The following trial balance has been extracted from the books of Keith Ltd as at 30 June 2016:

Additional information: 1 Inventory at 30 June 2016 valued at cost amounted to 155,000. 2 Depreciation is to be provided on machinery and vehicles at a rate of 20 per cent and 25 per cent, respectively, on cost. Chapter 5 Company accounts 131 M05 Accounting for Non-Accounting 28979.indd 131 21/03/2017 15:11 3 Accrual is to be made for auditors remuneration of 12,000. 4 Insurance paid in advance at 30 June 2016 amounted to 3000. 5 The allowance for doubtful debts is to be made equal to 5 per cent of outstanding trade receivables as at 30 June 2016. 6 Corporation tax owing at 30 June 2016 is estimated to be 60,000. 7 An ordinary dividend of 10p per share is declared just before the year end. 8 The investments had a market value of 30,000 at 30 June 2016. 9 The company has an authorised share capital of 600,000 ordinary shares of 0.50 each and of 50,000 8 per cent cumulative preference shares of 1 each.

Required: (a) Prepare Keith Ltds trading and statement of profit or loss and statement of retained earnings for the year to 30 June 2016 and a statement of financial position as at that date. (b) Explain why shareholders of Keith Ltd would not necessarily have been able to sell the business for its net assets value as at 30 June 2016.

Dr Cr 30000 7000 69000 70000 300000 55000 28000 17000 28000 4000 420000 152000 Advertising Cash Payables Debentures (10%) Receivables (all trade) Directors' remuneration Electricity Insurance Investments (quoted) Investment income Machinery: At cost Accumulated depreciation at 1.7.16 Office expenses Ordinary share capital (issued and fully paid) Preference shares Preference share dividend Retained earnings (at 1.7.16) Allowance for doubtful debts Purchases Rent and rates Sales Inventory (at 1.7.16) Vehicles: At cost Accumulated depreciation (at 1.7.16) Wages and salaries 49000 200000 50000 4000 132000 8000 1240000 75000 2100000 134000 80000 40000 358000 2825000 2825000