LOBSTER 2020 LTD You have been engaged as an Accountant for a company called Lobster Ltd and your first assignment is to prepare annual financial statements for the company for the year ended 31st March 2020 and to prepare a report on the profitability of the company to the Executive Management at the next meeting. An Accounts Clerk has processed the accounting transactions for Lobster Ltd for the year ended 31st March 2020 by entering the transactions in the respective general ledger accounts, balancing off each account and has extracted the following Trial balance as at 31st March 2020.

LOBSTER LTD
Trial Balance as at 31st March 2020
Sales	1,600,000
Motor Vehicles at cost	590,000
Accumulated Depreciation Motor Vehicles at 1st April 2019	77,000
Bank	10,000
Distribution costs	200,000
Trade Debtors	90,000
Finance costs	15,000
Income tax expense	10,000
Buildings at Cost	1,500,000
Accumulated Depreciation Buildings at 1st April 2019	350,000
Opening Stock at 1st April 2019	145,000
Share capital	750,000
Accumulated Reserves	140,000
Long Term Loans	68,000
Plant and Machinery at Cost	450,000
Accumulated depreciation plant and machinery at 1st April 2019	150,000
Trade Creditors	270,000
Accruals	30,000
Provision for doubtful debts at 1st April 2019	50,000
Purchases	430,000
Insurance	45,000
Total	3,485,000

Prior to preparing the annual financial statements you conducted a review of the general ledger accounts and held a discussion with the Accounts Clerk who has provided you with the following additional information.

i. ii.

An annual stock take had been undertaken and the value of closing stock was K80,000.00 The accounting policy for the company for depreciation of non-current assets were as follows:

a. Motor Vehicles depreciated at 25% per annum on cost on a straight line basis with no residual value b. Plant and Machinery depreciated at 10% per annum on cost on a straight line basis with no residual value c. Buildings depreciated over a useful economic life of fifty years on a straight line basis iii. Expenses that had been incurred but not paid and therefore not accounted for were: a. Selling expenses K10,000.00 b. Salaries K140,000.00 c. Repairs and Maintenance expenses K18,000.00

iv.	Expenses that had been prepaid were as follows: a. Insurance expenses of the annual paid insurance as per the Trial balance 10 % was prepaid.

v. vi. vii.

An amount of K20,000.00 due from a customer was considered unrecoverable. This was not accounted for. An amount of K40,000.00 for purchases had been debited to Distribution Costs. The Statement of Comprehensive Income for Lobster for 2019 was as follows:

LOBSTER LTD
Statement of comprehensive Income
2019
K
Sales	1,700,000
Cost of sales	450,000
Gross Profit	1,250,000
Expenses	580,000
Operating Profit	670,000
Financing Costs	60,000
Profit before Tax	610,000
Taxation	20,000
Profit for the Year	590,000

viii. Profitability Ratios for the Industry in which Lobster Ltd operates were as follows:

Industry Averages	2020	2019
Gross Profit	72%	70%
Operating Profit	30%	35%
Profit before Tax	33%	33%
Profit for the Year	30%	30%

Required:

(a) Prepare a revised Trial Balance after taking into account the additional information. (b) Prepare a Statement of Comprehensive Income for the year ended 31st March 2020. (c) Prepare a Statement of Financial Position as at 31st March 2020.
(d) Prepare a horizontal analysis of the Statement of Comprehensive Income for Lobster Ltd for 2020 compared to 2019.
(e) Prepare a vertical analysis of the Statement of Comprehensive Income for Lobster Ltd for 2020 and 2019. ( 9.5 marks)
(f) Prepare a Report on the profitability of Lobster Ltd in 2020 compared to 2019 and industry.

[Total: 100 marks] SUBMISSION INSTRUCTIONS 1. The assignment should be prepared using Microsoft Excel and/or Word.