Question
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:
- Inventory was valued at £235,000 on 30 June 2021.
- 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.
- 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.
- Plant and equipment are to be depreciated at 10% reducing balance basis. The expense is allocated to cost of sales.
- The estimated tax charge for the year is £2,000.
- Sales include deposits of £20,000 for orders of inventory which cannot now be met. The deposits will have to be refunded.
- A provision of 4% is required for doubtful debts.
- 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.
- 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.
- A Statement of Profit or Loss for the year ended 30 June 2021.
- A Statement of Financial Position as at 30 June 2021.
- Discuss the correct treatment of the item in note (3).
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