The year-end Trial Balance was extracted from the books of Sparrow Ltd as shown.

You are informed as follows:

(a) Included within sales are goods invoiced at £16,000 in respect of which the customers have the option to return until a week after the year-end. These goods were invoiced at cost plus a third.

(b) Cost of inventory held as at 30 September 2011 was £385,000.

(c) A portion of the shop premises has been let out, at £3,000 per month, since 2007.

(d) Buildings are depreciated at 2% of cost per annum assuming that a quarter of the cost related to land which is not depreciated. Directors wish to report land and buildings at their current value which was identified, as at 1 October 2010, as £1 million for land and £1.6 million for the buildings.

(e) New machinery was acquired for £80,000 on 1 April 2011. Machinery is depreciated at 10% per annum using the reducing balance method.

(f) Equipment acquired on 1 October 2008 is depreciated using the sum of the years’ digits method over five years.

(g) Tax on current year’s profit is estimated at £79,000. Deferred tax needs to be accounted for at 20% of taxable temporary difference which, as at 30 September 2011, is identified at an amount of £180,000.

Required: 

Prepare for publication the Statement of income for the year ended 30 September 2011 and the Statement of financial position as at that date.

Transcribed Image Text:

Trial Balance as at 30 September 2011 Land and buildings Machinery Equipment Accumulated depreciation to 30.9.2010: Buildings Machinery Equipment Directors' fees Cash and bank Retained earnings Purchases Administration expenses Sales Receivables/payables Carriage inwards General reserve Salaries Advertising Deferred tax £'000 £'000 2,400 720 450 II 78 59 2,117 192 - 496 74 296 54 - I 648 360 270 291 I 3,433 284 - 45 I 29