Self-test James Ltd was registered with an authorised capital of £200,000 divided into 20,000 6 per cent preference shares of £1 each and 360,000 ordinary shares of 50p each.

Trial balance as at 31 December 2010 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 at 1 January 2010 17,460 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 and salaries 122,000 Directors’ remuneration 29,000 Motor expenses 4,700 Audit fees 1,300 Rates and office expenses 1,700 Commission 17,400 Bad debts written off 2,600 Bad debt provision 600 Accumulated depreciation – Plant and equipment 6,000

– Motor vehicles 6,700

– Furniture and fittings 1,000 Preference dividend 600 Cash at bank 6,420 640,400 640,400 The following adjustments are to be made to the above trial balance:

(i) Stock on 31st December 2010 amounts to £86,500.

(ii) Depreciation at 10 per cent per annum on cost of plant and equipment.

(iii) Depreciation at 10 per cent per annum on the reducing balance of furniture and fittings.

(iv) Depreciation at 20 per cent per annum on cost of motor vehicles.

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

(vi) Tax should be provided at 30 per cent of taxable income.

(vii) The directors recommend that:

(a) The final preference dividend should be paid.

(b) A dividend of 5 per cent should be paid on the ordinary shares.

You are required to prepare the financial statements of James Ltd for the year ended 31 December 2010.