Leaving Cert Accounting FINAL ACCOUNTS - Company: Linken Ltd has an authorised cap

Question

Linken Ltd has an authorised capital of €1,200,000 divided into 700,000 ordinary shares at €1 each and 500,000 5% preference shares at €1 each. The following trial balance was extracted from its books at 31/12/2018:

Land and buildings at cost                      €    850,000
Accumulated depreciation - land and buildings     €    55,000
Delivery vans (cost €155,000)                  €    120,000
Discount (net)                                  €     15,500
Profit and loss balance 01/01/2018              €     71,500
Stocks on hand 31/12/2018                       €     64,500
Debenture interest for the first three months     €    360,000
3% Investments 01/04/2018                       €    430,000

Purchases and sales                             € 1,045,000
Dividends paid                                   €    60,000
Bad debts provision                              €    69,100
Debtors and creditors                            €    98,200
Bank                                            €     60,000
Salaries and general expenses (including suspense) €    243,100
7% Debentures (including €60,000 issued on 01/04/2018)  €  300,000
Issued share capital - ordinary shares           €    500,000
                - 5% preference shares           €    100,000
VAT                                             €     31,200
Advertising                                       €     45,000
Capital reserve                                  € 2,916,900

The following information and instructions are to be taken into account:
(i) Stock at cost on 31/12/2018 was €75,400 – this figure includes damaged stock which cost €6,000 but which now has a net realisable value of 75% of cost.

(ii) During the year, stock which had cost €7,200 was destroyed by fire. The insurance claim was only paid by way of compensations of €5,000.

(iii) The cost of delivery vans is to be written off on a straight line basis over 5 years. At full year’s depreciation is to be charged in the year of acquisition and none in the year of disposal. Delivery vans have a 5% scrap value of the original cost.

(iv) It was discovered that goods had been sent to a customer on 31/12/2018 on a ‘sale or return’ basis. These goods had been entered into the books as a credit sale of €7,500, of which €3,000 is a mark-up on cost of goods sold.

(v) Patents are to be written off over a 5 year period commencing in 2018.

(vi) The company has figured assets as a related figure for debenture interest received €460 entered only in the creditors account.

(vii) The company revalued land and buildings at €975,000 on 01/01/2018. The land element of this value is €150,000; the revaluation has not yet to be included in the accounts. Buildings are to be depreciated at the rate of 2% off cost per annum.

(viii) However, a bank statement dated 31/12/2018 has shown an overdraft of €628,620. A cheque drawn on the bank account to cover €20,000 in respect of taxes was not processed.

(ix) The Directors recommend that:
1. Provision should be made for both investment income due and debenture interest.
2. Provision for bad debts to be adjusted to 40% of debtors.
3. Directors accounts amounting to €860 had not been recorded in the accounts.
4. A payment for fees of €2,500 issued to a director had not been presented for payment.

(x) The Directors recommend that:
1. Provision should be made for both investment income due and debenture interest.
2. Provision for bad debts to be adjusted to 40% of debtors.
3. Directors accounts amounting to €860 had not been recorded in the accounts.
4. A payment for fees of €2,500 issued to a director had not been presented for payment.

Required:
(a) Prepare a trading and profit and loss account for the year ended 31/12/2018.
(b) Prepare a balance sheet as at 31/12/2018.

Linken Ltd has an authorised capital of €1,200,000 divided into 700,000 ordinary shares at €1 each and 500,000 5% preference shares at €1 each - Leaving Cert Accounting - Question 1 - 2019

Worked Solution & Example Answer:Linken Ltd has an authorised capital of €1,200,000 divided into 700,000 ordinary shares at €1 each and 500,000 5% preference shares at €1 each - Leaving Cert Accounting - Question 1 - 2019

Prepare a trading and profit and loss account for the year ended 31/12/2018.

Sales Calculation

Gross Profit Calculation

Expenses Calculation

Other Expenses

Net Profit Calculation

Summary

Prepare a balance sheet as at 31/12/2018.

Assets

Liabilities

Long-term Liabilities

Shareholders Equity

Final Balance Sheet

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