Unformatted text preview: Financial accounting for decision makers (5th edition) Atrill and McLaney Exercise Chapter 3 Lee Co mpany, a retail business, has been trading for some time. The balance sheet at 31 December 2007 was as fo llows: Balance sheet as at 31 December 2007 £ Noncurrent assets Property, plant and equipment Premises Plant cost 50,000 depreciat ion (8,000) Current assets Inventories Trade receivables Cash at bank £ Capital Balance at 31 December 2006 102,000 76,000 42,000 Noncurrent liabilities Borrowings fro m Commercial Loan Company Current liabilities Trade payables 173,000 23,000 21,000 11,000 45,000 26,000 173,000 During the year to 31 December 2008 (the fo llowing year) of the business, the fo llo wing total transact ions took place: a An addit ional item o f plant was bought for £10,000, which was paid immediately. b The owners of the business wit hdrew £11,000 in cash and inventories that had cost £8,000. These were for the owners’ personal use. c Sales revenue of £137,000 was made. The inventories sold cost £63,000. £42,000 of this sales revenue was for cash (immediate settlement) and the remainder was made on credit. d Inventories costing £59,000 were bought, all on credit. e Cash totalling £97,000 was received fro m trade receivables. f A credit customer who owed £2,000 went bankrupt and it was clear at the end of the year that no cash would ever be forthcoming fro m this customer. g Trade payables were paid £61,000. h Electricit y bills for the first nine months o f the year were paid totalling £3,000. At the end of the year, the bill for the last three months of the year (£1,000) remained unpaid. i Wages totalling £12,000 was paid.* j Interest of £4,000 was paid on the borrowings from the Co mmercial Loan Company.* k General expenses of £11,000 were paid.* Financial accounting for decision makers (5th edition) Atrill and McLaney Exercise * These three payments represented the full expense for the year (that is, there were no accruals and prepayments). You are told that the business wishes to depreciate all plant owned at the end of the year by 10% of its cost value. Required: Open a balance sheet for the business and enter the balances from the 31 December 2007 balance sheet. Also open an income statement. Show each of the transactions on the two statements as a series of pluses and minuses and transfer the profit or loss to the balance sheet to reach the posit ion of the business as at 31 December 2008. ...
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This note was uploaded on 11/29/2009 for the course ACCOUNTING 2 taught by Professor Reynolds during the Spring '08 term at Open Uni..
- Spring '08