Theory question 108
Company Accounts8. The following Trial Balance was extracted from the books of Linguere Limited on 31st December, 2003 after the Trading Account had been prepared (amounts in dalasis, D):
Ordinary Share Capital: 500,000 Ordinary Shares of D1 each D500,000
Share Premium D20,000
Profit and Loss D15,000
Freehold Premises (at cost) D250,000
Stock (31/12/2003) D16,300
Gross Profit D110,790
Discounts D350 (Dr); D260 (Cr)
Wages and Salaries D12,400
General office expenses D14,050
Motor vehicles (at cost) D200,000
Prov. for depreciation (motor vehicles) D20,000
Interim dividends D40,000
Debtors and creditors D22,400; D18,250
Cash and Bank D128,800
Totals D684,300 / D684,300
Additional information: (a) Wages and salaries accrued was D600 (b) Provide for depreciation on motor vehicles at 10% on reducing balance basis (c) Transfer D15,000 to general reserve (d) Final dividends proposed is 5 butus per share.
You are required to prepare: (i) Profit and Loss Account for the year ended 31st December, 2003; (ii) Profit and Loss Appropriation Account for the year ended 31st December, 2003; and (iii) A Balance Sheet as at that date.
Show the model answer
(The book prints some credit items in the debit column; the trial balance agrees at 684,300 with share capital, premium, profit and loss, gross profit, discount received, depreciation provision and creditors as credits.)
(i) Profit and loss: gross profit 110,790 + discount received 260 = 111,050. Expenses: discount allowed 350; wages 12,400 + 600 = 13,000; general office 14,050; depreciation 10% × (200,000 − 20,000) = 18,000; total 45,400. Net profit 65,650.
(ii) Appropriation: 65,650 + balance b/f 15,000 = 80,650; less interim dividend 40,000, general reserve 15,000, proposed final dividend 25,000 (500,000 × 5 butus); retained profit 650.
(iii) Balance sheet: freehold 250,000; motor vehicles 200,000 − 38,000 = 162,000; fixed assets 412,000. Current assets: stock 16,300; debtors 22,400; cash 128,800 = 167,500. Current liabilities: creditors 18,250; accrued wages 600; proposed dividend 25,000 = 43,850. Working capital 123,650; net assets 535,650 = share capital 500,000 + share premium 20,000 + general reserve 15,000 + retained profit 650.
Reducing balance: charge 10% on cost less depreciation already provided.