Question B.1  

a) Journal Entries - Amounts in JEs in £000 & all JEs at 30/9/19  

1. Cost of sales  

Cost of Sales DR 3,283 

Inventory CR 3,283 

Cost of Sales DR 23,715 

Purchases CR 23,715 

Inventory DR 3,752 

Cost of Sales CR 3,752 So Cost of Sales figure will now be 3,283 + 23,715 – 3,752 = 23,246  

2. Adjustments to non-current assets  

Land DR 1,275 

Revaluation reserve CR 1,275 

Depreciation: Buildings (1,400-500) ÷ 20 years = 45  

Depreciation expense – B DR 45 

Provision for depreciation – B CR 45 

Depreciation: Plant & machinery (7,500-4,800) x 40% = 1,080  

Depreciation expense – P&M DR 1,080 

Provision for depreciation – P&M CR 1,080 

Amortisation: Intangibles- Website Development (336) ÷ 3 years = 112  

Amortisation expense – Website DR 112 

Provision for amortisation - Website CR 112 

3. Rent expense must be reduced by 340 (510 for 3 months, but only 1 month relates to the  current year so 2 months must be transferred to prepayments as it relates to the following year).  

Prepayments DR 340 

Rent expense CR 340 

So rent expense on the I.S. will be reduced by 340 and  

prepayments on the SFP will be 340.  

 

4. Other operating expenses: 275 of additional expenses to be accrued  

Other operating expenses DR 275 

Accruals (Other op. exp.) CR 275 

So other op. exp. expense on the I.S. will be increased by 275 and  

accruals on the SFP will be 275  

5. Provision for environmental clean-up costs: to be increased by 17 ( will be a non-current  liability mon SFP  

Environmental clean-up expense DR 17 

Provision for environmental clean-up CR 17 

So expense on the I.S. will be 17 and  

the provision on the SFP will be the increased by 17  

6. Bad Debt expense: No bad debt write-offs this year but a provision of 4% is REQUIRED  Trade receivables balance x 4%  

2,600 x 4% = 104 (REQUIRED provision for bad/doubtful debts)  

Existing provision on Trial Balance = 82 so provision must be increased by 22  

Bad debts expense DR 22 

Provision for bad debts CR 22 

So bad debts expense on the I.S. will be 22 and  

trade receivables on SFP will be the Tr. Rec. balance minus reqd. prov.(2,600 – 104)  

7. Interest: no adjustment required. There are no loans and the interest relates to overdraft  interest only which has all been paid  

8. Taxation of 950 must be accrued for the taxation charge not yet paid  

Taxation expense DR 950 

Tax payable (or add to accruals) CR 950 

So taxation expense on the I.S. will be 125 and  

tax payable on the SFP will be 125

Answer rating: 100% (QA)

Sr No Date Particular LF Debit Credit 1 30092019 Cost of sales Ac ... View the full answer