The following trial balance relates to Macho plc for the year ended 30 June 2021:

£’000	£’000
Equity shares of £1 each	3,000
Share Premium	500
Retained earnings at 1 July 2020	646
Land and buildings at cost	2,400
Depreciation on land and buildings at 1 July 2020	555
Plant and equipment at cost	2,910
Depreciation on plant and equipment at 1 July 2020	640
Inventory at 1 July 2020	380
Trade receivables	370
Cash and cash equivalents	41
Trade payables	64
6% Loan repayable 2028	100
Revenue	1,288
Purchases	490
Distribution costs	176
Tax provision	5
Administrative expenses	80
Loan interest paid	3
Dividend paid	20
6,834	6,834

Further notes:

1. Inventory was valued at £235,000 on 30 June 2021.
2. Buildings are to be depreciated on a straight-line basis at 10% and depreciation is treated as an administration expense. Of the total cost of land and buildings, £600,000 relates to land and the remainder to buildings.
3. It is discovered that last year land was depreciated at 10% of cost, in error. This amount is included in the figure for depreciation in the trial balance.
4. Plant and equipment are to be depreciated at 10% reducing balance basis. The expense is allocated to cost of sales.
5. The estimated tax charge for the year is £2,000.
6. Sales include deposits of £20,000 for orders of inventory which cannot now be met. The deposits will have to be refunded.
7. A provision of 4% is required for doubtful debts.
8. On 31 October 2020 there was a 1 for 5 bonus issue. This has not yet been accounted for and will be funded from the share premium account as far as is possible.
9. The 6% loan was taken out in 2019.

Required:

Prepare the following statements in a form suitable for publication. Notes to the accounts are not required.

1. A Statement of Profit or Loss for the year ended 30 June 2021.

2. A Statement of Financial Position as at 30 June 2021. 

3. Discuss the correct treatment of the item in note (3).

Answer rating: 100% (QA)

A Statement of Profit or Loss for the year ended 30 June 2021 Statement of Profit or Loss for the ye... View the full answer