Polymer is a limited liability company with the following trial balance as at 31 October 2018. Dr                    Cr $000                $000  Distribution costs                                                       250 Administrative expenses                                             126 Salaries                                                                        1,180 Discounts received                                                                              88 Sales                                                                                                    9,427 Property expenses                                                       290 Returns inward                                                           166 Cash                                                                            27 Insurance                                                                     130 Purchases                                                                    6,248 Inventory at 1 November 2017                                   610 Bank                                                                                                    311  Loan note interest                                                      58 Share premium account                                                                       350 Retained earnings at 1 November 2017                                              875  Allowance for receivables at 1 November 2017                                70 Trade payables                                                                                    507 Trade receivables                                                        1,700 7% Loan notes                                                                                                822 Receivables expense                                                   260 $1 Ordinary shares                                                                              2,850 Dividends paid: Final for year ended 31 October 2017                        200 Land at cost                                                                1,295 Buildings at cost                                                         2,640 Motor vehicles at cost                                                 420 Furniture and equipment at cost                                 800 Accumulated depreciation at 1 November 2017 Buildings                                                                                 625 Motor vehicles                                                                        140 Furniture and equipment                                                         335  –––––––         _______ 16,400             16,400         Further information relating to Polymer: The insurance includes $10,000 which relates to November 2018. Buildings are depreciated at 5% of cost. Building depreciation during the year is allocated 50% to distribution costs and 50% to administrative expenses. At 31 October 2018 the buildings were professionally valued at $3,150,000 and the directors wish this valuation to be incorporated into the accounts. Depreciation is to be charged as follows: Motor vehicles at 25% of written down value, allocated to distribution costs Furniture and equipment at 20% of cost, allocated to administrative expenses. Inventory at 31 October 2018 was valued at $480,000 based on its original cost. Based on past experience the allowance for receivables is to be increased to 5% of trade receivables and allocated to administrative expenses. There are salaries outstanding of $60,000 for the year ended 31 October 2018. The items listed below should be apportioned as indicated: Cost of      Distribution    Administrative Sales          Costs               Expenses Property expenses 20%     30%                 50% Insurance 20%     40%                 40% Salaries 25%     35%                 40% Discounts received 100% Tax of $120,000 is to be provided for the year.   You are required to Identify the sources of finance for Polymer Ltd and evaluate the potential impact of each on the financial structure of the company.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Polymer is a limited liability company with the following trial balance as at 31 October 2018.

Dr                    Cr

$000                $000

 Distribution costs                                                       250

Administrative expenses                                             126

Salaries                                                                        1,180

Discounts received                                                                              88

Sales                                                                                                    9,427

Property expenses                                                       290

Returns inward                                                           166

Cash                                                                            27

Insurance                                                                     130

Purchases                                                                    6,248

Inventory at 1 November 2017                                   610

Bank                                                                                                    311

 Loan note interest                                                      58

Share premium account                                                                       350

Retained earnings at 1 November 2017                                              875

 Allowance for receivables at 1 November 2017                                70

Trade payables                                                                                    507

Trade receivables                                                        1,700

7% Loan notes                                                                                                822

Receivables expense                                                   260

$1 Ordinary shares                                                                              2,850

Dividends paid:

Final for year ended 31 October 2017                        200

Land at cost                                                                1,295

Buildings at cost                                                         2,640

Motor vehicles at cost                                                 420

Furniture and equipment at cost                                 800

Accumulated depreciation at 1 November 2017

Buildings                                                                                 625

Motor vehicles                                                                        140

Furniture and equipment                                                         335

 –––––––         _______

16,400             16,400

 

 

 

 

Further information relating to Polymer:

  • The insurance includes $10,000 which relates to November 2018.
  • Buildings are depreciated at 5% of cost. Building depreciation during the year is allocated 50% to distribution costs and 50% to administrative expenses.
  • At 31 October 2018 the buildings were professionally valued at $3,150,000 and the directors wish this valuation to be incorporated into the accounts.
  • Depreciation is to be charged as follows:
  1. Motor vehicles at 25% of written down value, allocated to distribution costs
  2. Furniture and equipment at 20% of cost, allocated to administrative expenses.
  • Inventory at 31 October 2018 was valued at $480,000 based on its original cost.
  • Based on past experience the allowance for receivables is to be increased to 5% of trade receivables and allocated to administrative expenses.
  • There are salaries outstanding of $60,000 for the year ended 31 October 2018.
  • The items listed below should be apportioned as indicated:

Cost of      Distribution    Administrative

Sales          Costs               Expenses

  1. Property expenses 20%     30%                 50%
  2. Insurance 20%     40%                 40%
  3. Salaries 25%     35%                 40%
  4. Discounts received 100%
  • Tax of $120,000 is to be provided for the year.

 

You are required to

Identify the sources of finance for Polymer Ltd and evaluate the potential impact of each on the financial structure of the company.                  

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