PUBLISHED ACCOUNTS

The following balances have been extracted from the books of Nkumbula Co. Ltd at 31 December 2017:

K K

Called-up share capital

600,000 Ordinary shares at K1 each 600,000

300,000 6% Preference shares at K1 each 300,000

Share premium account 120,000

Revaluation reserve 100,000

Profit and loss account b/f 330,000

5% Debenture loans 600,000

Debtors 400,000

Creditors 375,000

Bank balance 150,000

Freehold property at valuation 1,600,000

Plant and machinery at cost 1,900,000

Stock 300,000

Cash 10,000

Provision for doubtful debts 20,000

Provision for depreciation:

Land and buildings 400,000

Plant and machinery 700,000

Directors remuneration 250,000

Other administrative expenses 185,000

Selling and distribution expenses 250,000

Debenture interest 30,000

Sales 4,030,000

Cost of goods sold 2,800,000

The following information is to be taken into account:

1. The value of the buildings is estimated at K800,000. The balance of the figure for property represents the site. Depreciation at 5 per cent per annum is to be provided on the value of the buildings.

2. Depreciation on plant and machinery is to be provided at 10 per cent per annum on cost.

3. The provision for doubtful debts is to be adjusted to 2.5 per cent of debtors.

4. Corporation tax based on the years profit is calculated to be K50,000. Tax will be paid during 2018.

5. The audit fee for the year is estimated to be K15,000.

6. The directors have decided:

(a) to pay the preference dividend for the year, payment to be made during January 2018

(b) to recommend a dividend of 10 pence per share on the ordinary shares.

REQUIRED:

Prepare the profit and loss account of Nkumbula Co. Ltd for the year ended 31 December 2017 and the balance sheet as at that date for publication to external users.