and wages Salaries and wages Distribution expenses Administrative expenses Debenture interest paid Trade debtors and prepayments Trade creditors and accruals Directors' emoluments

£000 12000 2400 1560 8750 83 105 18567 12480 4930 3196 200 6380 96

£70747

£000 4000 43812 12000 6000 4935

£70747 The following additional information is relevant:

(i) The authorised share capital of the company is £30 million, divided into 20 million ordinary shares of £1 each and £10 million 7 per cent preference shares . The issued share capital is 12 million £I ordinary shares, fully paid .

(ii) The issue of debenture stock was made on I April 1983. The debentures are secured by a fixed charge on the freehold property and are redeemable at par in 2008.

(iii) The cost of the freehold land and buildings should be apportioned £4 million to the land and £8 million to the buildings. All these buildings are used in the manufacturing side of the operations. The buildings have an estimated useful life of 50 years.

(iv) The leasehold property includes warehouses which cost £800 000 and office premises which cost £1.6 million. All leases are for 25 years duration.

(v) Depreciation on fixed assets is to be provided on the following bases:

Freehold buildings straight-line Leasehold property straight-line Plant and equipment reducing balance over 10 years Office equipment straight-line over 7 years Required

(a) Prepare the final accounts of Thomas pic for publication in accordance with the requirements of the Companies Acts 1948-81, using recommended format I for the Profit and Loss Account.
In order to calculate the company's liability for corporation tax for the year you may assume that accounting profits are equal to taxable profits and that the appropriate corporation tax rate is 50 per cent.

(b) Identify those factors which are likely to cause a difference for Thomas pic between accounting profits and taxable profits.

(c) What tax, if any, would you expect Thomas pic to pay in respect of profits earned in 1983?

(d) Explain , with reasons, whether the company should make a provision for any future tax liability arising in respect of the 1983 accounting profits.