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The following trial balance relates to Macho plc for the year ended 30 June 2021: 000 000 Equity shares of 1 each 3,000 Share Premium

The following trial balance relates to Macho plc for the year ended 30 June 2021:

£’000

£’000

Equity shares of £1 each

3,000

Share Premium

500

Retained earnings at 1 July 2020

646

Land and buildings at cost

2,400

Depreciation on land and buildings at 1 July 2020

555

Plant and equipment at cost

2,910

Depreciation on plant and equipment at 1 July 2020

640

Inventory at 1 July 2020

380

Trade receivables

370

Cash and cash equivalents

41

Trade payables

64

6% Loan repayable 2028

100

Revenue

1,288

Purchases

490

Distribution costs

176

Tax provision

5

Administrative expenses

80

Loan interest paid

3

Dividend paid

20

6,834

6,834

Further notes:

  1. Inventory was valued at £235,000 on 30 June 2021.
  2. Buildings are to be depreciated on a straight-line basis at 10% and depreciation is treated as an administration expense. Of the total cost of land and buildings, £600,000 relates to land and the remainder to buildings.
  3. It is discovered that last year land was depreciated at 10% of cost, in error. This amount is included in the figure for depreciation in the trial balance.
  4. Plant and equipment are to be depreciated at 10% reducing balance basis. The expense is allocated to cost of sales.
  5. The estimated tax charge for the year is £2,000.
  6. Sales include deposits of £20,000 for orders of inventory which cannot now be met. The deposits will have to be refunded.
  7. A provision of 4% is required for doubtful debts.
  8. On 31 October 2020 there was a 1 for 5 bonus issue. This has not yet been accounted for and will be funded from the share premium account as far as is possible.
  9. The 6% loan was taken out in 2019.

Required:

Prepare the following statements in a form suitable for publication. Notes to the accounts are not required.

  1. A Statement of Profit or Loss for the year ended 30 June 2021.
  1. A Statement of Financial Position as at 30 June 2021. 
  1. Discuss the correct treatment of the item in note (3).


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