1. 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.

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

continued

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:

1. 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. (27 marks)

2. 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. (8 marks)

Identify and discuss one error which the trial balance can detect and one which it cannot. (5 marks)