TASK

The following is the trial balance of Silk Road Ltd as on 31 December 2020:

Dr ($) Cr ($)

Authorized and issued share capital:

25,000 ordinary shares of $1 each 25,000

25,000 10 per cent preference shares of $1 each 25,000

Stock as at 31 December 2019 76,590

Trade debtors / creditors 53,780 24,620

10 per cent debentures 40,000

Fixed assets replacement reserve 20,000 General reserve 12,000 Profit and loss account as at 31 December 2019 6,128

Provision for doubtful debt 1,800

Interest on debentures 2,000

Equipment at cost 70,000

Motor vehicles at cost 57,000

Bank 7,286

Cash 360

Purchases / Sales 82,700 199,000

Returns inwards 2,300

Carriage inwards 480

Wages and salaries 20,720

Rent, rates and insurance 10,340

Discounts allowed 2,492

Directors salaries 5,000

Accumulated depreciation at 31 December 2019:

Equipment 16,800

Motor vehicles _ 20,700

391,048 391,048

Further information:

a. Stock at 31 December 2020 is valued at $98,742.

b. The preference share dividends are outstanding at the end of the year and a final dividend of 20 per cent has been proposed on the ordinary shares.

c. Accrued rent $1,400; directors salaries to be paid $5,000.

d. Provision for doubtful debts is to be adjusted to 5 % of outstanding debtors.

e. Depreciation on cost: equipment 10 per cent; motor vehicles 20 per cent straight-line method

f. Corporation tax to be paid is 20 per cent.

g. Transfers to reserves: general reserve $4,000; fixed assets replacement reserve $2,000.