Adrian Frampton was considering the purchase of one of two businesses. However, Frampton had only been provided with limited information about the businesses, as follows:

Additional information:
1 Average stock had been calculated by using the year’s opening and closing stocks. Subsequently it was discovered that Business Y had overvalued its stock on 31 December 2009 by £10,000.
2 Business X’s administrative expenses included a payment for rent of £15,000 which covered a three-year period to 31 December 2011.

3 Assume of £2,500 was included in the administrative expenses of Business Y in respect of a holiday taken by the owner and his family.
4 Cash drawings for the year ended 31 December 2009 were:

5 The owners of the businesses had stipulated the following prices for their businesses:

Required:

(a) Based on the information available prepare comparative trading and profit and loss accounts for the year ending 31 December 2009.

(b) Using the information provided and the accounting statements prepared in (a), calculate relevant accounting ratios in order to give Frampton a basis for assessing the performances of the two businesses. Comment on the results.

(c) What additional information is needed in order to assess more accurately (i) the liquidity of the businesses;
(ji) the future prospects of the businesses?

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Information Summarised Financial Information for the year ended 31 December 2009 Business Business Cost of goods sold X 400,000 Y 600,000 Administrative expenses 50,000 60,000 Average stock at cost 40,000 50,000 Working capital as at 31 December 2009 90,000 250,000 Selling and distribution expenses 15,000 35,000 Proprietor's capital at 1 January 2009 200,000 350,000 Gross profit percentage mark-up on cost 20 25