Question 1 Hwang plc is a food distributor. The following trial balance was extracted from its accounting records as at 31 March X8: Dr Cr Leasehold property : cost 360,000 : provision for depreciation at 1 April X7 108,000 Plant, equipment and vehicles : cost 86,000 : provision for depreciation at 1 April X7 44,000 Stock of goods for resale at cost, 1 April X7 123,040 Long-term investment in shares (at cost) 50,000 Trade debtors 183,400 Cash at bank per cash book 61,720 Trade creditors 124,460 10% debenture loan, repayable in X15 70,000 50p ordinary shares 300,000 Retained earnings: balance at 1 April X7 74,900 Sales 2,045,700 Returns inwards 87,700 Purchases 1,342,600 Wages and salaries 82,600 Directors' remuneration 54,000 Rent 96,000 Electricity 24,000 Distribution costs 84,000 Other expenses 132,000 2,767,060 2,767,060 The following additional information is available: (1) The bookkeeper has yet to reconcile the cash book balance at 31 Mar X8 to the balance shown on the bank statement at that date, which is 74,420 in favour of the business. Investment income of 10,000 shown in the bank statement has not been entered in the books of the business, neither have bank charges of 2,500 nor a standing order for advertising cost of 6,800. 'Cheq'ues outstanding at 31 Mar X8 totalled'16,000 and deposits not yet cleared on the statement amounted to 4,000. All of these items related to the year ended 31 Mar X8. On December X7, a delivery vehicle was irreparably damaged and 1,000 of insurance claim proceeds was received in cash. The vehicle had been purchased for 16,000 on 1 April X3. The cash received from the insurance claim was paid to the company's employees as a new year bonus. Neither the sale of the vehicle nor the bonus have yet been included in the accounting records. Plant, equipment and vehicles are depreciated at 20% on cost. A full year depreciation is charged in the year of acquisition but none in the year of disposal. Leasehold property is amortised over the lease period which commenced on 1 April X4. The stock was counted on 31 March X8 and valued at retail price 180,750, with 25% mark-up. The directors have reviewed the stocks held at 31 March X8 and have identified one product line where the current selling price is less than the cost. The cost of the product was 10 per unit and the estimated selling price is now 7 per unit, there are 700 units of it in stock at 31 March X8. Costs to sell this batch of product were 200. The trade debtors balance does not agree with the list of balances in the debtors ledger which amounted to 186,000. Upon investigation, the following items were discovered: (a) an invoice of 2,600 has not been updated in the sales day book (b) a receipt of 1,000 from Chu plc has been updated into the Lee plc's account A customer owing 6,400 has recently been declared bankrupt. The company does not expect to recover any of this debt which is to be written off. Provision is to be made for the audit fee of 6,750 and also for a full year' s debenture interest due on 31 March X8 but not paid until 6 April X8. The company rents its premises and, on 1 March X8, it paid 36,000 as six months' rent in advance. Principles of Accounting University of London external programme (9) corporation ta); on the profit oi the year is payable on 1' )anuary X6 and a provision of 33,000 is to be made for it. Reguired: (a) (13) Make any necessary adjustments to the cash book balance as at 31 Mar X8 and prepare a bank reconciliation as at that date. (5 marks) Prepare a balance sheet and income statement for Hwang pic for the year ended 31 March X8 in a form suitable for presentation to the directors. (18 marks) Identify three groups of external users of financial information concerning a company and explain how annual published financial statements might improve their decisions. ( 7 marks) \f.3 -6 __ .7 Income Statement or ear ended 31 MarX8 8 -9 - :o 1m :1 :2 :3 _ :4 :5 m :5 :7 - w :3 647,26 !9 Less I aeratin; Exenses =0 -__ =1 =2 - =3 _ =4 =5 -_ :5 Loss on Sale of Fixed Asset 1000 16000- 20%*16k*4 s =7 _ =8 =9 0 Audit Fee 6 750 518 I250 ll Net Profit Before Interest and tax 129,01 Less: Debenture Interest 70,000'1096 Net Profit Before Tax Less : Tax Net Profit After Tax 122,01 33:00 89:01 If] C) O C) -1 -2 -3 4 -5 -6 -7 3 .q