Bengal Limited manufactures fridges and freezers. The trial balance at 31 December 2021 was as follows: Dr £ Cr £ Revenue 3,564,300 Purchases 1,578,250 Inventory on 31/12/20 120,500 Production expenses 805,230 Administrative expenses 151,530 Distribution expenses 214,250 Wages 500,400 Loan interest 11,000 Equipment at cost 1,100,000 Motor vehicles at cost 256,000 Accumulated depreciation: Office equipment 31/12/20 Motor vehicles 31/12/20 320,000 90,400 Trade receivables 219,500 Allowance for irrecoverable debts 2,500 Discounts allowed/received 3,400 3,780 Trade payables 130,400 Bank 80,770 Share capital 500,000 Retained earnings 129,450 Bank loan (repayable 2030) 300,000 5,040,830 5,040,830 i) Bengal provides for depreciation on equipment at 20% on a reducing balance basis. This should be recorded in production expenses. ii) The motor vehicles were bought two years ago. The residual value is £30,000 and depreciation is charged at 20% on a straight-line basis. This should be recorded in distribution expenses. iii) Bengal has decided that the doubtful debt provision should be set at 2% of the value of the trade receivables at the year end. iv) Additional storage space relating for the year ended 31 December 2021 are estimated at £5,000. No bill has yet been received. Costs should be recorded in administration expenses (v) Inventory at 31 December 2021 is valued at £145,240 Required: 1. Prepare the journals to record the adjustments needed for items (i) to (v) above. 2. Prepare the Income Statement for the year ended 31 December 2021.
Bengal Limited manufactures fridges and freezers. The
|
Dr £ |
Cr £ |
|
|
Revenue |
3,564,300 |
|
|
Purchases |
1,578,250 |
|
|
Inventory on 31/12/20 |
120,500 |
|
|
Production expenses |
805,230 |
|
|
Administrative expenses |
151,530 |
|
|
Distribution expenses |
214,250 |
|
|
Wages |
500,400 |
|
|
Loan interest |
11,000 |
|
|
Equipment at cost |
1,100,000 |
|
|
Motor vehicles at cost |
256,000 |
|
|
|
320,000 90,400 |
|
|
Trade receivables |
219,500 |
|
|
Allowance for irrecoverable debts |
2,500 |
|
|
Discounts allowed/received |
3,400 |
3,780 |
|
Trade payables |
130,400 |
|
|
Bank |
80,770 |
|
|
Share capital |
500,000 |
|
|
|
129,450 |
|
|
Bank loan (repayable 2030) |
300,000 |
|
|
5,040,830 |
5,040,830 |
-
i) Bengal provides for depreciation on equipment at 20% on a reducing balance basis. This should be recorded in production expenses.
-
ii) The motor vehicles were bought two years ago. The residual value is £30,000 and depreciation is charged at 20% on a straight-line basis. This should be recorded in distribution expenses.
-
iii) Bengal has decided that the doubtful debt provision should be set at 2% of the value of the trade receivables at the year end.
-
iv) Additional storage space relating for the year ended 31 December 2021 are estimated at £5,000. No bill has yet been received. Costs should be recorded in administration expenses
(v) Inventory at 31 December 2021 is valued at £145,240
Required:
1. Prepare the journals to record the adjustments needed for items (i) to (v) above.
2. Prepare the Income Statement for the year ended 31 December 2021.
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