Questions Lafferty Ltd manufactures and sells clothing and their inexperienced bookkeeper has produced the following trial balance for the 9 months ended 31st March 2020. The company has decided to move the financial year end away from June as that is a very busy time for theme You are required to: (a) Prepare a statement of profit or loss, a statement of changes in equity and a statement of financial position for the period to 31st March 2020 in a format that would be fit for publication. (b) Using the financial statements that you have prepared in (b) above and the data given below relating to the year ended on 30th June 2019 you are required to identify the important issues that would need to be given attention by the company's auditors and suggest some relevant audit tests that would need to be carried out. Lafferty Ltd - Trial Balance as at 31 March 2020 '000 '0002 450 350 1450 401 40001 108 1264 284 2404 Accumulated depreciation of land and buildings at 1.7.192 | Accumulated depreciation of shop fittings at 1.7.19 Accumulated depreciation of production machinery at 1.7.192 Allowance for receivables Bank loan at 4% p.a.e Carriage Inwards Carriage outwards Cash at bank | Directors remuneratione Discounts allowede Discounts receivede Dividends paide Heat and lighte Insurance Inventory of raw materials as at 1.7.192 Inventory of work in progress at 1.7.192 Inventory of finished goods at 1.7.19 Land and buildings Loan interest paide Office Expensese Payables Production Machinery Purchasese Receivables Retained Earnings Returns Inwards Returns Outwards Salese Share Capital (Shares of 10p eache Share Premium Account Shop fittings Wagese 1000 880 800 6204 380 12404 10000 80- 2404 2000 68604 24204 9098 1284 807 10856 2000 12004 14504 17804 TOTALS 3014341 30566 Additional information: 1. The land and buildings are shown at cost including 5,000,000 for the land. Buildings are depreciated on a straight-line basis over 60 years 2. Shop fittings are depreciated at 25% per year on a reducing balance basis 3. Machinery is depreciated on a reducing balance basis at 20% per year 4. There have been no additions of property, plant or equipment in the period. Lafferty Ltd charges a full years depreciation in the year of purchase and none in the year of disposal. 5. A dividend of 5p per share was declared on 28th February 2020 but has not yet been paid and a further dividend of 10p per share is expected to be declared in April. 6. Insurance includes 36,000 for the year to December 2020- 7. An accrual for heat and light for March 2020 is needed. Two thirds of heat and light is for administration and the rest is for production. 8. A credit note from a supplier for 24,000 has been debited to payables and debited to returns inwards 9. A bill for insurance for 24,000 has been credited to the bank account and debited to office expenses 10. The 25 year bank loan was taken out 5 years ago and the capital is being repaid in equal annual installments on 31 March each year. 11. Inventory at 31 March 2020 is valued at a cost of 940,000 for raw materials and 760,000 for work in progress. There was a serious fire in the finished goods warehouse on 31 March 2020 that destroyed the finished goods inventory and all records relating to it. Lafferty Ltd claim to operate to a strict policy of making a 40% gross profit mark-up. The destroyed goods are covered by an insurance policy that covers the cost of the goods destroyed. 12. A debt of 63,000 is irrecoverable and further debts of 180,000 are 60 days or more overdue. 13. Lafferty Ltd sold some shop fittings on 31 March 2020 for 40,000 in cash. The bookkeeper has not recorded the transaction. The fittings cost 150,000 5 years ago. 14.60% of the wages relate to production labour. 15. Corporation tax for the period is estimated at 22,000 16. Relevant data from the financial statements to 30 June 2019 Revenue 12,980,000 Gross profit 4,327,000 Profit for the year 1,075,000 Trade Receivables 1,082,000+ Trade Payables 450,000 Questions Lafferty Ltd manufactures and sells clothing and their inexperienced bookkeeper has produced the following trial balance for the 9 months ended 31st March 2020. The company has decided to move the financial year end away from June as that is a very busy time for theme You are required to: (a) Prepare a statement of profit or loss, a statement of changes in equity and a statement of financial position for the period to 31st March 2020 in a format that would be fit for publication. (b) Using the financial statements that you have prepared in (b) above and the data given below relating to the year ended on 30th June 2019 you are required to identify the important issues that would need to be given attention by the company's auditors and suggest some relevant audit tests that would need to be carried out. Lafferty Ltd - Trial Balance as at 31 March 2020 '000 '0002 450 350 1450 401 40001 108 1264 284 2404 Accumulated depreciation of land and buildings at 1.7.192 | Accumulated depreciation of shop fittings at 1.7.19 Accumulated depreciation of production machinery at 1.7.192 Allowance for receivables Bank loan at 4% p.a.e Carriage Inwards Carriage outwards Cash at bank | Directors remuneratione Discounts allowede Discounts receivede Dividends paide Heat and lighte Insurance Inventory of raw materials as at 1.7.192 Inventory of work in progress at 1.7.192 Inventory of finished goods at 1.7.19 Land and buildings Loan interest paide Office Expensese Payables Production Machinery Purchasese Receivables Retained Earnings Returns Inwards Returns Outwards Salese Share Capital (Shares of 10p eache Share Premium Account Shop fittings Wagese 1000 880 800 6204 380 12404 10000 80- 2404 2000 68604 24204 9098 1284 807 10856 2000 12004 14504 17804 TOTALS 3014341 30566 Additional information: 1. The land and buildings are shown at cost including 5,000,000 for the land. Buildings are depreciated on a straight-line basis over 60 years 2. Shop fittings are depreciated at 25% per year on a reducing balance basis 3. Machinery is depreciated on a reducing balance basis at 20% per year 4. There have been no additions of property, plant or equipment in the period. Lafferty Ltd charges a full years depreciation in the year of purchase and none in the year of disposal. 5. A dividend of 5p per share was declared on 28th February 2020 but has not yet been paid and a further dividend of 10p per share is expected to be declared in April. 6. Insurance includes 36,000 for the year to December 2020- 7. An accrual for heat and light for March 2020 is needed. Two thirds of heat and light is for administration and the rest is for production. 8. A credit note from a supplier for 24,000 has been debited to payables and debited to returns inwards 9. A bill for insurance for 24,000 has been credited to the bank account and debited to office expenses 10. The 25 year bank loan was taken out 5 years ago and the capital is being repaid in equal annual installments on 31 March each year. 11. Inventory at 31 March 2020 is valued at a cost of 940,000 for raw materials and 760,000 for work in progress. There was a serious fire in the finished goods warehouse on 31 March 2020 that destroyed the finished goods inventory and all records relating to it. Lafferty Ltd claim to operate to a strict policy of making a 40% gross profit mark-up. The destroyed goods are covered by an insurance policy that covers the cost of the goods destroyed. 12. A debt of 63,000 is irrecoverable and further debts of 180,000 are 60 days or more overdue. 13. Lafferty Ltd sold some shop fittings on 31 March 2020 for 40,000 in cash. The bookkeeper has not recorded the transaction. The fittings cost 150,000 5 years ago. 14.60% of the wages relate to production labour. 15. Corporation tax for the period is estimated at 22,000 16. Relevant data from the financial statements to 30 June 2019 Revenue 12,980,000 Gross profit 4,327,000 Profit for the year 1,075,000 Trade Receivables 1,082,000+ Trade Payables 450,000