11.3 The trial balance of Alan Jones & Co. Ltd, a trading company, as at 31 December 20X1 was as follows:

£

£

Profit and loss account 120,000 Ordinary shares of £l each 1,000,000 Share premium account 80,000 Land and buildings at cost 800,000 Motor vehicles at cost 400,000 *

Creditors - trade 300,000 Cash at bank 20,000 Stock at cost as at 1 January 20X1 500,000 Sales 3,200,000 Purchases 1,900,000 Overhead expenses 600,000 Debtors - trade 700,000 Accumulated depreciation - motor vehicles 200,000 Provision against doubtful debts 20,000

£4,920,000

£4,920,000 The following information is relevant:

1. Stock as at 31 December 20X1, at cost, amounted to £300,000.

2. Bad debts of £10,000 are to be written off.

3. The provision against doubtful debts is to be adjusted to 5 per cent of debtors.

4. Depreciation is to be provided on motor vehicles at the rate of 25 per cent per annum on the reducing balance.

5. Depreciation is to be provided on the buildings at the rate of 2 per cent per annum on £600,000; the balance of the figure of £800,000 relates to the land.

6. Provision is to be made for an audit fee of £10,000.

7. Corporation tax based on the year’s profit will be £100,000 and will be paid during 20X2.

8. The directors propose to pay a dividend of 10 per cent on the ordinary share capital.

Prepare the profit and loss account for the year ended 31 December 20X1 and the balance sheet as at that date, in good form, for use by the directors.