QUESTIONS ON FINANCIAL STATEMENT PREPARATIONS:

Question One

The Trial balance of A$.$Ltd Company was extracted as at $31$st Dec $2022.$

Particulars

Ordinary shares of sh$\mathrm{.}10$ each

$7\%$ Preference share capital.

$5\%$ Debentures

Land and Buildings $($Land cost sh$.1,600,000)$

Motor vans

Fixtures and Fittings DR

Sh$\mathrm{.}000$

$5,000$

$15,800$

$12,500$ CR Sh$\mathrm{.}000$

$16,000$

$8,000$

$6,000$

Provisions for depreciation on motor vans

Provision for Depreciation on land and buildings

Provision for depreciation on Fixtures and Fittings

Stock in trade

Balance at bank

Provision for doubtful debts

Trade debtors and creditors

Directors$$ remuneration

Wages and salaries

Delivery expenses

Rates

Purchases

Sales

Legal expenses

General expenses

Profit and loss account $($retained earnings$)$

$449$

$5800$

$1230$

$400$

$133$

$320$

$733$

$1080$

$640$

$580$

$44,665120$

$170$

$56$

$20$

$275$

$14,000$

$24$

$44,665$

Additional information at the end of the year $31$st Dec $2022.$

$1.$ Stock in trade sh$.300,000$

$2.$ Accrued Salaries and wages sh$.700,000.$

$3.$ Write off bad debts at $4\%$ on current trade debtors.

$4.$ Prepaid Delivery expenses amounts to sh$.40,000.$

$5.$ Depreciation on land and buildings is at $12\%$ on cost$,$ Fixtures and Fittings at the rate of $8\%$ on cost and that on motor vehicles is at the rate of $10$ on reducing balance method.

$6.$ One of the fixtures whose original cost was Sh$\mathrm{.}900,000$ was disposed for sh$\mathrm{.}840,000$ on $10$th September $2022.$ The provision for depreciation on this asset was $20700$ as of $1$st January $2022.$

$7.$ Land and Buildings were revalued to sh$\mathrm{.}8,400,000($Land $3,000,000)$ as at $16$th October $2022.$

$8.$ The directors have decided to recommend a dividend of $\mathrm{.}40$ cents per share.

$9.$ The company pays tax at the rate of $30\%.$

$10.$ Transfer $8\%$ of the current profits to General reserve.

$11.$ Provision for Bad debts is to be kept at $5\%.$

Required:

Prepare income statement and a balance sheet as at $31$st Dec $2022$

Question two

The book$-$keeper of B$.$ Ltd$.$ prepared the following trial balance as at $31$ December $2022$:

Sh$.000$ Sh$.000$

Ordinary shares @ $20$ each $100,000$

Share premium $50,000$

Retained profits as at $1$ January $2022100,000$

$10\%$ debentures $100,000$

Stock $200,000$

Motor vehicles $100,000$

Provision for depreciation a$-$ motor vehicles $60,000$

Machinery $120,000$

Provision for depreciation $$ machinery $50,000$

Buildings at cost $230,000$

Provision for depreciation on buildings

Sales $70,000$

$750,000$

Purchases $350,000$

Discounts $2,000$

Returns $2,000$

Carriage $72,000$

Rates $200,000$

Advertising $10,000$

Creditors $200,000$

Debtors $200,000$

Provision for doubtful debts $6,000$

Debenture interest $5,000$

Cash at bank $\_\_\_\_\_\_\_\_\_\_5,000$

$1,491,0001,491,000$

Additional information:

$1.$ Rates are prepaid up to Sh$\mathrm{.}1,20,000.$

$2.$ Advertisement is accrued by sh$\mathrm{.}40,000.$

$3.$ Write off $5\%$ as bad debts.

$4.$ Create a general provision for bad debts at the rate of $2\mathrm{.}5\%$

$5.$ Directors have declared a dividend of $75$ cents per share.

$6.$ Stock as at $31$ December $2022$ is valued at Sh$\mathrm{.}180,000,000$

$7.$ Depreciation is at the rate of $12\%$ on cost for motor vehicles,$10\%$ on buildings on cost and at the rate of $8\%$ on reducing balance basis for machinery.

$8.$ A motor vehicle whose original cost was $2800,000$ was disposed on $14$th June $2022$ for sh$\mathrm{.}2500,000.$The accumulated depreciation on this vehicle was sh$\mathrm{.}170,000$

$9.$ On $10$th October $2022$ the buildings were revalued to sh$\mathrm{.}370,000,000.$

$10.$ Transfer $5\%$ of the profits to general reserve.

$11.$ Tax is at the rate of $30\%.$

Required:

$($a$)$ Income statement for the year ended $31$ December $2022.$

$($b$)$ Balance sheet as at $31$ December $2022$