Selling price The following adjustments have yet to be accounted for: 1. The company's depreciation policy is as follows: a. Buildings 10% reducing balance method b. Plant and equipment straight line over 10 years The cost of the land was £125,000, and all non-current assets are assumed to have zero residual values. There were no additions to or disposals of non-current assets during the year ended 30 September 2018. Depreciation on buildings is charged to administrative expenses, and depreciation on plant and equipment is charged to cost of sales. 2. Dannz plc's annual insurance premium for plant and equipment is £15,000 for the year ended 30 September 2018. Dannz plc paid £6,000 in respect of this on 30 June 2018. This payment is included in administrative expenses. 3. The following details pertain to the two types of inventories of Dannz plc as at 31 December 2018 are as follows: Item Total cost REGULAR 21,000 18,000 SPECIAL 41,000 58,000 QUESTION 2: Dannz plc The following trial balance was extracted from the nominal ledger of Dannz plc on 30 September 2018: Land and buildings cost Plant and equipment cost Land and buildings accumulated depreciation at 1 October 2017 Plant and equipment accumulated depreciation at 1 October 2017 Inventories at 1 October 2017 Trade receivables Allowance for receivables Bank Equity share capital (£1 shares) £ 1,125,000 £ 258,780 166,500 92,475 50,400 74,400 Required: 6,480 11,475 (i) Prepare the Statement of Profit or Loss of Dannz plc for the year ended 30 September 2018. (12 marks) 337,500 Share premium 67,500 (ii) Prepare the Statement of Financial Position of Dannz plc as at 30 September 2018 4. At the year end, trade receivables include a balance of £6,400 which is considered irrecoverable. Another customer, who owes Dannz plc £9,000 has been uncontactable for the past 6 months, and management wish to provide a 50% allowance in respect to this particular customer. The company presents irrecoverable debts as other operating expenses on the face of the statement of profit or loss. 5. Dannz plc paid rent of £40,000 on 01 October 2017 which covers the period 1 October 2017 to 31 January 2018. This amount has been included in distribution costs. 6. The bank loan was received on 1 November 2017 and is repayable in full in five years. Interest is charged at a fixed rate of 10% per annum. 7. Dannz plc products come with a 6 months warranty. Management estimates that 15% of warranties will be invoked, at a cost of £32,000 to Dannz plc. Provisions are charged to other operating expenses. 8. During the year, the company offered a 2 for 12 bonus issue to shareholders, from share premium. 9. Income tax for the year ended 30 September 2018 is estimated at £54,600. Bank loan Irrecoverable debts Loan interest paid Retained earnings Accounts payable Advance deposits from customers Sales Purchases Distribution costs Administrative expenses 73,800 (18 marks) 72,000 43,000 4,500 1,899,000 765,000 279,000 194,400 16,550 1,200 Equity dividends paid 9.500 2,774,230 2,774,230

Selling price The following adjustments have yet to be accounted for: 1. The company's depreciation policy is as follows: a. Buildings 10% reducing balance method b. Plant and equipment straight line over 10 years The cost of the land was £125,000, and all non-current assets are assumed to have zero residual values. There were no additions to or disposals of non-current assets during the year ended 30 September 2018. Depreciation on buildings is charged to administrative expenses, and depreciation on plant and equipment is charged to cost of sales. 2. Dannz plc's annual insurance premium for plant and equipment is £15,000 for the year ended 30 September 2018. Dannz plc paid £6,000 in respect of this on 30 June 2018. This payment is included in administrative expenses. 3. The following details pertain to the two types of inventories of Dannz plc as at 31 December 2018 are as follows: Item Total cost REGULAR 21,000 18,000 SPECIAL 41,000 58,000 QUESTION 2: Dannz plc The following trial balance was extracted from the nominal ledger of Dannz plc on 30 September 2018: Land and buildings cost Plant and equipment cost Land and buildings accumulated depreciation at 1 October 2017 Plant and equipment accumulated depreciation at 1 October 2017 Inventories at 1 October 2017 Trade receivables Allowance for receivables Bank Equity share capital (£1 shares) £ 1,125,000 £ 258,780 166,500 92,475 50,400 74,400 Required: 6,480 11,475 (i) Prepare the Statement of Profit or Loss of Dannz plc for the year ended 30 September 2018. (12 marks) 337,500 Share premium 67,500 (ii) Prepare the Statement of Financial Position of Dannz plc as at 30 September 2018 4. At the year end, trade receivables include a balance of £6,400 which is considered irrecoverable. Another customer, who owes Dannz plc £9,000 has been uncontactable for the past 6 months, and management wish to provide a 50% allowance in respect to this particular customer. The company presents irrecoverable debts as other operating expenses on the face of the statement of profit or loss. 5. Dannz plc paid rent of £40,000 on 01 October 2017 which covers the period 1 October 2017 to 31 January 2018. This amount has been included in distribution costs. 6. The bank loan was received on 1 November 2017 and is repayable in full in five years. Interest is charged at a fixed rate of 10% per annum. 7. Dannz plc products come with a 6 months warranty. Management estimates that 15% of warranties will be invoked, at a cost of £32,000 to Dannz plc. Provisions are charged to other operating expenses. 8. During the year, the company offered a 2 for 12 bonus issue to shareholders, from share premium. 9. Income tax for the year ended 30 September 2018 is estimated at £54,600. Bank loan Irrecoverable debts Loan interest paid Retained earnings Accounts payable Advance deposits from customers Sales Purchases Distribution costs Administrative expenses 73,800 (18 marks) 72,000 43,000 4,500 1,899,000 765,000 279,000 194,400 16,550 1,200 Equity dividends paid 9.500 2,774,230 2,774,230

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles

Section: Chapter Questions

Problem 8.5E: Change in Estimate Assume that Bloomer Company purchased a new machine on January 1, 2016, for...

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