Question 1
The following information has been extracted from the books of Tonson, a limited liability company, as at 31 October 20X6.
 3
You have also been provided with the following information:
(a) Inventory at 31 October 20X6 was valued at $275,000 based on its original cost. However, $45,000 of this inventory has been in the warehouse for over two years and the directors have
agreed to sell it in November 20X6 for a cash price of $20,000.
(b) The marketing expenses include $5,000 which relates to November 20X6.
(c) The allowance for receivables is to be increased to the equivalent of 5% of trade receivables.
(d) There are wages and salaries outstanding of $40,000 for the year ended 31 October 20X6.
(e) Buildings are depreciated at 5% of cost. At 31 October 20X6 the buildings were professionally valued at $1,800,000 and the directors wish this valuation to be incorporated into the financial statements.
(f) Depreciation is to be charged as follows:
(i) Motor vehicles at 20% of carrying amount
(ii) Furniture and equipment at 20% of cost
(g) No dividends have been paid or declared.
(h) Tax of $150,000 is to be provided for the year.
(i) During October 20X6 a bonus issue of one for ten shares was made to ordinary shareholders.
This has not been entered into the books. The share premium account was used for this purpose.
Required
Prepare the following statements, for internal use:
(a) The statement of profit or loss for the year ended 31 October 20X6
(b) The statement of financial position as at 31 October 20X6

Dr Cr s000 S000 Cash 15 75 350 60 Insurance Inventory at 1 November 20X5 General expenses Energy expenses Marketing expenses Wages and salaries Discounts received 66 50 675 50 Share premium account Retained earnings at 1 November 20X5 Aliowance for receivables at 1 November 20x5 200 315 40 Sales revenue 5,780 80 Telephone expenses Property expenses Bank 100 94 Returns inward 95 Trade payables 290 Loan note interest 33 900 3,570 Trade receivables Purchases 7% loan notes 470 Irrecoverable debts 150 $1 ordinary shares Accumulated depreciation at 1 November 20x5 Buildings Motor Vehicles 1,800 360 80 Furniture and equipment Land at cost 420 740 Buildings at cost 1,500 240 1,200 9,899 Motor vehicles at cost Furniture and equipment at cost 9,899