a) Prepare a Statement of Profit or Loss (or `Income Statement`) for Augax Ltd for the year ended 30 June 2020 and a Statement of Financial Position (or `Balance Sheet`) as at that date.
The following information concerns Augax Ltd in relation to its year ended 30 June 2020:
|
Trial balance as at 30 June 2020: |
Dr £ |
Cr £ |
|
Inventory as at 1 July 2019 |
50,418 |
|
|
Wages & salaries |
126,407 |
|
|
Trade payables |
70,881 |
|
|
Business rates |
27,974 |
|
|
Utilities |
21,584 |
|
|
Purchases |
505,626 |
|
|
Trade receivables |
92,400 |
|
|
Sales |
1,053,388 |
|
|
Fixtures & fittings: at cost |
440,160 |
|
|
IT equipment: at cost |
188,160 |
|
|
Fixtures & fittings: accumulated depreciation at 1 July 2019 |
109,800 |
|
|
IT equipment: accumulated depreciation at 1 July 2019 |
70,920 |
|
|
Dividends paid |
41,960 |
|
|
Cash at bank |
1,592 |
|
|
5% loan notes 2030-2032 |
161,000 |
|
|
Loan note interest paid |
4,025 |
|
|
Bad debt expense |
10,918 |
|
|
Share premium |
33,000 |
|
|
Allowance for doubtful debts at 1 July 2019 |
1,861 |
|
|
Premises: at cost |
675,700 |
|
|
Premises: accumulated depreciation at 1 July 2019 |
175,682 |
|
|
Ordinary shares of 10p each |
139,000 |
|
|
3% irredeemable preference shares of £1 each |
61,000 |
|
|
Commissions received |
8,766 |
|
|
Directors` remuneration |
84,270 |
|
|
Retained profits at 1 July 2019 |
385,896 |
|
|
2,271,194 |
2,271,194 |
In addition to the above trial balance you ascertain the following information:
1. The inventory was counted at 30 June 2020 and was valued at a cost of £54,909.
2. Depreciation needs to be charged at the following rates per year:
Premises: Fixtures & fittings: IT equipment:
(straight-line) 2% (reducing balance) 25% (straight-line) 20%
- The amount shown for business rates on the trial balance includes a payment of £6,180 which represents twelve months` business rates to 31 August 2020.
- Utilities charges incurred for which no invoices have yet been received amount to a total of £7,842.
- The audit fee for the year has been agreed at £18,000 and this needs to be provided for.
- The allowance for doubtful debts is to be set at 3% of trade receivables.
- The interest on the loan notes is paid in two instalments each year, and the second instalment needs to be accrued.
- The corporation tax charge on this year`s profit is estimated to be £27,000.
Required:
- a) Prepare a Statement of Profit or Loss (or `Income Statement`) for Augax Ltd for the year ended 30 June 2020 and a Statement of Financial Position (or `Balance Sheet`) as at that date.
(38 marks)
- b) There are many possible different groups of users of financial statements. For example, the suppliers of a company may be interested in using its financial statements to assess that company`s ability to pay for its goods. Identify three other potential user groups (in addition to suppliers) and briefly outline why they would be interested in financial statements.
(6 marks)
- c) Explain, using at least two examples, why the increase (or decrease) in a company`s cash during the year will nearly always be different to the profit (or loss) that it reports for that year.
