QUESTION 1 ANSWER ALL PARTS OF THIS QUESTION Part A You are the newly appointed accountant for Slipstir plc which produces and sells premium non-alcoholic drinks. You are about to prepare the financial statements for the year ended 31 March 2021. You have been given the trial balance as follows: '000 '000 12,750 1,250 13,500 6,620 2,400 10,030 Slipstir plc Trial balance as at 31 March 2021 Equity shares (nominal value 1) Revaluation reserve Buildings Machinery (at cost) Machinery (depreciation at 31 March 2020) Investments Investment income Inventory at 31 March 2020 Trade receivables/payables Retained profits at 31 March 2020 Sales/purchases Cash Wages and salaries General administrative expenses Sales and distribution costs 1,071 1,340 1,760 1,870 14,874 10,250 4,710 2,020 2,250 1,780 1,131 45,141 44,465 You notice that the trial balance doesn't balance and you record the difference in a suspense account. By examining the accounting records, you have identified the following problems: An invoice for a credit sale for 57,800 has been incorrectly posted to sales as 75,800. The associated receivable was correctly recorded. Wages of 24,000 paid in cash were correctly recorded in the cash book but were incorrectly debited twice in the wages expense account in the ledger. A new machine was purchased for cash for 290,000 during the year. The machine's asset value was correctly recorded in the asset account but the cash payment was incorrectly understated in the cash book by 20,000. No depreciation has been charged on buildings this year. During the year, the company had a professional valuation carried out and the company's buildings were revalued upwards by 650,000. The adjustment for this was made to the value of buildings in the asset account but no adjustment was made to the revaluation reserve. REQUIRED (a) Provide the journals (i.e. the debit and credits) required to correct the trial balance and clear the suspense account (no narratives are required) and show the corrected balances. (You do not need to show the suspense account). [10 marks] (b) Use of a suspense account is one internal control available to a company. Briefly explain why companies have internal controls and identify one other internal control that a company might use. [4 marks) PART B Using the calculations you have made and the information from the trial balance in PART A, you also collect the following additional information to finalise the financial statements: Depreciation is charged at 15% per year on a reducing balance basis for machinery Inventory at 31 March 2021 was 1,505,000. The company paid a dividend of 1,400,000 during the year for which no adjustment has been made. REQUIRED Prepare a statement of profit or loss and a statement of changes in equity for the year ended 31 March 2021, and a statement of financial position as at that date. Use appropriate headings and show all workings. [19 marks)
