A Long Acre Ltd has just finished its second year of trading to 31 December 19X4. Balances per 8.1 need to be brought forward into this question. Tax rates are the same as for \(19 \mathrm{X} 3\).

The following information is available:

(i) The proposed final dividend for \(19 \times 3\) (see 8.1) was paid on 31 January \(19 \mathrm{X} 4\).

(ii) Shares in Covent Ltd were bought on 1 January 19X4. A dividend of \(£ 2,400\) was received on 30 September 19 X4.

(iii) Debentures in Covent Ltd were bought 1 July 19X4. Debenture interest of \(£ 7,200\) (net) was paid to us on 31 December \(19 \mathrm{X} 4\).

(iv) Debenture interest of \(£ 9,600\) (net) was paid by us on 31 December \(19 \mathrm{X} 4\).

(v) Income tax owing to the Inland Revenue for 19X4 was not paid by us until 19X5. The 19X3 income tax had been paid on 30 January \(19 \mathrm{X} 4\).

(vi) An interim dividend of \(7 \frac{1}{2}\) per cent on \(400,000 £ 1\) ordinary shares was paid by us on 10 July 19 X4.

(vii) A final dividend of \(171 / 2\) per cent was proposed for the year.

(viii) Depreciation of \(£ 70,000\) was charged in the accounts. Capital allowances amounted to \(£ 96,000\).

(ix) Net trading profit (before taking into account (ii), (iii), and (iv)) was \(£ 360,000\).

(x) The corporation tax due for \(19 \mathrm{X} 3\) was paid on 1 October 19X4. Corporation tax for the year to 31 December \(19 \mathrm{X} 4\) is expected to be \(£ 95,000\).

\section*{You are required to:}

(a) Draw up the double entry accounts recording the above (except bank).

(b) Show the relevant extracts from the profit and loss account for the year and balance sheet at the year end.

Question 8.3 is a typical professional examination question. It is not easy. Remember to bring forward the balances from the previous year which will often have to be deduced. The letters (A) to (L) against the information will make it easier for you to check your answer against that given at the back of the book.