Lecture 4 & 5 - Preparing Financial Statements

The following balances have been extracted from the books of the XYZ Company Ltd, at 31
December, 2012:


Capital authorised and issued and fully paid:
90,000 Ordinary Shares of 1 each 90,000
Share Premium Account 10,000
General Reserve 20,000
Retained Earnings at 1 January, 2011 28,000
5% Debentures of 1 each (issued in 2007) 80,000
Debtors 40,000
Balance at bank (Overdrawn) 4,000
Land and buildings at cost 160,000
Plant and machinery at cost 210,000
Land and buildings - accumulated depreciation 40,000
On Plant and machinery - accumulated depreciation 70,000
Stocks and work in progress at 31 December 2012 30,000
Cash 1,000
Provision for bad debts at 1 January, 2012 2,000
Turnover 623,000
Cost of sales 480,000
Administrative expenses 45,000
Selling and distribution expenses 35,000
Debenture interest paid 2,000
Ordinary dividend paid 9,000
Creditors 45,000

Further information:

a) (i) Provide depreciation for the year on land and buildings at 2 per cent per annum on the
straight-line basis.

(ii) Provide depreciation on plant and machinery at 20 per cent per annum on the reducing-
balance basis.

b) The Provision for bad debts is to be revised to 7 per cent of Debtors. Bad debts written off have
been included within selling & distribution expenses.

c) Administrative expenses of 1,000 accrued at 31 December 2012 have not yet been recorded.

d) Allow for estimated corporation tax of 9,000 on the profit for the year.

e) The directors have decided to eliminate the General Reserve by transferring its balance back into
Retained Earnings.

Requirements: Prepare an Income Statement and a Statement of Movement in Equity for the
year to 31 December 2012 and a Statement of Financial Position at that date.