Denim Ltd started trading on 1 May 2020. The trial balance at 30 April 2021 is as follows: £000 £000 £1 Ordinary shares Share premium Bank Trade payables Trade receivables Plant and equipment at cost Administrative expenses Wages Purchases Sales 50 10 12 20 55 2 14 30 102 102 The following information was obtained after the trial balance had been prepared: Inventory at 30 April 2021 is valued at £2,000. Plant and equipment is to be depreciated 10% straight line with a zero residual value. At 30 April 2021, Denim Ltd owed £3,000 for wages, and administrative expenses had prepaid by £1,000. Bad debts of £1,000 are to be written off. A long-term bank loan of £5,000 was taken out on 30 April 2021. (ii) (iv) (v) Prepare Denim Ltd.'s Statement of Financial Position as at 30 April 2021.
Denim Ltd started trading on 1 May 2020. The trial balance at 30 April 2021 is as follows: £000 £000 £1 Ordinary shares Share premium Bank Trade payables Trade receivables Plant and equipment at cost Administrative expenses Wages Purchases Sales 50 10 12 20 55 2 14 30 102 102 The following information was obtained after the trial balance had been prepared: Inventory at 30 April 2021 is valued at £2,000. Plant and equipment is to be depreciated 10% straight line with a zero residual value. At 30 April 2021, Denim Ltd owed £3,000 for wages, and administrative expenses had prepaid by £1,000. Bad debts of £1,000 are to be written off. A long-term bank loan of £5,000 was taken out on 30 April 2021. (ii) (iv) (v) Prepare Denim Ltd.'s Statement of Financial Position as at 30 April 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Denim Ltd started trading on 1 May 2020. The trial balance at 30 April 2021 is as follows:
£000
£000
| £1 Ordinary shares
Share premium
Bank
Trade payables
Trade receivables
Plant and equipment at cost
Administrative expenses
Wages
Purchases
Sales
50
10
5
12
20
55
6.
14
30
102
102
The following information was obtained after the trial balance had been prepared:
(i)
(ii)
(ii)
Inventory at 30 April 2021 is valued at £2,000.
Plant and equipment is to be depreciated 10% straight line with a zero residual value.
At 30 April 2021, Denim Ltd owed £3,000 for wages, and administrative expenses had been
prepaid by £1,000.
Bad debts of £1,000 are to be written off.
A long-term bank loan of £5,000 was taken out on 30 April 2021.
(iv)
(v)
Prepare Denim Ltd.'s Statement of Financial Position as at 30 April 2021.
Expert Solution
Step 1
1. Depreciation on Plant and Equipment
Book Value = 55,000
Depreciation Expense = 55,000 x 10% = 5,500
Book Value = 55,000 -5,500 = 49,500
2. Cost of Goods Sold = Opening Stock +Purchases Made - Closing Stock
Cost of Goods Sold = 0+ 14,000 - 2,000 = 12,000
3. Wages Expense : 6,000 + 3000 =9,000
4. Administrative Expense Prepaid(Current Assets) : 1,000
5. Bad Debts Written off: 1,000
6. Bank Balance =opening Balance + Bank Loan - Prepaid Expense Paid in cash
5,000 + 5,000 - 1,000 = 9,000
8. Wages Payable: 3000
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