Workshop Question 1: Chapter 12 SOPL and SoFP - Ambi plc QUESTION 1: Ambi plc The following trial balance was extracted from the nominal ledger of Ambi plc on 31 December 2023: Sales Inventories at 1 January 2023 Purchases Distribution costs Administrative expenses Irrecoverable debts £ £ 2,110,000 56,000 850,000 310,000 216,000 18,500 Loan interest paid 4,000 Land and buildings cost 1,250,000 Plant and equipment cost 287,500 Land and buildings accumulated depreciation at 1 January 2023 185,000 Plant and equipment accumulated depreciation at 1 January 2023 102,750 72,000 12,750 375,000 75,000 80,000 82,000 15,000 48,000 8,500 3,079,000 3,079,000 Bank Trade receivables Equity share capital (£1 shares) Share premium Bank loan Retained earnings Equity dividends paid Accounts payable Advance deposits from customers The following adjustments have yet to be accounted for: 1. The company's depreciation policy is as follows: a. Buildings Straight-line over 30 years b. Plant and equipment 10% reducing balance method • The cost of the land was £100,000, and all non-current assets are assumed to have zero residual values. Workshop Question 1: Chapter 12 SOPL and SoFP - Ambi plc 2. During the year, the company offered a 1 for 5 bonus issue to shareholders, from share premium. 3. The bank loan was received on 1 January 2023 and is repayable in full in five years. Interest is charged at a fixed rate of 10% per annum. 4. Inventories held at 31 December 2023 are valued at £118,500 5. Ambi plc paid rent of £60,000 on 01 April 2023 which covers the period 1 April 2023 to 31 March 2024. This amount has been included in distribution costs. 6. The bank reconciliation performed at 31 December 2023 revealed that a check for £75,000 issued by Ambi plc to one of its suppliers was accounted or recorded by Ambi plc as £57,000. 7. At the year end, trade receivables include a balance of £18,000 which is considered irrecoverable. Another customer, who owes Ambi plc £16,000 has been uncontactable for the past 6 months, and management believe that an allowance should be set up in respect to this particular customer as there is uncertainty around the customer's ability to pay. The company presents irrecoverable debts as other operating expenses on the face of the statement of profit or loss. 8. Ambi plc's annual insurance premium for plant and equipment is £12,000 for the year ended 31 December 2023. Ambi paid £6,000 in respect of this on 30 June 2023. This payment is included in administrative expenses. 9. Ambi plc products come with a 4 month warranty. Management estimates that 5% of warranties will be invoked, at a cost of £25,000 to Ambi plc. Provisions are charged to other operating expenses. 10. Income tax for the year ended 31 December 2023 is estimated at £78,000. Required: (i) • There were no additions to or disposals of non-current assets during the year ended 31 December 2023. (ii) Prepare the statement of profit or loss of Ambi plc for the year ended 31 December 2023 Prepare the statement of financial position of Ambi plc as at 31 December 2023 • Depreciation on buildings is charged to administrative expenses, and depreciation on plant and equipment is charged to cost of sales.

Workshop Question 1: Chapter 12 SOPL and SoFP - Ambi plc QUESTION 1: Ambi plc The following trial balance was extracted from the nominal ledger of Ambi plc on 31 December 2023: Sales Inventories at 1 January 2023 Purchases Distribution costs Administrative expenses Irrecoverable debts £ £ 2,110,000 56,000 850,000 310,000 216,000 18,500 Loan interest paid 4,000 Land and buildings cost 1,250,000 Plant and equipment cost 287,500 Land and buildings accumulated depreciation at 1 January 2023 185,000 Plant and equipment accumulated depreciation at 1 January 2023 102,750 72,000 12,750 375,000 75,000 80,000 82,000 15,000 48,000 8,500 3,079,000 3,079,000 Bank Trade receivables Equity share capital (£1 shares) Share premium Bank loan Retained earnings Equity dividends paid Accounts payable Advance deposits from customers The following adjustments have yet to be accounted for: 1. The company's depreciation policy is as follows: a. Buildings Straight-line over 30 years b. Plant and equipment 10% reducing balance method • The cost of the land was £100,000, and all non-current assets are assumed to have zero residual values. Workshop Question 1: Chapter 12 SOPL and SoFP - Ambi plc 2. During the year, the company offered a 1 for 5 bonus issue to shareholders, from share premium. 3. The bank loan was received on 1 January 2023 and is repayable in full in five years. Interest is charged at a fixed rate of 10% per annum. 4. Inventories held at 31 December 2023 are valued at £118,500 5. Ambi plc paid rent of £60,000 on 01 April 2023 which covers the period 1 April 2023 to 31 March 2024. This amount has been included in distribution costs. 6. The bank reconciliation performed at 31 December 2023 revealed that a check for £75,000 issued by Ambi plc to one of its suppliers was accounted or recorded by Ambi plc as £57,000. 7. At the year end, trade receivables include a balance of £18,000 which is considered irrecoverable. Another customer, who owes Ambi plc £16,000 has been uncontactable for the past 6 months, and management believe that an allowance should be set up in respect to this particular customer as there is uncertainty around the customer's ability to pay. The company presents irrecoverable debts as other operating expenses on the face of the statement of profit or loss. 8. Ambi plc's annual insurance premium for plant and equipment is £12,000 for the year ended 31 December 2023. Ambi paid £6,000 in respect of this on 30 June 2023. This payment is included in administrative expenses. 9. Ambi plc products come with a 4 month warranty. Management estimates that 5% of warranties will be invoked, at a cost of £25,000 to Ambi plc. Provisions are charged to other operating expenses. 10. Income tax for the year ended 31 December 2023 is estimated at £78,000. Required: (i) • There were no additions to or disposals of non-current assets during the year ended 31 December 2023. (ii) Prepare the statement of profit or loss of Ambi plc for the year ended 31 December 2023 Prepare the statement of financial position of Ambi plc as at 31 December 2023 • Depreciation on buildings is charged to administrative expenses, and depreciation on plant and equipment is charged to cost of sales.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter6: Receivables And Inventories

Section: Chapter Questions

Problem 6.2MBA: Allowance method Using transactions listed in £6-S. indicate the effects of each transaction on the...

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