C.L.Worcester Ltd provides office supplies to businesses throughout the UK. Preparation of its financial statements for the year ended 31 March 20X3 is now underway and the trial balance is shown below. All figures in the trial balance and in the additional information supplied beneath it are in 000s.

Additional information is as follows:

- Depreciation is charged on distribution vehicles on a 25% reducing balance basis.

- It is assumed that fixtures and fittings, which are depreciated on a straight-line basis over five years, will have no residual value on disposal. Their depreciation is treated as an administration cost.

- An accrual of 1,300 is required for power consumed in February and March 20X3 but not billed by the year-end. Rent and utility costs are split equally between the selling and distribution department and the administration department.

- Insurance is treated as an administration cost. Included within the trial balance figure is a premium for public liability insurance of 375 which relates to cover for the period 1 August X2 to 31 July X3.

- An accrual of 500 should be made for auditors and consultancy fees.

- The companys policy is to make an allowance for irrecoverable receivables at a rate of 3% of the year-end trade receivables balance. Movements on this allowance are classified as relating to administration.

- Inventory as at 31 March 20X3 was valued at 15,400.

- Provision should be made for taxation at a rate of 20% of the profit after finance costs.

Required to do:

A. Prepare the companys Statement of Profit or Loss for the year ended 31 March 20X3, in a form suitable for publication, together with its Statement of Financial Position as at that date. Support your response with full workings. (50 marks)

B. The companys shares have a nominal value of 1 each and on 31 March 20X3 they had a market value of 11.52 each. Based on this information and the financial statements you have prepared, compute the gross profit margin, operating profit margin, EPS (Earnings per Share) and the P/E (Price/Earnings) ratio. Round the EPS to the nearest penny and the other ratios to one decimal place. (25 marks)

C. Identify and discuss one error which the trial balance can detect and one which it cannot. (25 marks)

DR CR '000s '000s 1,190 230 395 Carriage inwards Returns inwards & outwards Selling & distribution salaries Administration salaries Directors' remuneration Purchases 33,500 10,120 4,500 45,500 Sales 122,275 9,200 800 Rents & utilities (power & water) Insurance Running & repair of distribution vehicles Advertising Professional fees 1,200 2,200 1,700 Loan interest 200 290 14,800 12,500 20,600 200 1,180 Discounts allowed Inventory Trade receivables Trade payables Allowance for irrecoverable receivables as at 1 April X2 Bank/cash Share capital account Share premium account Retained earnings reserve Bank loan (repayable in 20X8) Interim dividend paid Distribution vehicles: Cost as at 1 April X2 Accumulated depreciation provision as at 1 April X2 Fixtures & fittings: Cost as at 1 April X2 Accumulated depreciation provision as at 1 April X2 3,600 1,400 8,140 2,900 500 19,300 5,400 15,000 9,000 173,910 173,910