Object Limited is a retail outlet selling word processing equipment both for cash and on hire purchase terms. The following information has been extracted from the books of account as at 31 August 2016:

Additional information:
1 The company’s policy is to take credit for gross profit (including interest) for hire purchase sales in proportion to the instalments collected. It does this by raising a provision against the profit included in hire purchase accounts receivables not yet due.

2 The cash selling price is fixed at 50% and the hire purchase selling price at 80% above the cost of goods purchased.
3 The hire purchase contract requires an initial deposit of 20% of the hire purchase selling price, the balance to be paid in four equal instalments at quarterly intervals. The first instalment is due three months after the agreement is signed.
4 Hire purchase sales for the year amounted to £540,000 (including interest).
5 In February 2016 the company repossessed some goods which had been sold earlier in the year. 

These goods had been purchased for £3,000, and the unpaid instalments on them amounted to £3,240. They were then taken back into inventory at a value of £2,500. Later on in the year they were sold on cash terms for £3,500.
6 Depreciation is charged on premises and equipment at a rate of 15% per annum on cost.

Required:
Prepare Object Limited’s statement of profit or loss for the year ending 31 August 2016, and a statement of financial position as at that date. 

Your workings should be submitted.

Transcribed Image Text:

Authorised, issued and fully paid share capital (ordinary shares of £1 each) Administration and shop expenses Cash at bank and in hand Cash received from hire purchase customers Cash sales Depreciation of premises and equipment (at 1 September 2015) Hire purchase accounts receivable (at 1 September 2015) Premises and equipment at cost Retained profits (at 1 September 2015) Provision for unrealised profit (at 1 September 2015) Purchases Inventory (at 1 September 2015) Trade accounts payable Dr £ 130,000 6,208 2,268 100,000 342,000 15,000 595,476 Cr £ 75,000 315,468 71,000 45,000 8,000 1,008 80,000 595,476