Chapter 1
Example 1
The following information has been extracted from the books of Picklette for the year to 31 st March
20X9
$000 $000
Administrative expenses 170
Interest paid 5
Called up share capital
(ordinary shares of $1 200
each)
Dividend 6
Cash at bank and in hand 9
Income tax
(remaining balance from previous year) 10
Warranty provision 90
Distribution costs 240
Land and buildings:
at cost (Land $110,000, Buildings 210
$100,000)
accumulated depreciation (at 1 April 48
20X8)
Plant and machinery:
at cost 125
accumulated depreciation (at 1 April 75
20X8)
Retained earnings (at 1 April 20X8) 270
10% Loan note (issued in 20X7) 80
Purchases 470
Sales 1,300
Inventory (at 1 April 20X8) 150
Trade payables 60
Trade receivables 728
––––– –––––
2,123 2,123
Additional information
Inventory at 31 March 20X9 was valued at $250,000.
Buildings and plant and machinery are depreciated on a straight- line basis
(assuming no residual value) at the following rates:
On cost: Building 5%
Plant and machinery
There were no purchases or sales of non-current assets during the year to
31 March 20X9.
1 The depreciation charges for the year to 31
March 20X9 are to be apportioned as follows:
Cost of sales 60%
Distribution costs 20%
Administrative expenses 20%
2 Income taxes for the year to 31 March 20X9 are
estimated to be
$135,000.
3 The 10% loan note was issued on 1 April
20X7 and is repayable five years from that
date.
4 The year-end provision for warranty claims has been
estimated at
$75,000. Warranty costs are charged to administrative
expenses.
Required:
Prepare Picklette’s statement of profit or loss for the year to 31
March 20X9 and a statement of financial position as at that
date.
Test Your Understanding 1
The following trail balance has been extracted from the
bookjs of arran as at 31st March 20X7
$000 $000
Administration expenses 250
Distribution costs 295
Share capital $1 270
Share premium 80
Revaluation surplus 20
TestDividend paid
your understanding 2 27
Cash at bank and in hand 3
The following trial balance relates to P at 31 March
Receivables
20X1: 233
Interest paid $000 25 $000
Dividends received
Revenue 5,300 15
Interest
Cost received
of sales 1,350 1
Dividends
Land andreceived
buildings at cost 210
(land 380, buildings
Administration 100)
expenses 490480
Distribution costs
Land and buildings: accumulated 370 30
depreciation
Interest paid 190
Prepayments
Plant and machinery at cost 25
400
Dividends
Plant andpaid
machinery: accumulated 390 170
Property, plant and equipment
depreciation 4,250
Short-term
Retained investments
earnings account (at 1 April 2,700 235
20X6)
Inventory at 31 March 20X1 114
Purchases
Trade receivables 1,260
418
Cash
Salesand cash equivalents 12 2,165
Trade payables
Inventory at 1 April 20X6 140 136
Long-term loans (repayable 20X9)
Trade payables 1,200 27
Share capital 1,500
Bank loan 100
Share premium 800
––––– –––––
Retained earnings at 31 March 20X0 1,163
3,113
–––––– –––––– 3,113
––––– 10,309
10,309 –––––
–––––– ––––––
Additional Information
1) Inventory at 31 March 20X7 was valued at a cost of $95,000.
Included in this balance were goods that had cost $15,000.
These goods had become damaged during the year and it is
considered that the goods could be sold for $5,500, less
commission of $500.
2) Depreciation for the year to 31 March 20X7 is to be charged
against cost of sales as follows:
Buildings 5% on cost (straight line)
Plant and machinery 30% on carrying amount (reducing balance)
3) Land is to be revalued upwards by $100,000.
4) Income tax of $165,000 is to be provided for the year to 31
March 20X7.
5) The bank loan is repayable in five years' time.
Prepare the statement of profit or loss and other comprehensive income,
statement of changes in equity and statement of financial position for
year ended 31 March 20X7.
Note: Show all workings, notes are not required.
The following information should also be taken into account:
1 The tax charge for the year has been estimated at $470,000.
2 The directors declared a final dividend of $270,000 on 3 April
20X1.
Required:
Prepare, in a form suitable for publication, the statement of profit or loss and other comprehensive
income, statement of financial position and statement of changes in equity for the year ended 31
March 20X1
Chapter 2