FFA/F3 FINANCIAL ACCOUNTING
196
17 Preparation questions: preparing financial statements
17.1 Mr Yousef
MR YOUSEF
INCOME STATEMENT FOR THE YEAR ENDED 31 MAY 20X6
$ $
Sales 138,078
Opening inventory 11,927
Purchases (W1) 84,561
96,488
Less closing inventory 13,551
Cost of goods sold 82,937
Gross profit 55,141
Carriage out (W2) 2,933
Rent and insurance (W3) 5,952
Postage and stationery 3,001
Advertising 1,330
Salaries and wages 26,420
Irrecoverable debts 877
Depreciation charge (W4) 8,700
Increase in allowance for receivables 40
49,253
Net profit 5,888
MR YOUSEF
STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 20X6
Accumulated Carrying
Cost depreciation value
$ $ $
Non-current assets
Equipment 58,000 27,700 30,300
Current assets
Inventory 13,551
Receivables 12,120
Less allowance for receivables 170
11,950
Prepayment 880
Cash 177
Bank 1,002
27,560
57,860
Capital
At 1 June 20X5 53,091
Profit for year 5,888
58,979
Drawings (7,800)
At 31 May 20X6 51,179
Current liabilities
Payables 6,471
Accrual 210
6,681
57,860
ANSWERS
197
Workings
1 Purchases
$
Per trial balance 82,350
Add carriage inwards
2,211
Per income statement
84,561
2 Carriage out = $5,144 $2,211 = $2,933.
3 Rent, rates and insurance
$
Per trial balance 6,622
Add rent accrual 210
Less insurance prepayment
(880)
Per income statement
5,952
4 Depreciation charge = 15% $58,000 = $8,700
17.2 Shuswap
SHUSWAP
STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 20X4
Cost or Accumulated Carrying
valuation depreciation value
$’000 $’000 $’000
Assets
Non-current assets
Land and buildings 12,000 – 12,000
Plant and equipment (W1) 19,600 7,950 11,650
23,650
Current assets
Inventories (3,000 – 140) 2,860
Receivables (2,600 – 200 – 106) 2,294
Cash at bank 1,900
Total assets 30,704
Equity and liabilities
Equity
Issued share capital (6,000 + 2,000) 8,000
Share premium (4,000 × 0.60) 2,400
Revaluation reserve (3,000 + 1,000) 4,000
Retained earnings (W2) 12,310
26,710
Non-current liabilities
Loan notes (redeemable 20Y0) 2,000
Current liabilities
Trade payables (2,100 – 106) 1,994
Total equity and liabilities 30,704
Workings
1 Plant and equipment
$’000
Disposal – Cost 1,400
– Depreciation (700)
– Carrying value 700
Proceeds (W3) (600)
Loss on sale 100
Cost adjustment 21,000 – 1,400 = 19,600
Accumulated depreciation adjustment (9,000 – 700 – (1,400 × 25%)) = 7,950
FFA/F3 FINANCIAL ACCOUNTING
198
2 Retained earnings
$’000
Per draft 12,400
Irrecoverable debts (200)
Inventory write down (500 – 360) (140)
Loss on disposal of plant (W1) (100)
Depreciation adjustment (1,400 × 25%) (W1) 350
12,310
3 Suspense account
Proceeds of issue of 4m shares at $1.10 4,400
Proceeds of sale of plant (balance) 600
5,000
17.3 Malright
(a) MALRIGHT
INCOME STATEMENT FOR THE YEAR ENDED 31 OCTOBER 20X7
$’000
Revenue (W4) 1,765
Cost of sales (W1) (1,343)
Gross profit 422
Distribution costs (W1) (80)
Administrative expenses (W1) (192)
Profit before interest and tax 150
Finance cost: 50,000 10% (5)
Profit before taxation 145
Income taxes (45)
Profit for the year 100
(b) MALRIGHT
STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 20X7
$’000 $’000
Non-current assets
Tangible assets (W3) 966
Current assets
Inventory 75
Trade receivables (320 – 16) 304
379
Equity and liabilities 1,345
Equity
$1 ordinary shares 650
Share premium 80
Retained earnings (W5) 200
930
Non-current liabilities
10 % loan notes 50
Current liabilities
Trade payables 250
Bank overdraft 50
Tax payable 45
Loan interest payable 5
Energy expense accrual 15
365
Total equity and liabilities 1,345
ANSWERS
Workings
1 Cost of sales/distribution costs/administration expenses
Cost of Distribution Administrative
sales cost expenses
$’000 $’000 $’000
Purchases 1,105
Discounts received (90)
Wages (40:25:35) 72 45 63
Energy expenses ($105 + $15)
(40:20:40) 48 24 48
Opening inventory 160
Administrative expenses 80
Increase in allowance for receivables
(W2)
6
Director’s remuneration 70
Closing inventory (75)
Depreciation – buildings (30:30:40) (W3) 11 11 15
Depreciation – plant (W3) 22
1,343 80 192
2 Allowance for receivables
$’000
Trade receivables at 31 October 20X7 320
Allowance needed: $320 5% 16
Allowance at 1 November 20X6 10
Increase 6
3 Tangible non-current assets
