Self-test Larnaca Limited has an authorised capital of £350,000 in ordinary shares of

£1 each. The financial year ends on 31 March. At 31 March 2006 the following figures were extracted from the books, subject to final adjustment.

Debit Credit Ordinary shares issued, fully paid 200,000 Profit and loss account at 1 April 2005 19,000 Bank balance 25,789 8 per cent debentures 25,000 8 per cent loan 10,000 Remuneration of auditors 800 Remuneration of directors 32,000 Interest on loan 800 Interest on debentures 2,000 Office expenses 74,800 Delivery expenses 68,000 Leasehold workshop at cost 180,000 Provision for depreciation on leasehold workshop 60,000 Machinery at cost 160,000 Provision for depreciation on machinery 27,000 Additions to machinery at cost during the year 10,000 Stock at 31 March 2006 86,000 Debtors 95,200 Prepaid expenses 700 Trade creditors 50,500 Accrued expenses 5,340 Sales 900,000 Materials consumed 560,751 1,296,840 1,296,840 The following matters are to be taken into consideration:

(i) The lease on the workshop expires on 31 March 2015. Provide for the annual depreciation at the appropriate rate.

(ii) Depreciation on machinery is 15 per cent on cost. A full year’s depreciation is charged on all machinery owned at 31 March 2006.

(iii) A dividend of 5 per cent is proposed on the share capital.

(iv) The only distribution cost during the year was delivery expenses.

(v) A provision for corporation tax of £11,000 is to be made.

You are required to prepare the profit and loss account for the year ended 31 March 2006 and a balance sheet as at that date in a form satisfying the minimum requirements of the Companies Act.

Note 1 You must show relevant working outside the profit and loss account and balance sheet but there is no need to show any of the notes required by the Companies Act.

Note 2 Ignore all exemptions permitted for small and medium-sized companies.