The following trial balance has been extracted from the books of Baganza plc as at 30 September 20X7:

Additional information:

1. The stock at 30 September 20X7 was valued at £3,600,000.

2. Depreciation for the year to 30 September 20X7 is to be charged on the historic cost of the fixed assets as follows:

Freehold property: 5 per cent

Plant and machinery: 15 per cent

3. The basic rate of income tax is assumed to be 27 per cent.

4. The directors propose a final dividend of 60p per share.

5. The company was incorporated in 20X0.

6. Corporation tax based on the profits for the year at a rate of 35 per cent is estimated to be £850,000.

7. A transfer of £40,000 is to be made to the deferred taxation account.

Required:

In so far as the information permits, prepare Baganza plc’s profit and loss account for the year to 30 September 20X7, and a balance sheet as at that date in accordance with the Companies Act 1985 and appropriate accounting standards.

However, formal notes to the accounts are not required, although detailed workings should be submitted with your answer, which should include your calculation of earnings per share.

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Administrative expenses Called up share capital (1,200,000 ordinary shares of £1 each) Cash at bank and in hand Corporation tax (overpayment for the year to 30 September 20X6) Deferred taxation (at 1 October 20X6) Distribution costs Dividends received (on 31 March 20X7) Extraordinary item (net of tax) Freehold property: at cost accumulated depreciation (at 1 October 20X6) Interim dividend (paid on June 20X7) Investments in United Kingdom companies Plant and machinery: at cost accumulated depreciation (at 1 October 20X6) Profit and loss account (at 1 October 20X6) Purchases Research expenditure Stock (at 1 October 20X6) Tax on extraordinary item Trade creditors Trade debtors Turnover £000 400 60 600 2,700 36 2,000 5,200 16,000 75 2,300 2,700 £32,071 £000 1,200 20 460 249 1,500 260 3,600 2,022 360 2,900 19,500 £32,071