Olive Ltd started trading on 1 January 2020. The trial balance at 31 December 2020 is as follows:The following information was obtained after the trial balance had been prepared:(i) Inventory at 31 December 2020 is valued at £310,000 cost. However poor sales demand means that this inventory will have to be sold for £300,000.(ii) Furniture is to be depreciated at a rate of 15% straight line.(iii) At 31 December 2020, Olive Ltd owed £5,000 for telephone expenses, and insurance had been prepaid by £2,000.(iv) Bad debts of £20,000 are to be written off.a)Prepare Olive Ltd’s Income Statement for the year ending 31 December 2020.b)Prepare Olive Ltd’s Statement of Financial Position as at 31 December 2020. £000£000£1 Ordinary sharesShare premium500100Bank40Trade payables550Trade receivables540Furniture at cost800General expenses1,400Insurance200Purchases2,100Sales4,000Telephone expenses1505,1905,190

Financial statement is prepared from the trial balance which include :- Profit and loss and other…

Answered: Olive Ltd started trading on 1 January…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Olive Ltd started trading on 1 January 2020. The trial balance at 31 December 2020 is as follows:

The following information was obtained after the trial balance had been prepared:

(i) Inventory at 31 December 2020 is valued at £310,000 cost. However poor sales demand means that this inventory will have to be sold for £300,000.
(ii) Furniture is to be depreciated at a rate of 15% straight line.
(iii) At 31 December 2020, Olive Ltd owed £5,000 for telephone expenses, and insurance had been prepaid by £2,000.
(iv) Bad debts of £20,000 are to be written off.

a)Prepare Olive Ltd’s Income Statement for the year ending 31 December 2020.
b)Prepare Olive Ltd’s Statement of Financial Position as at 31 December 2020.

£000
£000
£1 Ordinary shares
Share premium
500
100
Bank
40
Trade payables
550
Trade receivables
540
Furniture at cost
800
General expenses
1,400
Insurance
200
Purchases
2,100
Sales
4,000
Telephone expenses
150
5,190
5,190

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