10.6 The trial balance of Southgate plc at 31 December 20X9 was as follows:

£ £

Ordinary share capital (shares £1 each) 500,000 Freehold property at cost 500,000 Furniture and equipment at cost 375,000 Provision for depreciation of furniture and equipment, 1 January 20X9 59,500 Debtors and prepayments 105,000 Stock and work in progress at 31 December 20X9 104,200 Creditors and accruals 85,300 Balance at bank 72,000 Gross profit on trading 416,500 Rent and rates 30,000 Office salaries 142,600 Advertising costs 21,000 Transport costs 23,600 Profit and loss account balance, 1 January 20X9 278,500 Taxation due but unpaid on 20X8 profits 103,600 Deposit on new equipment 10,000 Temporary investment 60,000 1,443,400 1,443,400 You are given the following additional information:
1 The company has contracted to purchase new equipment at a cost of £50,000. A deposit of £10,000 was paid during December 20X9 and the remainder will be paid during January 20Y0 when delivery is expected.
2 Depreciation is to be provided on furniture and equipment, other than the new equipment referred to under 1, at the rate of 10 per cent on cost.
3 The figure for rent and rates in the above trial balance covers the 15 months to 31 March 20Y0.
4 During December 20X9 the company used part of the profit and loss account balance at 1 January 20X9 to make a bonus issue of one new share for every five shares already held. The issue was made at par but has not yet been written into the books.
5 During November 20X9 the company’s freehold premises were valued at £650,000 by a firm of professional valuers. The company’s directors have decided to write the revaluation into the 20X9 accounts and credit the surplus arising to revaluation reserve.
6 Taxation is to be provided at 50 per cent on the company’s net profit from trading operations.

(a) The profit and loss account of Southgate for 20X9 and balance sheet at 31 December 20X9. Each accounting statement should be presented in vertical format.

(b) Your comments on the suggestion, from one director, that the company should pay a dividend of 10p per share on the issued share capital in view of the large bank balance and the fact that no dividend was paid for 20X8.
Note Ignore depreciation of freehold property.