The following trial balance has been extracted from the books of Keith Ltd as at 30 June 2011:

Additional information:
1 Stock at 30 June 2011 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.
3 Provision is to be made for auditors' remuneration of £12,000.
4 Insurance paid in advance at 30 June 2011 amounted to £3000.
5 The provision for bad and doubtful debts is to be made equal to 5 per cent of outstanding trade debtors as at 30 June 2011.
6 Corporation tax owing at 30 June 2011 is estimated to be £60,000.
7 An ordinary dividend of 10p per share is proposed.
8 The investments had a market value of £30,000 at 30 June 2011.
9 The company has an authorized 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 Ltd's trading and profit and loss account for the year to 30 June 2011 and a balance sheet as at that date.
(b) Explain why shareholders of Keith Ltd would not necessarily have been able to sell the business for its balance sheet value as at 30 June2011.

Transcribed Image Text:

Dr £000 30 Cr £000 Advertising Bank Creditors Debentures (10%) Debtors (all trade) Directors' remuneration Electricity Insurance Investments (quoted) Investment income Machinery: 69 70 28 17 28 4 At cost 420 Accumulated depreciation at 1.7.10 Office expenses Ordinary share capital (issued and fully paid) Preference shares Preference share dividend Profit and loss account (at 1.7.10) Provision for bad and doubtful debts Purchases Rent and rates Sales Stock (at 1.7.10) Vehicles: 152 49 200 50 132 1240 75 2 100 134 At cost 80 Accumulated depreciation (at 1.7.10) 40 358 2825 Wages and salaries 2825