Week 4 - Tutorial 3 Flashcards
January 2018
The following trial balance has been drawn up on behalf of Munnis Ltd for the year ending 31st December 2017:
£ £
Sales 3,500,000
Stock as at 1st January 2017 41,000
Purchases 1,980,000
Salaries 420,000
Rent and rates 275,000
Advertising 68,000
Postage and telephone 23,000
General expenses 37,000
Audit and legal fees 18,000
Fixtures and fittings 818,000
Motor vehicles 320,000
Fixtures and fittings- acc. dep. 245,400
Motor vehicles – acc. dep. 128,000
Trade receivables 86,000
Trade payables 180,600
Bank 118,000
Capital 150,000
4,204,000 4,204,000
However a check of Munnis Ltd’s records finds the following errors and omissions:
- The closing inventory figure for the year is £58,000.
- No depreciation has been charged for the year. The fixtures and fittings are depreciated at 10% per annum, whereas the motor vehicles are depreciated at 20%. The straight line method is used in both cases.
- There is an outstanding utility bill of £5,000. Utilities are categorised as general expenses.
- The rates have been paid up until the end of June 2018. The monthly charge for rates is £2,500.
- One of the company’s trade receivables has gone out of business and will be unable to pay the £5,000 they owe Munnis Ltd.
- The legal advisor to Munnis Ltd. overcharged for their services by £2,000. They have already returned the overpaid amount in a cheque but it was mistakenly omitted from the records.
- Munnis pays 20% corporation tax.
Required
Draw up Munnis Ltd’s Income Statement for the year ending 31st December 2017 following the check of the records.
Draw up Munnis Ltd’s Statement of Financial Position as at 31st December 2017 following the check of the records.
Income Statement for Munnis for the year ending 31st December 2017
£ £
Sales 3,500,000
Less Cost of Goods Sold
Opening inventory 41,000
Purchases 1,980,000
2,021,000
Less closing inventory 58,000 1,963,000
Gross Profit 1,537,000
Less expenses
Salaries 420,000
Rent and rates 260,000
Advertising 68,000
Postage and telephone 23,000
General expenses 42,000
Audit and legal fees 16,000
Bad debt 5,000
Depreciation - F&F 81,800
Depreciation - MV 64,000 979,800
Profit before tax 557,200
Tax 111,440
Profit after tax 445,760
Statement of financial position for Munnis as at 31st December 2017
£ £ £
Cost Acc Dep WDV
Non-current assets 818,000 327,200 490,800
Fixtures and Fittings 320,000 192,000 128,000
Motor Vehicles 618,800
Current assets
Inventory 58,000
Trade receivables 81,000
Prepayments 15,000
Bank 120,000 274,000
Total Assets 892,800
Capital and reserves
Capital 150,000
Profit for year 445,760 595,760
Current liabilities
Trade payables 180,600
Accruals 5,000
Taxation 111,440 297,040
Total Liabilities 892,800
August 2018
The following trial balance has been drawn up on behalf of O’Gara Ltd for the year ending 31st December 2017:
£000 £000 Sales 2,200 Stock as at 1st January 2017 86 Purchases 1,042 Salaries 750 Rent and rates 150 Advertising 44 Vehicle running costs 12 Administration 22 Utilities 36 Professional fees 14 Fixtures and fittings 22 Motor vehicles 62 Fixtures and fittings - acc. dep. 4.4 Motor vehicles - acc. dep. 18.6 Trade receivables 112 Trade payables 60 Bank 382 Accruals 15 Capital 436
2,734 2,734
However, having reviewed the figures the company accountant finds the following errors and omissions:
- The accruals figure is incorrect. Only £5,000 is outstanding for utility bills.
- The closing inventory figure for the year is £64,000.
- No depreciation has been charged for the year. The motor vehiclesare depreciated at 15% per annum, whereas the fixtures and fittings are depreciated at 10%. The straight line method is used in both cases.
- The owner of the premises allows the company to sub-let part of the buildings. This brings in £4,000 per annum. This had not been included in the statements as there had been a mistake with the standing order, which had been going to the wrong bank account. This has now been rectified and the bank balance has also been corrected.
- One of the company’s debtors has gone out of business and will be unable to pay the £2,000 they owe O’Gara Ltd.
- The vehicle running costs include payments made in advance to the supplier for vehicle servicing. During the current financial year the company took advantage of an offer that would cover the next two year’s (i.e. up to 31st December 2019) services at £1,000 per year if
they paid for them during 2017.
- The company pays corporation tax at a rate of 20%.
Required
Draw up O’Gara Ltd’s Income Statement for the year ending 31st December 2017 following the changes discovered by the accountant.
Draw up O’Gara Ltd’s Statement of Financial Position as at 31st December 2017 following the changes discovered by the accountant.
Income statement for O’Gara Ltd for the year ending 31st December 2017
£000 £000
Sales 2,200
Less Cost of Goods Sold
Opening inventory 86
Purchases 1,042
1128
Less Closing inventory 64 * 1064
1,136
Plus other income 4 *
1,140
Less expenses
Salaries 750
Rent and rates 150
Advertising 44
Vehicle running costs 10 *
Administration 22
Utilities 26 *
Professional fees 14
Bad deb 2 *
Depreciation - F&F 2.2 *
Depreciation - MV 9.3 * 1.029.5
Profit before tax 110.50
Tax 22.1
Profit after tax 88.40 *
Statement of Financial Position for O’Gara Ltd as at 31st December 2017
£000 £000 £000
Non-current assets Cost Acc Dep WDV
Fixtures & Fittings 22 6.6 15.4
Motor Vehicles 62 27.9 34.1
49.5
Current Assets
Inventory 64
Trade receivables 110
Prepayment 2
Bank 386
562 562
Total Assets 611.5
Capital and Reserves
Capital 436
Retained profit 88.4 524.4
Current Liabilities
Trade payables 60
Tax 22.1
Accruals 5 87.1
Total Liabilities 611.5
