Revision For Question 10

1 Seafare Ltd is a retailing company; its trial balance at 31 March 2007 is as follows: £ £ Ordinary shares of 25p each fully paid 40,000 Share premium 12,000 8% Loan repayable 2010 10,000 Retained earnings 1 April 2006 18,000 Dividends paid 5,000 Loan interest paid 400 Land and buildings at cost (land element £30,000) 80,000 Buildings - depreciation, 1 April 2006 10,000 Plant and machinery at cost 65,000 Plant and machinery - depreciation, 1 April 2006 35,000 Trade payables 15,200 Trade receivables 25,400 Inventory at 1 April 2006 28,200 Bank 7,500 Sales revenue 209,000 Purchases 112,200 Returns outwards 2,600 Carriage inwards 1,500 Administrative expenses 24,600 Distribution costs 17,000 359,300 359,300 The following notes are relevant: (i) Inventory was valued at cost of £24,500 on 31 March 2007. Goods with a cost of £10,000 had been damaged and had a resale price of only £6,000. (ii) The buildings are depreciated over a 50 year life. Plant and machinery is depreciated by 15% per annum on the reducing balance basis. All depreciation is to be treated as cost of sales. (iii) Distribution costs accruing at 31 March 2007 were £5,000. (iv) Included in administrative expenses, was an amount of £6,000 for the annual rent of an office for the year ended 30 June 2007. (v) Provide for the second half of the annual loan interest. (vi) A provision for corporation tax for the year ended 31 March 2007 of £9,000 is required. Required; for Seafare Ltd for the year ended 31 March 2007, prepare: (a) The income statement (b) The movement on retained earnings; and (c) A balance sheet

12 marks 5 marks 18 marks Total 35 marks

Q1 Seafare Ltd Income Statement year to 31 March 2007 £ Revenue Opening Inventory Purchases (112,200 - 2,600) Carriage inwards Depreciation (1,000 + 4,500) Closing Inventory (24,500 - 4,000) Gross Profit

28,200 109,600 1,500 5,500 (20,500)

Distribution (17,000 + 5,000) Administrative costs (24,600 - 1,500) Loan interest (400 + 400) Profit before tax Taxation Profit for the period

(22,000) (23,100)

Movement in the Retained earnings – year ended 31 March 2007 Balance b/f Profit for period Dividends paid Balance c/f Balance Sheet at 31 March 2007 Non-current Assets Land and buildings (80,000 - (10,000 + 1,000) Plant (65,000 - (35,000 + 4,500) (or property, plant and equipment) Current Assets Inventory Receivables Prepayment Total assets Equity and liabilities Share capital Ordinary shares of 50p each Reserves Share premium Retained earnings

(124,300) 84,700 (45,100) (800) 38,800 (9,000) 29,800 18,000 29,800 (5,000) 42,800

69,000 25,500 94,500 20,500 25,400 1,500

47,400 141,900

40,000 12,000 42,800

Non-current liabilities 8% Loan Current liabilities Payables Accruals (5,000 + 400) Overdraft Taxation

£ 209,000

54,800 94,800 10,000

15,200 5,400 7,500 9,000

37,100 141,900