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Final Accounts of a Company The following balances were extracted from the books of Bowe Ltd as on 31/12/2015 - Leaving Cert Accounting - Question 1 - 2016
Question 1
Final Accounts of a Company The following balances were extracted from the books of Bowe Ltd as on 31/12/2015. Share capital € € Authorised - 1,000,000 Ordinary S... show full transcript
Worked Solution & Example Answer:Final Accounts of a Company The following balances were extracted from the books of Bowe Ltd as on 31/12/2015 - Leaving Cert Accounting - Question 1 - 2016
Step 1
Prepare a trading and profit and loss account for the year ended 31/12/2015.
Answer
Trading and Profit and Loss Account for Bowe Ltd for the year ended 31/12/2015
Sales: €560,900
Less: Sales Returns: €4,800
Net Sales: €556,100
Cost of Sales:
- Opening Stock: €45,300
- Purchases: €225,000
- Closing Stock: €45,300
Cost of Goods Sold:
Cost of Sales = Opening Stock + Purchases - Closing Stock
Cost of Sales = €45,300 + €225,000 - €45,300 = €225,000
Gross Profit:
Gross Profit = Net Sales - Cost of Goods Sold
Gross Profit = €556,100 - €225,000 = €331,100
Less Expenses:
- Administration Expenses:
- Stationery: €6,800
- Wages and Salaries: €127,100
- Light, Heat, and Insurance: €24,000
- Directors’ Fees: €35,300
- Depreciation on Buildings: 2% of €720,000 = €14,400
- Depreciation on Office Equipment: 10% of €75,000 = €7,500
- Total Administration Expenses: €6,800 + €127,100 + €24,000 + €35,300 + €14,400 + €7,500 = €213,100
Operating Profit:
Operating Profit = Gross Profit - Total Administration Expenses
Operating Profit = €331,100 - €213,100 = €118,000
Sales and Distribution Expenses:
- Advertising: €6,300
Net Operating Income:
Net Profit before Tax = Operating Profit - Sales and Distribution Expenses
Net Profit before Tax = €118,000 - €13,500 = €104,500
Add Other Income:
- Rent Received: €14,000
- Decrease in Bad Debts Provision: €1,700
- Total Other Income: €15,700
Net Profit for the Year:
Net Profit = Net Operating Income + Other Income
Net Profit = €104,500 + €15,700 = €120,200
Less Taxation: €15,000
Net Profit After Tax: €105,200
Add Profit/Loss Brought Forward from Previous Year: €22,100
Profit/Loss Balance at 31/12/2015: €127,300
Step 2
Prepare a balance sheet as at 31/12/2015.
Answer
Balance Sheet of Bowe Ltd as at 31/12/2015
Intangible Assets:
- Patents: €160,000
Fixed Assets:
- Buildings:
- Cost: €720,000
- Less: Accumulated Depreciation: €14,400
- NBV: €705,600
- Office Equipment:
- Cost: €75,000
- Less: Accumulated Depreciation: €7,500
- NBV: €67,500
Total Fixed Assets: €160,000 + €705,600 + €67,500 = €933,100
Current Assets:
- Closing Stock: €45,300
- Stock of Stationery: €700
- Debtors: €62,000
- Less Bad Debt Provision: €3,100
- Rent Receivable: €12,000
Total Current Assets: €45,300 + €700 + (€62,000 - €3,100) + €12,000 = €116,900
Total Assets: €933,100 + €116,900 = €1,050,000
Creditors (Amounts falling due within 1 year):
- Creditors: €48,000
- VAT: €7,200
- Bank: €12,500
- Debenture Interest Due: €12,000
- Corporation Tax: €15,000
- Total Current Liabilities: €94,700
Net Current Assets: €116,900 - €94,700 = €22,200
Total Liabilities: €94,700
Financed by:
- Creditors (amounts falling due after 1 year): €62,000
- 8% Debentures: €62,000
- Share Capital: €650,000
- Profit and Loss Account: €127,300
Total Liabilities and Equity: €1,050,000