Prepare the balance sheet at 31 December 20X9 for Yeovil Electronics, in each of the following situations. The capital is not given, so you should calculate it as being the figure needed to make the balance sheet balance, in accordance with the balance sheet equation.

(a) First, the accountant has extracted the following balances from the books at 31 December, all balances being at the traditional historical cost valuation.

Prepare the historical cost balance sheet.

(b) Second, the managers of Yeovil Electronics are concerned that the historical cost figures do not represent the ‘true’ worth of the company and are accordingly a poor basis for their decision making. They have therefore estimated the replacement cost of the assets and liabilities. Specifically, the balances which differ significantly from historical cost are:

All other figures may be assumed to be at historical cost. Prepare a replacement cost balance sheet.

(c) Third, the major lender has expressed a wish to wind up the company, sell the assets, and use the proceeds firstly to repay her loan of £120,000. Her estimates of what the assets would sell for and what the liabilities could be settled for are set out below. Draft a balance sheet using these net realisable values.

(d) Which balance sheet gives the most true and fair view of the state of affairs of Yeovil Electronics? Justify your decision.

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Premises 345,000 Plant and machinery 104,800 Inventory 67,250 Debtors 46,200 Bank overdraft 15,000 Creditors 56,780 Non-current loan 120,000