SECTION A (COMPULSORY) Answer BOTH questions Question 1 (40 marks) Below is the trial balance of...

Transcribed Image Text:

SECTION A (COMPULSORY) Answer BOTH questions Question 1 (40 marks) Below is the trial balance of Primrose Ltd. as at 30th June 2020. Sales Purchases Salaries Insurance Motor vehicles at cost Accumulated depreciation (1st July 2019) Fixtures and fittings Accumulated depreciation (1st July 2019) Inventory (1st July 2019) Trade receivables Allowance for trade receivables (1st July 2019) Trade payables Accrued salaries (1st July 2019) Capital (1st July 2019) Prepaid insurance (1st July 2019) Cash Retained profit (1st July 2019) Bank loans (8%) £ 109,725 33,000 2,160 32,000 30,000 13,524 55,059 1,485 60,303 337,256 £ 176,329 7,500 13,125 271 27,117 2,000 60,000 10,914 40,000 337,256 Additional information: 1. During the year, some fixtures and fittings were disposed of. Its cost was 8,000 when originally acquired in January 2018. The proceeds from the disposal was £2,800. The disposal of the fixtures and fittings has not been accounted for. The fixtures and fittings are depreciated on a 25% reducing balance basis. Question 1 continued overleaf PTO Question 1 continued The company policy on all its non-current assets is to charge a full year depreciation in the year of purchase and none in the year of disposal. 2. Motor vehicles were bought on 1st November 2018. Their useful economic life is 4 years, and the residual value is £2,000. The straight-line method is used to calculate the depreciation expense of these motor vehicles. 3. At the financial year end, trade receivables include a balance of £3,800 which is considered uncollectable. Given the current economic conditions, Primrose Ltd wishes to adjust the allowance for trade receivables to 4% of the trade receivables amount for the current financial year. 4. Salaries relating to June each year are paid in early July. Salaries for June 2020, amounting to £3,000 has not been accounted for. 5. Interest charges are paid annually in the first week of July. 6. The motor vehicle insurance paid during the year was £2,160. The insurance policy runs from 1st June 2020 to 31st May 2021. 7. The closing inventory was £13,675. This question ignores tax. Required: a) Prepare workings to show how to account for: i) The disposal of the fixtures and fittings ii) Depreciation charges for the non-current assets for the year iii) Accrued expenses (4 marks) (4 marks) (2 marks) iv) Prepayments (3 marks) v) The amount of allowance for trade receivables in the income statement and statement of financial position (3 marks) b) Using your workings from a) and the information provided in the question, prepare for Primrose Ltd: i) Income Statement for year ending 30 June 2020. ii) Statement of Financial Position as at 30 June 2020. (7 marks) (9 marks) c) Identify Primrose's form of business and outline its legal and financial reporting requirements. (8 marks) (Total 40 marks) PTO SECTION A (COMPULSORY) Answer BOTH questions Question 1 (40 marks) Below is the trial balance of Primrose Ltd. as at 30th June 2020. Sales Purchases Salaries Insurance Motor vehicles at cost Accumulated depreciation (1st July 2019) Fixtures and fittings Accumulated depreciation (1st July 2019) Inventory (1st July 2019) Trade receivables Allowance for trade receivables (1st July 2019) Trade payables Accrued salaries (1st July 2019) Capital (1st July 2019) Prepaid insurance (1st July 2019) Cash Retained profit (1st July 2019) Bank loans (8%) £ 109,725 33,000 2,160 32,000 30,000 13,524 55,059 1,485 60,303 337,256 £ 176,329 7,500 13,125 271 27,117 2,000 60,000 10,914 40,000 337,256 Additional information: 1. During the year, some fixtures and fittings were disposed of. Its cost was 8,000 when originally acquired in January 2018. The proceeds from the disposal was £2,800. The disposal of the fixtures and fittings has not been accounted for. The fixtures and fittings are depreciated on a 25% reducing balance basis. Question 1 continued overleaf PTO Question 1 continued The company policy on all its non-current assets is to charge a full year depreciation in the year of purchase and none in the year of disposal. 2. Motor vehicles were bought on 1st November 2018. Their useful economic life is 4 years, and the residual value is £2,000. The straight-line method is used to calculate the depreciation expense of these motor vehicles. 3. At the financial year end, trade receivables include a balance of £3,800 which is considered uncollectable. Given the current economic conditions, Primrose Ltd wishes to adjust the allowance for trade receivables to 4% of the trade receivables amount for the current financial year. 4. Salaries relating to June each year are paid in early July. Salaries for June 2020, amounting to £3,000 has not been accounted for. 5. Interest charges are paid annually in the first week of July. 6. The motor vehicle insurance paid during the year was £2,160. The insurance policy runs from 1st June 2020 to 31st May 2021. 7. The closing inventory was £13,675. This question ignores tax. Required: a) Prepare workings to show how to account for: i) The disposal of the fixtures and fittings ii) Depreciation charges for the non-current assets for the year iii) Accrued expenses (4 marks) (4 marks) (2 marks) iv) Prepayments (3 marks) v) The amount of allowance for trade receivables in the income statement and statement of financial position (3 marks) b) Using your workings from a) and the information provided in the question, prepare for Primrose Ltd: i) Income Statement for year ending 30 June 2020. ii) Statement of Financial Position as at 30 June 2020. (7 marks) (9 marks) c) Identify Primrose's form of business and outline its legal and financial reporting requirements. (8 marks) (Total 40 marks) PTO

Answer rating: 100% (QA)

a Workings i Disposal of Fixtures and Fittings Cost of fixtures and fittings 8000 Accumulated depreciation 13125 Book value before disposal Cost Accumulated depreciation 8000 13125 5125 Proceeds from ... View the full answer