The following trial balance has been extracted from the nominal ledger of Epicteta Ltd on 31 July 2024:

In addition to the above trial balance, you are given the following information:
(i) Closing inventory at 31 July 2024 was valued at a cost of £267,000. This valuation does not take account of the fact that, at the year-end physical inventory count, it was discovered that certain goods with an original cost of £38,000 had been very badly damaged. The scrap value of these goods is thought to be only £5,000.
(ii) The trade receivables figure in the above trial balance includes a debt of £17,000 which is considered irrecoverable. Based on an analysis of the company’s debt collection experience, the allowance for doubtful debts requires adjustment to 4% of trade receivables.
(iii) The bank reconciliation reveals that bank charges of £4,000 appearing on the company’s July 2024 bank statement have been omitted from the accounting records.
(iv) Depreciation is to be provided for the year on the buildings at 2% straight line and on plant &
equipment at 35% using the reducing balance method.
(v) Repairs and maintenance includes a payment for a maintenance contract of £57,000, which covers the six months to 30 November 2024.
(vi) Advertising expenses of £23,000 were incurred before the year end but have not yet been accounted for.
(vii) In June 2024, the land was professionally valued at £595,000. The directors wish to recognise this valuation in the financial statements.
(viii) As of 1 August 2023, the company started offering a 12-month warranty on the goods it sells.
The trial balance indicates that costs of £44,000 to repair goods under these warranties have already been incurred during the financial year. Management estimate that 2% of all warranties will ultimately be exercised and that the future costs of further repairs in relation to goods already sold will amount to £66,000.
(ix) During July 2024, the company made a 1-for-4 bonus issue of its 50p ordinary shares. Management had intended to use the share premium account for this. However, no entries whatsoever have yet been made in the books in respect of the issue.
(x) Corporation tax due on the profit for the year is calculated to be £82,000. (This estimate is unaffected by the various matters above.)
Required:
In a publishable format, produce an income statement for Epicteta Ltd for the year ended 31 July 2024 and a balance sheet as at that date.

Transcribed Image Text:

7% redeemable preference shares of 1 each Advertising Allowance for doubtful debts as at 1 August 2023 Share premium account Bad debt expense 5% bank loan (repayable 2028) Buildings at cost Buildings: accumulated depreciation at 1 August 2023 Cash at bank Communication expenses General operating expenses Insurance Loan interest paid Inventory at 1 August 2023 Freehold land at cost Lighting and heating expense Ordinary dividends paid Ordinary shares of 50p each Petty cash Plant & equipment at cost Plant & equipment: accumulated depreciation at 1 August 2023 Preference dividends paid Purchases Repairs and maintenance Retained earnings as at 1 August 2023 Warranty repairs expense Sales Trade payables Trade receivables Wages and salaries '000 258 192 1,100 14 74 123 101 16 288 339 89 77 1 1,471 7 2,935 149 44 767 423 8,468 '000 100 21 202 320 242 380 691 978 5,152 382 8,468