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.
(b) Producing an income statement for the year and a balance sheet as at 31st March 2012.
Campbell - Trial Balance as at 31 March 2012
|
|
£'000
|
£'000
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|
Accumulated depreciation of land and buildings at 1.4.11.
|
|
600
|
|
Accumulated depreciation of shop fittings at 1.4.11
|
|
640
|
|
Bank Interest
|
40
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|
|
Bank loan at 5%
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|
1600
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|
Capital
|
|
838
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|
Carriage inwards
|
80
|
|
|
Carriage outwards
|
126
|
|
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Cash at bank
|
|
116
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|
Discounts allowed
|
124
|
|
|
Discounts received
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|
58
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|
Drawings
|
305
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|
|
Heat and light
|
254
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|
|
Insurance
|
295
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|
|
Inventory as at 1.4.11
|
402
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|
|
Land and buildings
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2400
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|
|
Office expenses
|
320
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|
|
Payables (Creditors)
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|
440
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|
Purchases
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5992
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|
|
Provision for doubtful debts as at 1.4.11
|
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32
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|
Receivables
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1216
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|
|
Returns Inwards
|
240
|
|
|
Returns outwards
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|
200
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|
Sales
|
|
9840
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|
Shop fittings
|
1240
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|
|
Wages
|
1480
|
|
|
|
|
|
|
|
|
|
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TOTALS
|
14514
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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 Campbell's 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
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£000s
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£000s
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|
Sales
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1,690
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|
Cost of Sales
|
|
1,252
|
|
Gross Profit
|
|
438
|
|
Admin expenses
|
144
|
|
|
Depreciation
|
170
|
|
|
Loss on sale of machinery
|
60
|
374
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|
Operating Profit
|
|
64
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|
Interest payable
|
|
32
|
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Profit Before Tax
|
|
32
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|
Tax
|
|
10
|
|
Profit After Tax
|
|
22
|
Sessegnon Ltd Balance Sheet as at 31 December 2011
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|
2011
|
2011
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2010
|
2010
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|
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£000s
|
£000s
|
£000s
|
£000s
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|
Non-Current Assets NBV
|
|
4500
|
|
3274
|
|
Current Assets
|
|
|
|
|
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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.
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?