Question 1

The following trial balance has been extracted from the books of Cyrenaica Ltd at 31

December 2020:

DR CR

Purchases 500,500

Allowance for receivables debts at 31 December 2019 6,534

Irrecoverable debts 4,800

Revenue (sales) 759,255

Authorised and issued ordinary share capital (1) 75,000

Retained earnings at 31 December 2019 29,184

Administrative expenses 23,021

Salaries 83,984

Rent 23,560

Receivable 64,875

Payable 43,443

Inventory as at 31 December 2019 60,642

Bank overdraft 19,341

Dividend paid 21,000

Equipment at cost 57,750

Accumulated depreciation on equipment at 31 December 2019 9,375

Vehicles at cost 127,500

Accumulated depreciation on vehicles at 31 December 2019 25,500

967,632 967,632

(i) A further adjustment is required in respect of receivables as an amount due

from Alex Peng of 915 needs to be written off.

(ii) The company has a policy to include an allowance for receivables debts of 15%

of the year-end receivables.

(iii) 2,470 was prepaid for rent.

(iv) Salaries owed but not yet paid, 4,500.

(v) Equipment is depreciated at 20% per annum on a straight-line basis and motor

vehicles at 25% using the reducing balance method. No depreciation has yet

been charged for the year ended 31 December 2020. All depreciation should be

charged to administrative expenses.

(vi) The year-end bank reconciliation identified that a cash receipt from Terry Danial

of 6,800, in respect of a credit sale, had been omitted from the cashbook in

error.

(vii) The net realisable value of inventory at 31 December 2020 was 6,700 less

than its cost of 34,400.

(viii) Cyrenaica Ltd began renting an additional storage unit on 1 October 2020 at a

cost of 500 per month. No payment has been made to date.

(ix) Corporation tax of 15,200 is to be provided on profits for the year.

REQUIRED:

(a) Prepare a statement of profit or loss for Cyrenaica Ltd for the year ended 31

December 2020. (10 marks)

(b) Prepare a statement of financial position for Cyrenaica Ltd as at 31 December

2020. (10 marks)