Moscow Ltd is a food distributor. The following trial balance was extracted from its accounting records as at 31 December 2017:

Dr Cr

$000 $000

Land 450

Buildings

cost 300

provision for depreciation at 1 January 2017 180

Plant and equipment:

Cost 1,080

provision for depreciation at 1 January 2017 324

Motor vehicles:

Cost 258

provision for depreciation at 1 January 2017 132

Inventory of goods for resale at cost, 1 January 2017 369

Trade receivables 549

Provision for doubtful debts 30

Cash at bank 54

Trade payables 342

10% debenture loan, repayable in 2030 210

Ordinary shares capital @ 50c each 900

Retained profits 240

Sales revenue 6,144

Returns inwards 264

Wages and salaries 249

Purchases 4,029

Directors remuneration 162

Insurance 18

Electricity 72

Distribution costs 252

Other expenses 396

8,502 8,502

The following additional information is available:

(1) In December 2017 the company sold a delivery van for $12,000 in cash. The vehicle was purchased on 1 July 2015 for $30,000. The cash received from the sale was paid to the companys employees as a Christmas bonus. Neither the sale of the vehicle nor the bonus have yet been included in the accounting records.

(2) Depreciation is to be provided on the non-current assets using the following annual rates:

Freehold land nil

Buildings 2% per year on a straight line basis Plant and equipment

10% per year on a straight line basis Motor vehicles

20% per year on a reducing balance basis

A full years depreciation is provided in the year of acquisition and no depreciation is provided in the year of disposal.

(3) The inventory was counted on 31 December 2017 and valued at cost, $474,000.

Included in this were some crates of ready-made meals costing $12,000 which were close to their expiry dates. The managers decided to mark these down to

$3,000 for quick sale.

(4) A customer owing $24,000 has recently been declared bankrupt. The company does not expect to recover any of this. A provision for doubtful debts is to be adjusted to 4% of the remaining trade debtors.

(5) Provision is to be made for the audit fee of $36,000. A full years debenture

interest which was due on 31 December 2017 was paid on 5 January 2018.

(6) The company has not been paying dividends to shareholders for the last two years.

The directors plan to pay a dividend in respect of the current year of 12c per share, payment to be made in January 2018.

(7) Corporation tax on the profit for the year has been calculated to be $90,000 and is payable on 1 October 2018.

(8) An electricity bill for $6,000 for the three months to 31 December 2017 was received and paid in January 2018.

(9) On 1 December 2017, the company paid building insurance of $12,000 for the four months ended 31 March 2018.

(10) During the year, the company revalued the freehold land to $1,500,000. This revaluation has not been reflected in the trial balance.

Required:

(a) Prepare an income statement for Moscow Ltd for the year ended 31 December

2017, statement of financial position at 31 December 2017 and statement of movements in equity for the year ended 31 December 2017 in a form suitable for presentation to the directors.

(b) The managing director is concerned about the amount of dividend to be paid. In particular, he is not sure whether the company has sufficient funds for the dividend payments. What matters should the directors consider before finally deciding on a dividend payment?