Adjustments 1) Closing inventories was 490,000 on the 31st of December 2020. 2) Corporation tax is 25% for the year, half due now in cash and half due in April 2021. 3) Land was revalued from 2,000,000 to 2,300,000. 4) A court case is currently going through the courts in which Alpha Social Network Ltd is suing its biggest competitor for 20,000,000, in which the outcome of winning the court case is considered probable (over 50%). 5) Depreciation (all based on reducing balance): a) IT Equipment - 5% b) Production Machinery - 10% c) Fixture and Fittings - 15% 6) Amortisation/Impairment: 7) a) 200,000 of inventories need to be written off as they've been damaged by a recent flood (not yet included in stock figure). A further 320,000 of staff wages not yet paid and relating to the financial year ending the 31st of December 2020 still need to be accounted for. 8) Dividends were distributed to shareholders during the financial year to a value of 1,000,000 in cash. 9) A 1 for 5 bonus issue was given to shareholders. The bonus issue was conducted before the rights issue. 10) A rights issue of 4 for 1 basis, at 5 per share, with 80% of shares bought by shareholders. REQUIRED Please prepare a balance sheet and income statement for 31st December 2020 using the trial balance presented on the previous page, ensuring that you make all the requested adjustments. Please also ensure to add notes of any contingent assets and/or contingent liabilities if you consider such an event to have arisen. Total marks for Question 1 (40 marks) The following information is the preliminary trial balance of Alpha Social Network Ltd for year ending of 31st of December 2020: Debits () Credits (E) Sales 20,000,000 Short-Term Marketable Securities 800,000 Goodwill 2,000,000 Purchases 5,000,000 Bank Loan 4,000,000 Inventories (at the 1st of January 2020) 980,000 Advertising 400,000 Share Capital (1) 1,000,000 Property 6,200,000 Staff Wages 3,500,000 Pension Liability 1,200,000 General Expenses 550,000 Management Salaries 1,200,000 Cash and Cash Equivalents 2,650,000 Fixture and Fittings - Historic Cost 4,500,000 Fixture and Fittings - Accumulated Depreciation 1,100,000 Land 2,000,000 Lease Liabilities (due in more than one year) 340,000 Trade Receivable 260,000 Bank Interest Expense 60,000 Production Machinery - Historic Cost 3,200,000 Production Machinery - Accumulated Depreciation 800,000 Accrued Staff Wages 250,000 Trade Payable 140,000 Share Premium 3,500,000 IT Equipment - Historic Cost 4,200,000 IT Equipment - Accumulated Depreciation 600,000 Asset Revaluation 120,000 Rent Received (additional office space) 250,000 Retained Earnings 4,200,000 37,500,000 37,500,000