Question 1 Blue Stream plc is a small company with interests in retailing and property. The financial director of Blue Stream plc is currently finalising the financial statements for the year ended 28 February 20X5. The trial balance at that date is shown below: BLUE STREAM plc TRIAL BALANCE AT 28 FEBRUARY 20X5 Debit Credit 000 000 Ordinary share capital (1 par value) 2,500 Retained earnings at 28 February 20X4 1,424 Investment property: Fair value (at 28 February 20X4) 1,950 Equipment: Cost 1,740 Equipment: Accumulated depreciation (at 28 February 480 20X4) Right of use asset 2,000 Lease liability 2,000 Accounts receivable 1,115 Inventory at cost HMRC/Tax authority Cash at bank Accounts payable Sales Cost of sales 1,245 200 974 870 9,850 5,100 Rental income Salaries and wages 100 1,200 Other costs 1,700 17,224 17,224 The following relevant information needs to be taken into account: The company classifies its expenses using the function method. The financial director has identified three functions, namely sales, administration and distribution. The salaries and wages of 1,200,000 are allocated 700,000 to the administration function and 500,000 to the distribution function. 100,000 of the other costs are prepaid and 70,000 are accrued. The other costs are allocated 50% to the administration function and 50% to the distribution function. These costs include expenses for rent, advertising and repairs and are all individually immaterial. The equipment is all used within the administrative function and the leased vehicles are all used within the distribution function. Any bad debts are allocated to the administration function. The company regards any expenses over 100,000 as material.