Statement of financial position as at 31 December 20X1 and 31 December 20X2

ASSETS

20X2

20X1

Non-current assets

Plant and machinery at cost

2,100,000

1,240,000

Accumulated depreciation

(830,000)

(470,000)

Plant and machinery at net book value

1,270,000

770,000

Investments

10,000

200,000

Total non-current assets

1,280,000

970,000

Current assets:

Inventory

842,000

285,000

Receivables

263,000

193,000

Bank

20,000

Total current assets

1,125,000

478,000

Total assets

2,405,000

1,448,000

EQUITY AND LIABILITIES

20X2

20X1

Share capital and reserves:

Ordinary shares of 1 nominal value each

900,000

430,000

Ordinary share premium

250,000

100,000

Retained earnings

505,000

222,000

Total equity

1,655,000

752,000

Liabilities:

Non-current liabilities

Bonds

334,000

214,000

Current liabilities

Bank overdraft

160,000

Payables

390,000

300,000

Interest payable

11,000

17,000

Corporation tax payable

15,000

5,000

Total current liabilities

416,000

482,000

Total liabilities

750,000

696,000

Total equity and liabilities

2,405,000

1,448,000

Sales revenue

2,310,000

Cost of sales

(1,513,000)

Gross profit

797,000

Administrative expenses

(210,000)

Distribution costs

(220,000)

Profit before interest and taxation

367,000

Finance costs

(24,000)

Profit before taxation

343,000

Taxation

(20,000)

Profit for the year

323,000

(i)Closing inventory at 31 December 20X7 is 190,000

(2)Marketing expenses include a payment of 18,000for the period 1 December 20X7 to 28 February 20X8.

(3)Perfume Ltd's depreciation policy is as follows.

PPE is to be depreciated at 8% on a straight line basis.

Vehicles are to be depreciated at 25% on a reducing balance basis.

No depreciation has been charged for the year ended 31 December 20X7.

(4)Irrecoverable receivables to be written off amount to 8,000.

(5)The allowance for receivables is to be set at 10% of receivables at the financial year end.

(6)The audit fee for the year ended 31 December 20X7 is estimated to be 5,000. This has not been included in the trial balance or paid at the year end.

(7)During the year, the company estimates that the costs in relation to a warranty on its products are likely to be around 9,000.50% of the warranty costs will be paid in20X8 and 50% in 20x9.Warranty costs have not been included in the trial balance.

(8)irrecoverable receivables, depreciation on PPE, the audit fee, warranty costs and marketing expenses are to be recorded under administrative expenses.Depreciation on vehicles is to be recorded under distribution costs.

(9)The loan is repayable in ten years' time. Interest of 6% has not yet been recorded. The loan interest has not been paid at the year end.

(10)The corporation tax rate for the year ended 31 December 20X7 is 20%.