Adjustments 1) Closing inventories was £30,000,000 on the 31st of December 2020. 2) Corporation tax is 25% for the year, half due now in cash and half due in April 2021. 3) Property was revalued from £55,000,000 to £70,000,000. 4) A court case of a present obligation is being settled (within a year) and therefore regarded as being probable, with Kingsla Motors PLC needing to pay a competitor for copyright infringements at a reliably estimated amount of £25,000,000. 5) Depreciation (all based on reducing balance): a) Fixture and Fittings 15% 6) Amortisation/Impairment: a) £3,000,000 of inventories need to be written off as they've been deemed obsolete (not yet included in stock figure) 7) £2,000,000 of intangibles assets were purchased using cash. 8) Dividends were distributed to shareholders during the financial year to a value of £3,000,000 in cash. 9) A1 for 4 bonus issue was given to shareholders. The bonus issue was conducted before the rights issue. 10) A rights issue of 5 for 2 basis, at £300 per share, with 50% of shares bought by shareholders. REQUIRED Please prepare a balance sheet and income statement for 31st December 2020 using the trial balance presented on the previous page, ensuring that you make all the requested adjustments.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Deduce an Income staetment and a balance sheet with the following adjustments

Adjustments
1) Closing inventories was £30,000,000 on the 31st of December
2020.
2) Corporation tax is 25% for the year, half due now in cash and half
due in April 2021.
3) Property was revalued from £55,000,000 to £70,000,000.
4) A court case of a present obligation is being settled (within a year)
and therefore regarded as being probable, with Kingsla Motors PLC
needing to pay a competitor for copyright infringements at a
reliably estimated amount of £25,000,000.
5) Depreciation (all based on reducing balance):
a) Fixture and Fittings 15%
6) Amortisation/Impairment:
a) £3,000,000 of inventories need to be written off as they've
been deemed obsolete (not yet included in stock figure)
7) £2,000,000 of intangibles assets were purchased using cash.
8) Dividends were distributed to shareholders during the financial year
to a value of £3,000,000 in cash.
9) A1 for 4 bonus issue was given to shareholders. The bonus issue was
conducted before the rights issue.
10) A rights issue of 5 for 2 basis, at £300 per share, with 50% of shares
bought by shareholders.
REQUIRED
Please prepare a balance sheet and income statement for 31st
December 2020 using the trial balance presented on the previous page,
ensuring that you make all the requested adjustments.

Debits (E)
Credits (E)
160,000,000
Sales
55,000,000
Property
Goodwill
15,000,000
Intangible Assets (e.g. Patents, Trademarks))
25,000,000
Advertising
6,000,000
Purchases
60,000,000
Land
15,000,000
Pre-paid Advertising
2,000,000
Cash and Cash Equivalents
25,000,000
Inventories (at the 1st of January 2020)
32,000,000
Accrued Bank Interest
100,000
Staff Wages
20,000,000
Management Salaries
4,000,000
Trade Receivable
5,000,000
Fixture and Fittings Historic Cost
28,000,000
Fixture and Fittings Accumulated Depreciation
14,000,000
Pension Liability
10,000,000
Tools and Equipment Historic Cost
Tools and Equipment Accumulated Depreciation
120,000,000
80,000,000
Share Capital (E100)
50,000,000
Rent Received (additional warehouse space)
2,000,000
Bank Interest Expense,
10,000,000
Retained Earnings
58,000,000
General and Administrative Expenses
9,000,000
Share Premium
20,000,000
Trade Payables
4,900,000
Assembly Line Machine Historic Cost
100,000,000
Assembly Line Machine Accumulated Depreciation
67,000,000
Asset Revaluation
5,000,000
Bank Loan
60,000,000
531,000,000
531,000,000

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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