FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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The following is the trial balance of Pyramid Ltd as at 30 November 2021

                                                                                    Debit         Credit
                                                                                          £            £
Sales                                                                                               2,465,000 
Other operating income                                                                   25,000 
Inventory at 1 December 2020                                  367,000 
Purchases                                                                 1,245,000 
Administration expenses                                            198,000 
Distribution expenses                                                 75,000 
Marketing expenses                                                   298,200 
Salaries                                                                      412,000 
Rent                                                                            25,500 
Energy                                                                        15,300 
Computer equipment - cost                                        405,000 
Computer equipment - accumulated depreciation                              230,000 
Motor vehicles - cost                                                    265,000 
Motor vehicles - accumulated depreciation                                        146,000 
Non-current investments                                              26,000 
Receivables                                                                 388,000 
Allowance for receivables                                                                   13,000 
Payables                                                                                             252,400 
Cash and cash equivalents                                           250,200 
Ordinary £1 shares                                                                              560,000 
Share premium                                                                                    26,000 
Retained earnings as at 1 December 2020                                         210,800 
5% debentures                                                                                     76,000 
Interim dividend paid                                                     13,000 
Suspense account                                                         21,000 
Total                                                                            4,004,200          4,004,20

The following information is relevant:
1. Closing inventory at 30 November 2021 is £375,000.
2. On further investigation of the suspense account in the trial balance above, it was discovered that a cash payment made on 1 July 2021 of £21,000 posted to the suspense account represents the cost of purchase of computer equipment.
3. Pyramid Ltd depreciates non-current assets as follows:
• computer equipment at 15 per cent on a straight line basis
• motor vehicles at 20 per cent on a reducing balance basis.

4. Depreciation is charged on a monthly basis. No depreciation for the year ended 30 November 2021 has been entered into the accounting records.
5. On 30 November 2021, Pyramid Ltd. decided to write off a trade receivable of £5,500 and to make an allowance for irrecoverable receivables of 3 per cent of the outstanding receivables at that date. No entries have been made in the 
nominal ledger accounts.
6. A full year’s debenture interest is to be accrued.
7. Energy costs have been paid up to 30 September 2021. The next invoice 
covering the period 1 October 2021 to 31 December 2021 is expected to be for 
about £5,200.
8. On 1 July 2021 Pyramid Ltd paid £17,000 for rent to cover the period 1 July 
2021 to 31 December 2021.
9. For the financial year ended 30 November 2021, corporation tax is estimated to be £27,800 and the audit fee is estimated to be £8,000.
10. Pyramid Ltd allocates expenses as follows:
• depreciation on motor vehicles is allocated to distribution expenses
• depreciation on computer equipment is allocated to administration expenses
• salary is allocated 80% to administration and 20% to distribution expenses
• energy expenses are allocated 70% to administration and 30% to distribution 
expenses
• rent is allocated to administration expenses

Required:
Prepare an income statement for the year ended 30 November 2021 and a balance sheet as at 30 November 2021 for Pyramid Ltd      

 

 

 

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