Self-test Hilmor Ltd has an authorised capital of £200,000 divided into 20,000 6 per cent preference shares of £1 each and 180,000 ordinary shares of £1 each. All the preference shares and 100,000 ordinary shares were issued and fully paid.

Trial balance as at 31 December 2009 Ordinary share capital 100,000 Preference share capital 20,000 Share premium account 10,000 Profit and loss account 12,400 General reserve 15,000 Stock 1st January 2009 17,460 Freehold land and buildings 100,000 Plant and equipment (at cost) 22,000 Motor vehicles (at cost) 15,000 Furniture and fittings (at cost) 6,000 Debtors and creditors 14,200 17,700 Purchases and sales 280,020 451,000 Wages 80,000 Salaries 42,000 Directors’ remuneration 29,000 Motor expenses 4,700 Auditors’ fees 1,300 Rates and insurance 1,700 Advertising 17,400 Bad debts written off 2,600 Bad debt provision 600 Depreciation provisions – Plant 6,000 Motor vehicles 6,700 Furniture 1,000 Preference dividend 600 Cash at bank 6,420 640,400 640,400 Prepare the trading and profit and loss account for the year ended 31 December 2009 and the balance sheet at that date taking the following additional information into account.

(i) Stock at 31 December 2009 is £46,500.

(ii) Depreciation:

(a) 10 per cent per annum on cost of plant and equipment and furniture and fittings.

(b) 20 per cent per annum on cost of motor vehicles.

(iii) The provision for bad debts is to be made equal to 10 per cent of sundry debtors.

(iv) The directors recommend that a dividend of 10 per cent should be paid on the paid-up value of the ordinary shares.

(v) The final dividend was also paid to preference shareholders.