The following is the trial balance of Pyramid Ltd as of 30 November 2021.

                                                                                             Debit                 Credit
                                                                                                 £                     £
Sales                                                                                                               2,465,000
Other operating income                                                                                   25,000
Inventory at 1 December 2020                                                367,000
Purchases                                                                               1,245,000
Administration expenses                                                         198,000
Distribution expenses                                                               75,000
Marketing expenses                                                                 298,200
Salaries                                                                                    412,000
Rent                                                                                          25,500
Energy                                                                                      15,300
Computer equipment - cost                                                      405,000
Computer equipment - accumulated depreciation                                            230,000
Motor vehicles - cost                                                                 265,000
Motor vehicles - accumulated depreciation                                                      146,000
Non-current investments                                                           26,000
Receivables                                                                               388,000
Allowance for receivables                                                                                  13,000
Payables                                                                                                            252,400
Cash and cash equivalents                                                        250,200
Ordinary £1 shares                                                                                             560,000
Share premium                                                                                                   26,000
Retained earnings as at 1 December 2020                                                        210,800
5% debentures                                                                                                   76,000
Interim dividend paid                                                                   13,000
Suspense account                                                                       21,000
Total                                                                                            4,004,200      4,004,200

 

The following information is relevant:
1. Closing inventory on 30 November 2021 is £375,000.
2. On further investigation of the suspense account in the trial balance above, it was discovered that a cash payment made on 1 July 2021 of £21,000 was posted to the suspense account representing the cost of purchase of computer equipment.
3. Pyramid Ltd depreciates non-current assets as follows:
• computer equipment at 15 percent on a straight-line basis
• motor vehicles at 20 percent on a reducing balance basis

4. Depreciation is charged on a monthly basis. No depreciation for the year ended 30 November 2021 has been entered into the accounting records.
5. On 30 November 2021, Pyramid Ltd. decided to write off a trade receivable of  £5,500 and to make an allowance for irrecoverable receivables of 3 percent of the outstanding receivables at that date. No entries have been made in the nominal ledger accounts.
6. A full year’s debenture interest is to be accrued.
7. Energy costs have been paid up to 30 September 2021. The next invoice covering the period 1 October 2021 to 31 December 2021 is expected to be for about £5,200.
8. On 1 July 2021 Pyramid Ltd paid £17,000 for rent to cover the period 1 July  2021 to 31 December 2021.
9. For the financial year ended 30 November 2021, corporation tax is estimated to be £27,800 and the audit fee is estimated to be £8,000.
10. Pyramid Ltd allocates expenses as follows:
• depreciation on motor vehicles is allocated to distribution expenses
• depreciation on computer equipment is allocated to administration expenses
• salary is allocated 80% to administration and 20% to distribution expenses
• energy expenses are allocated 70% to administration and 30% to distribution
expenses
• rent is allocated to administration expenses.
Required:
-Prepare an income statement for the year ended 30 November 2021 and a balance sheet as of 30 November 2021 for Pyramid Ltd.

 

Answer rating: 100% (QA)

Income statement For the year ended 30 November 2021 Sales 2465000 Less Cost of goods sold 1237000 Gross Margin 1228000 Less operating expenses income ... View the full answer