Chick Ltd had the following trial balance on 31. October 2020.

8% Debentures	£.000	V000 1,200
Accumulated depreciation at 1.11.19 Equipment		620
Motor Vehicles Allowance for doubtful debts at 1.11.19		330 100
Bank and cash Carriage outwards	160 160
Directors' remuneration Dividends paid	1,100 60
Dividends received Equipment at cost	2,200	20
Interest paid Inventory at 1.11.19	64 500
Equity investments Motor vehicle expenses	600 76
Motor Vehicles at cost 50p Ordinary shares at 1.11.19	1,200	800
Purchases Rent and rates	5,020 700
Retain. earnings at 1.11.19 Sales revenue		990 12,160
Share premium at 1.11.19 Trade payables		1,220 900
Trade receivables Wages and salaries	1,600 4.900
	18,340	18,340

Additional information at 31. October 2020 is given below:

a.            Closing inventory was valued at £1,000,000. However, inventory includes. in this valuation at £160,000 had gone out of date and has no resale value.

b.            Accrued wages at the year-end were £190,000.

c.             Part of the debenture interest for the year was accrued at the year-end. The debentures were held for the full 12 months. However, £400,000 of the debentures will mature in May 2021.

d.            In June 2020 the company pd £600,000 for new specialised equipment for long-term business use. This transaction was debited to the purchases account and cr.ited to the bank account.

e.            Motor vehicle insurance of £12,000 was paid in July 2020 for the 12 months to 3, July 2021.

f.             The allowance for doubtful debts is to be amended to 4% of trade receivables at the year¬end.

g.            The company charges a full year's depreciation in the year of acquisition and none in the year of disposal. Annual depreciation is charged for equipment at 10% on a straight-line basis and for motor vehicles at 20% on a reducing balance basis.

h.            Expenses relating to equipment, rent and rates and wages and salaries are to be apportion. as follows: 50% to cost of sales, 30% to administration expenses and 20% to distribution expenses. Motor expenses are selling and distribution cests.

i.              The estimated corporation tax charge for the year is £214,000.

j.             The company issued 200,000 ordinary shares at a premium of £1.50 per share on 31. October 2020. The shares were fully paid on that day but no adjustments have been made to either the bank or the equity reserves yet.

k.            A final dividend of 3p per share is proposed.

l.              REQUIRED: A statement of profit or loss, changes in equity, for the year ended 31. October 2020, and A statement of financial position as at that date, Any relevant notes to accounts for the year ended 31 October.

m.           The directors of Chick Ltd are looking to raise further capital to fund the redemption of the debentures and further expansion. They propose to issue 1 million 4% £1 irredeemable preference shares on 1. March 2021. Explain how the issue will affect each of the financial statements you prepared above in the year e.. 31. October 2021.

Answer rating: 100% (QA)

Profit or loss for the year ended 31 October 2020 Sales revenue 12160 Cost of sales 5020 Gross profi... View the full answer