Section A
Question 1
Campbell runs a clothing store and has produced the following trial balance for the year ended 31st March 2012. The trial balance produced does not balance and he has asked for your help.
You are required to help Campbell by:
(a) Preparing journal entries to correct the trial balance and deal with all of the year-end adjustments including the fire. (36 Marks)
(b) Producing an income statement for the year and a balance sheet as at 31st March 2012. (24 Marks)
Campbell Trial Balance as at 31 March 2012
£000
£000
Accumulated depreciation of land and buildings at 1.4.11.
600
Accumulated depreciation of shop fittings at 1.4.11
640
Bank Interest
40
Bank loan at 5%
1600
Capital
838
Carriage inwards
80
Carriage outwards
126
Cash at bank
116
Discounts allowed
124
Discounts received
58
Drawings
305
Heat and light
254
Insurance
295
Inventory as at 1.4.11
402
Land and buildings
2400
Office expenses
320
Payables (Creditors)
440
Purchases
5992
Provision for doubtful debts as at 1.4.11
32
Receivables
1216
Returns Inwards
240
Returns outwards
200
Sales
9840
Shop fittings
1240
Wages
1480
TOTALS
14514
14364
Adjustments:
1. The land and buildings are shown at cost including £800,000 for the land. Buildings are depreciated on a straight line basis over 50 years
2. Shop fittings are depreciated at 20% per annum on a reducing balance basis
3. Campbell took goods valued at £24,000 from the shop for his own use during the year
4. Insurance includes £36,000 for the year to December 2012
5. An accrual for heat and light for £8000 is needed
6. A bad debt of £16000 is to be written off and the provision for doubtful debts should be maintained at 2% of the remaining receivables
7. Campbell sold some shop fittings on 31 March 2012 for £50,000 he has debited the cash at bank account but nothing else. The fittings cost £240,000 5 years ago.
8. An interest payment on the bank loan is due. The loan was taken out in 2009.
9. A payment to a supplier for £50,000 has been debited to payables and debited to the cash at bank account.
10.A payment for insurance for £50,000 has been debited to the office expenses account and credited to the cash at bank account
11.An invoice for clothing goods for £50,000 has been debited to office expenses and credited to payables
12.On 31 March 2012 there was a fire in Campbells storeroom and all of his remaining inventory and his inventory records were destroyed. In addition to information in the trial balance you know that all sales are made based on a standard margin of 40% and that the inventory is covered by an insurance policy which covers the sales value of any inventory lost.
Section B The following data is to be used for questions 2 AND 3
Sessegnon Ltd Income Statement for the year ended 31 December 2011
£000s
£000s
Sales
1,690
Cost of Sales
1,252
Gross Profit
438
Admin expenses
144
Depreciation
170
Loss on sale of machinery
60
374
Operating Profit
64
Interest payable
32
Profit Before Tax
32
Tax
10
Profit After Tax
22
Sessegnon Ltd Balance Sheet as at 31 December 2011
2011
2011
2010
2010
£000s
£000s
£000s
£000s
Non-Current Assets NBV
4500
3274
Current Assets
Inventory
136
148
Receivables
160
190
Cash at Bank
–
296
180
518
Total Assets
4796
3792
Non-Current Liabilities
Bank Loan
1500
640
Current Liabilities
Trade Payables
192
155
Taxation
15
60
Interest Payable
10
7
Bank Overdraft
115 332
– 222
Total Liabilities
1832
862
Net Assets
2964
2930
Equity
Share Capital
1000
950
Share Premium Account
30
20
Retained Earnings
1934
1960
2964
2930
Notes
1. Dividends were paid during the year
2. The assets disposed of had a book value of £260,000
Question 2
Prepare a cashflow statement for the year ended 31 December 2011 and describe what it tells us.
TOTAL = 40 Marks
Question 3
Analyse the profitability, the liquidity and the gearing of Sessegnon Ltd based on the information above and using appropriate financial ratios. Would a new supplier be willing to give them credit?
TOTAL = 40 Marks
