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Assessment one: Financial Statements Preparation (50 marks) You are about to commence preparation of the financial statements of Target Ltd. for the year ended 31 December 2019. The entity's trial balance as at 31 December 2019 is shown as follows: DR CR E E Share capital 100,000 Share premium 20,000 Revaluation reserve at 1 January 2019 50,000 Trade and other payables 13,882 Land & buildings-value/cost 210,000 Accumulated depreciation at 1 January 2019 30,000 Plant and machinery-cost 88,000 Accumulated depreciation at 1 January 2019 16,010 Trade and other receivables 8,752 Allowance for doubtful debts at 1 January 2019 40 Accruals 3,029 5% bank loan repayable 2033 40,000 Cash and cash equivalents 6,993 Retained earnings at 1 January 2019 23,853 Sales 178,833 Purchases 130,562 Distribution cost 7,009 Administrative expenses 7,100 Inventories at 1 January 2019 17,331 Bank interest received 100 Total 475,747 475,747The following Information Is relevant: 1. 2. 6. The interest for the year on the bank loan has not yet been accrued. Land. which is non-depreciable. is included in the trial balance at a value of 110,000. At 31 December 2019 it was revalued to 150,000 and this revaluation is to be included in the nancial statements. Depreciation is to be provided for the year to 31 December 2019 as follows: Buildings 10% per annum Straight line basis Plant and machinery 20% per annum Reducing balance basis As part of the buildings contains the ofce accommodation and part of the buildings contains the plant and machinery, the depreciation expenses for the " Buildings" should be allocated between cost of sales and administrative expenses as follows: % Cost of sales 40% Administrative expenses 60% Included in trade receivables is a balance of 1,752 that is considered to be irrecoverable due to the customer going into bankruptcy and the Direct of the Target feels this should be written off. In addition. it was decided that the allowance for receivables should be adjusted to 2% of the ending balance of trade receivables. . Target is being sued by a customer regarding the sale of goods that the customer believes to be defective. Legal advisers think that it is probable that Target will lose the case and that they will have to pay damages of 5,000 in 2020. Legal expenses are charged to cost of sales. The tax charge for the year has been calculated as 2,700. Required: Using excel format. prepare the statement of prot or loss and other comprehensive income, the statement of changes in equity of Target for the year ended 31 December 2019 and the statement of nancial position as at 31 December 2019. Assessment two: Financial Statements Analysis (50 marks) The following is a summary of the nancial statements of Northern Group Ltd for years ending 31 October 2018 and 2019. Statement of Comprehensive Income 2018 2019 000 000 Revenue 6.800 7,810 Cost of sales 4,800 5,400 Gross prot 2.000 2.410 Operating expenses 842 1,119 Other operating income 1_ LG Prot from operation 1.308 1.401 Finance costs Q m Profit before tax 1,268 1.301 Taxation 1 10 1 15 E l Prot for the year 1.13 Statement of Financial Position Non-current assets Intangible assets Property, plant and equipment Current assets Inventories Trade receivables Investments Cash and cash equivalents Total assets Capital and Reserves Called up share capital Share premium Retained earnings Non-current liabilities Financial liabilities Current liabliities Trade pavables Bank overdraft Income tax payable Total Equity and Liabilities 201 8 000 908 339 500 50. 1,000 200 1,108 '4 _|. CD 410 6 1.166 2,308 400 201 9 000 1 .450 824 500 1 .200 600 1 ,789 919 125 m 600 2,374 2,974 3,589 1.000 Required: Calculate a minimum of two relevant accounting ratios from each category of profitability, liquidity, efficiency and capital structure/gearing. Analyse the results of the ratios calculated above and provide a report on the company's financial performance/position for each of these ratios. Prepare a conclusion in your report on the financial statements of Northern Group Led by commenting on key points and any relationships between different ratios or ratio categories. Make recommendations based on your findings. Suggest a minimum of two possible sources of long-term finance appropriate to the company's situation. 5
