4Cranberry plc

The following trial balance was extracted from the nominal ledger of Cranberry plc on
31 December 20X8:
£ £
Revenue 2,180,000
Inventories at 1 January 20X8 91,000
Purchases 935,000
Distribution costs 395,000
Administrative expenses 543,000
Loan interest paid 24,000
Land and buildings cost 450,000
Plant and equipment cost 460,000
Land and buildings accumulated depreciation at
1 January 20X8 208,000
Plant and equipment accumulated depreciation at
1 January 20X8 246,000
Trade receivables 340,000
Bank 64,000
Ordinary share capital (£1 shares) 180,000
Share premium 60,000
Bank loan 400,000
Retained earnings 9,000
Trade payables 54,000
Dividends paid 35,000
3,337,000 3,337,000

The following additional information is relevant:

(1) Cranberry plc paid an annual insurance premium of £24,000 for the year 1 June 20X8 to
31 May 20X9. This payment is included in administrative expenses.
(2) During the year the company made a 1 for 10 bonus issue of its ordinary shares from the share premium. No
entries have been made in respect of this.
(3) The income tax charge for the period has been estimated at £28,000.
(4) Land and buildings include £150,000 for the land. Buildings are depreciated on a straight-line basis over 10
years. Plant is depreciated on a straight-line basis at a rate of 15%
Depreciation is apportioned as follows:
Cost of sales 70%
Distribution costs 10%
Administrative expenses 20%
(5) The bank loan received on 1 July 20X8 is repayable in full in eight years. Interest is charged at a fixed rate of
6% per annum.
(6) Closing inventories at cost amounted to £105,000.
(7) Cranberry plc is currently defending an action by a former employee in respect of unfair dismissal. The legal
advisors believe that this action will be successful. The employee is seeking £10,000 in compensation.
Provisions are charged to administrative expenses.
(8) A payment was made to a supplier that was recorded in the accounting records as £32,200. When the
electronic banking report was downloaded, it was discovered that the correct amount is £33,200.
(9) A customer of Cranberry plc is in financial difficulties. Management believe that there is a low prospect that
any of the £12,000 debt will be paid by the customer and the amount requires to be written off as
irrecoverable. Irrecoverable debts are charged to administrative expenses.
Requirement
Prepare the statement of profit or loss for Cranberry plc for the year ended 31 December 20X8 and the statement
of financial position at that date.
Statement of profit or loss for the year ended 31 December 20X8
£
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit / (loss)
Finance costs
Profit / (loss) before tax
Income tax expense
Profit / (loss) for year
Statement of financial position at 31 December 20X8
£
ASSETS
Non-current assets
Land and buildings
Plant and equipment
Current assets
Inventories
Trade receivables
Prepayments
Cash and cash equivalents
Total assets

EQUITY AND LIABILITIES

Equity
Ordinary share capital
Share premium
Retained earnings
Non-current liabilities
Borrowings
Current liabilities
Trade payables
Provisions
Income tax payable
Total equity and liabilities
5 Hexagon plc
The following trial balance was extracted from the nominal ledger of Hexagon plc on 30 June 20X3:
£ £
Sales 5,190,000
Inventories at 1 July 20X2 418,000
Purchases 2,854,500
Administrative expenses 1,082,000
Irrecoverable debts expense 123,500
Land and buildings cost 2,540,000
Plant and machinery cost 1,000,000
Office equipment cost 214,000
Goodwill 120,000
Land and buildings accumulated depreciation at 1 July 20X2 635,000
Plant and machinery accumulated depreciation at 1 July 20X2 360,000
Office equipment accumulated depreciation at 1 July 20X2 80,250
Trade receivables 487,000
Cash at bank 53,400
Ordinary share capital (£1 shares) 1,000,000
6% irredeemable preference shares (£1 shares) 500,000
Share premium 100,000
Retained earnings 825,550
Ordinary dividends 50,000
Preference dividends 30,000
Trade payables 281,600
8,972,400 8,972,400
The following adjustments have yet to be accounted for:
(1) The company depreciates its non-current assets as follows:
Buildings Over 40 years on a straight-line basis
Plant and machinery 20% reducing balance
Office equipment 25% straight-line
Land and buildings includes land that cost £500,000. Half of the depreciation on buildings is charged to cost
of sales with the remainder charged to administrative expenses. Plant and machinery depreciation is charged
to cost of sales. Office equipment depreciation is charged to administrative expenses.
(2) An impairment review revealed that goodwill should be written down to 80% of the amount shown in the
draft trial balance at 30 June 20X3. Any amount written off goodwill should be charged as an administrative
expense.
(3) An inventory count and subsequent inventory calculations has shown closing inventory to be £427,000.
(4) Hexagon plc hired some machinery on a short-term basis to help manufacture additional products to cope
with increased demand. The cost to hire the machinery for the period from 1 December 20X2 to 30
November 20X3 (inclusive) is £90,000.
The rental payments are six monthly. £45,000 was paid on 1 December 20X2 the remaining £45,000 was paid
on 1 June 20X3. Machinery hire costs are charged to cost of sales.
(5) Shortly after the year end an electricity bill for the company factory for £18,600 was received. This invoice
covered the quarter from 1 June 20X3 to 31 August 20X3 and was charged to cost of sales in July 20X3.
(6) The company made a 1 for 5 bonus issue of ordinary shares on 30 June 20X3, utilising share premium. No
accounting entries have been made in respect of this issue.
(7) A customer owing £14,600 at 30 June 20X3 has gone into administration and the full amount is considered
irrecoverable. The company presents irrecoverable debts as other operating expenses in the statement of
profit or loss.
(8) It has been discovered that a purchase invoice received on 25 June 20X3 for £19,800 was incorrectly
accounted for. The invoice was entered into the accounting system as £18,900 and is included within
purchases and trade payables.
(9) Income tax for the year ended 30 June 20X3 is yet to be provided for. It is estimated that £260,500 of tax will
be payable.
Requirement
Prepare the statement of profit or loss for Hexagon plc for the year ended 30 June 20X3 and the statement of
financial position at that date.
Statement of profit or loss for the year ended 30 June 20X3
£
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating expenses
Operating profit / (loss)
Finance costs
Profit / (loss) before tax
Income tax expense
Profit / (loss) for year
Statement of financial position at 30 June 20X3
£
ASSETS
Non-current assets
Land and buildings
Plant and machinery
Office equipment
Goodwill
Current assets
Inventories
Trade receivables
Prepayments
Cash and cash equivalents
Total assets

EQUITY AND LIABILITIES

Equity
Ordinary share capital
Preference share capital
Share premium
Retained earnings
Non-current liabilities
Borrowings
Current liabilities
Borrowings
Trade payables
Accruals
Provisions
Income tax payable
Total equity and liabilities
6 Goldberg plc
The following trial balance was extracted from the nominal ledger of Goldberg plc on
31 December 20X1:

£ £
Sales 2,284,900
Inventories at 1 January 20X1 71,000
Purchases 1,052,100
Distribution costs 172,100
Administrative expenses 437,000
Irrecoverable debts expense 29,000
Loan interest paid 4,500
Land and buildings cost 800,000
Plant and equipment cost 224,000
Motor vehicles cost 48,800
Land and buildings accumulated depreciation at 1 January 20X1 33,000
Plant and equipment accumulated depreciation at 1 January 20X1 44,800
Motor vehicles accumulated depreciation at 1 January 20X1 24,400
Trade receivables 226,900
Cash at bank 12,600
Ordinary share capital (£1 shares) 150,000
Share premium 125,000
Irredeemable 5% preference shares 100,000
Bank loan 150,000
Retained earnings 101,800
Dividends paid 25,000
Trade payables 89,100
3,103,000 3,103,000

The following adjustments have yet to be accounted for:

(1) The company depreciates all its non-current assets on a straight-line basis with zero residual values. Land
included in non-current assets cost £250,000 and buildings are depreciated over 50 years.
Plant and equipment is depreciated over 5 years and Motor vehicles are depreciated over four years.
Depreciation is charged as follows:
Depreciation on: Charged to:
Buildings Administrative expenses
Motor vehicles Distribution expenses
Plant and equipment Cost of sales
(2) Goldberg plc sells three products (Product Z1, Product Z2 and Product Z3). Inventory at
31 December 20X1 is made up of the following:
Item Z1 Z2 Z3
Units 1,100 2,000 1,200
Cost per unit (£) 25 15 18
100 of the units of Z3 sustained minor damage when being moved from one inventory area to another. As a
result these will only be sold for half of their normal selling price of £30 per unit.
(3) Goldberg plc rents offices at a cost of £48,000 per year and pays quarterly in arrears. The last rental payment
made during 20X1 covered the quarter ending 31 October 20X1. The invoice for the following quarter to 31
January 20X2 is yet to be received. Rent is charged to administrative expenses.
(4) Trade receivables at 31 December 20X1 include a balance of £2,300 in relation to a customer having severe
financial difficulties. Goldberg considers it very unlikely this amount will ever be recovered and have decided
to write the debt off as irrecoverable. The Irrecoverable debts expense is included in other operating
expenses.
(5) The company received the bank loan on 1 February 20X1. The loan is repayable in full on 31 July 20X9.
Interest is charged at a fixed rate of 6% per annum.
(6) A company employee dismissed during the year initiated a legal action against Goldberg in November 20X1.
The likely outcome is an out of court settlement for £20,000. Provisions are charged to administrative
expenses.
(7) Income tax for the year ended 31 December 20X1 is yet to be provided for. It is estimated that £140,000 of
income tax will be payable.
(8) The dividends paid represents £5,000 paid in respect of irredeemable preference shares and £20,000 paid in
respect of ordinary shares.
Requirement
Prepare the statement of profit or loss for Goldberg plc for the year ended 31 December 20X1 and the statement
of financial position at that date.
Statement of profit or loss for the year ended 31 December 20X1
£
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Other operating expenses
Operating profit / (loss)
Finance costs
Profit / (loss) before tax
Income tax expense
Profit / (loss) for year
Statement of financial position at 31 December 20X1
£
ASSETS
Non-current assets
Land and buildings
Plant and equipment
Motor vehicles
Current assets
Inventories
Trade receivables
Prepayments
Cash and cash equivalents
Total assets

EQUITY AND LIABILITIES

Equity
Ordinary share capital
Irredeemable preference share capital
Share premium
Retained earnings
Non-current liabilities
Borrowings
Current liabilities
Borrowings
Trade payables
Accruals
Provisions
Income tax payable
Total equity and liabilities
7 MDFH plc
The following trial balance was extracted from the nominal ledger of MDFH plc on
30 September 20X5:
£ £
Sales 1,320,000
Inventories at 1 October 20X4 124,000
Purchases 1,026,300
Distribution costs 78,200
Administrative expenses 234,000
Other operating expenses 9,500
Loan interest paid 11,250
Other interest paid 2,900
Land and buildings cost (Land cost = £75,000) 225,000
Plant and equipment cost 271,000
Land and buildings accumulated depreciation at 1 October 20X4 30,000
Plant and equipment accumulated depreciation at
30 September 20X5 101,625
Intangible asset – development costs 11,000
Trade and other receivables 109,000
Allowance for receivables 3,000
Bank overdraft 13,580
Ordinary share capital (£1 shares) 100,000
Share premium 50,000
Bank loan 200,000
Retained earnings 191,945
Trade payables 92,000
2,102,150 2,102,150

The following information is now available and may result in adjustments being needed to the amounts shown in
the trial balance above:
(1) Depreciation on buildings for the year ended 30 September 20X5 has not yet been provided. Buildings are
depreciated at 2% per annum on a straight-line basis (with no residual value). Depreciation on buildings is
included in administrative expenses. Depreciation for the year to 30 September 20X5 has already been
provided on plant and equipment.
(2) No entries have been made in relation to equipment sold for £15,000 to another company, GBHL plc.
MDFH delivered the equipment and related invoice to GBHL on 30 September 20X5, but payment for the
non-current asset was not received until October 20X5. The equipment originally cost £40,000 when MDFH
purchased it on 1 October 20X3. Depreciation on plant and equipment is charged on a straight-line basis at
25%. Profits or losses on disposals are included within administrative expenses.
(3) Closing inventory has been calculated as £118,000. All closing inventory is included at cost, apart from 1,000
kg of raw materials which is valued based on the warehouse manager's estimate of £2.00 per kg. The cost per
kg of the material on the related purchase invoice was £1.50 per kg.
(4) MDFH plc received a telephone bill for £600 on 1 November 20X5 covering the period from 1 August 20X5 to
30 October 20X5. Telephone expenses are charged to administrative expenses.
(5) MDFH plc has decided to write off as irrecoverable a debt of £1,700 relating to a customer balance which has been
in dispute for a long time. Irrecoverable debts should be included in other operating expenses.
(6) MDFH plc received a payment from a customer in respect of a debt of £3,000 that had been written off in the
prior year. The bookkeeper recorded this in the cash at bank account and as additional revenue received in
the year, MDFH plc has decided that an allowance for receivables of £5,000 is required at 30 September
20X5.
(7) The bank loan was received on 30 September 20X4 and is repayable in four equal instalments. The first
instalment is due on 30 September 20X6. Interest is charged at a fixed rate of 7.5% per annum.
(8) The development costs recorded as an intangible asset were all incurred during the year ended 30 September
20X5 and all related to development of a proposed new product. However, management have assessed that
the development costs should instead be recorded as an expense within administrative expenses.
(9) Sales for the year to 30 September 20X5 include deposits from customers totalling £15,000. These deposits
relate to products which are currently being manufactured and will not be delivered until December 20X5.
(10) No income tax is expected to be payable for the year ended 30 September 20X5.
Requirement
Prepare the statement of profit or loss for MDFH plc for the year ended 30 September 20X5 and the statement of
financial position at that date.
Statement of profit or loss for the year ended 30 September 20X5
£
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Other operating expenses
Operating profit / (loss)
Finance costs
Profit / (loss) before tax
Income tax expense
Profit / (loss) for year
Statement of financial position at 30 September 20X5
£
ASSETS
Non-current assets
Land and buildings
Plant and equipment
Intangible assets
Current assets
Inventories
Trade and other receivables
Prepayments
Cash and cash equivalents
Total assets

EQUITY AND LIABILITIES

Equity
Ordinary share capital
Share premium
Retained earnings
Non-current liabilities
Borrowings
Current liabilities
Borrowings
Bank overdraft
Trade payables
Accruals
Deferred income
Income tax payable
Total equity and liabilities
8 Billabong plc
The following trial balance was extracted from the nominal ledger of Billabong plc on
31 December 20X3:
£ £
Revenue 1,380,000
Inventories at 1 January 20X3 65,000
Purchases 823,500
Distribution costs 171,250
Administrative expenses 567,000
Other operating expenses 7,800
Redeemable preference dividend paid 5,000
Land and buildings cost 750,000
Plant and equipment cost 125,000
Motor vehicles cost 50,000
Land and buildings accumulated depreciation at 1 January 20X3 50,000
Plant and equipment accumulated depreciation at 1 January 20X3 30,000
Motor vehicles accumulated depreciation at 1 January 20X3 25,000
Trade receivables 280,000
Bank 6,300
Ordinary share capital (£1 shares) 150,000
Share premium 150,000
Retained earnings 615,850
Redeemable 4% preference shares 250,000
Ordinary dividends paid 10,000
Trade payables 210,000
2,860,850 2,860,850
The following adjustments have yet to be accounted for:
(1) Land included in non-current assets cost £250,000 and buildings are depreciated on a straight-line basis over
50 years.
Plant and equipment is depreciated on the reducing balance method at a rate of 20% and motor vehicles are
depreciated on a straight-line basis at a rate of 25%.
Depreciation is charged as follows:
Depreciation on: Charged to:
Buildings Administrative expenses
Motor vehicles Distribution costs
Plant and equipment Cost of sales
(2) Billabong plc values its closing inventory at £75,000. However this total includes some damaged items,
originally costing £5,000. It will cost £1,000 to repair the damage, after which the inventory can be sold for
£5,500.
(3) Billabong plc insurance costs of £50,000 per year and pays quarterly in advance. The last insurance payment
made during 20X3 covered the quarter ending 31 January 20X4. Insurance is charged to administrative
expenses.
(4) Shortly after the year end, an electricity bill was received for £12,600 covering the period from 1 June to 1
December 20X3. No entries have been made in the records. Electricity is charged to administrative expenses.
(5) Trade receivables at 31 December 20X3 include a balance of £2,800 in relation to a customer that has gone into
receivership. Billabong has been advised that it is unlikely to recover this amount. The irrecoverable debts
expense is charged to other operating expenses.
(6) The redeemable 4% preference shares pay dividends half-yearly. The final dividend for the year ended 31
December 20X3 has not been paid.
(7) During the year a customer initiated a legal action against Billabong for supplying faulty goods. The likely
outcome is an out of court settlement for £250,000. Provisions are charged to administrative expenses.
(8) Income tax for the year ended 31 December 20X3 is yet to be provided for. It is estimated that £25,000 of tax
will be payable.
Requirement
Prepare the statement of profit or loss for Billabong plc for the year ended 31 December 20X3 and the statement
of financial position at that date.
Statement of profit or loss for the year ended 31 December 20X3
£
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Other operating expenses
Operating profit / (loss)
Finance costs
Profit / (loss) before tax
Income tax expense
Profit / (loss) for year
Statement of financial position at 31 December 20X3
£
ASSETS
Non-current assets
Land and buildings
Plant and equipment
Motor vehicles
Current assets
Inventories
Trade receivables
Prepayments
Cash and cash equivalents
Total assets

EQUITY AND LIABILITIES

Equity
Ordinary share capital
Share premium
Retained earnings
Non-current liabilities
Redeemable 4% preference shares
Current liabilities
Trade payables
Accruals
Provisions
Income tax payable
Total equity and liabilities