Solutions to homework question
Please rework the solutions to M plc without looking at the answers (below). The solutions for L Ltd will be sent by Friday along with notes and questions on the new topic ‘ Investment decisions’
Homework question – M plc
Trial balance was from the books of M plc. for the y/e 31/12/2020:
£000 £000
Debenture interest paid 5
Inventory 50
Receivables & payables 80 40
Purchases & Sales 1035 1655
Rates & insurance 40
Communication expenses 20
Miscellaneous expenses 3
Lighting & heating 30
Audit fee 9
Bad debt 2
Directors remuneration 67
Interest on bank loan 4
Land & buildings at cost 500
Machinery at cost 200
Machinery – accumulated depreciation 50
Motor vehicles at cost 140
Motor vehicles – accumulated depreciation 20
Bank & cash 9
Wages & salaries 176
£1 Ordinary shares 220
6 % Long term bank loan 100
4 % Debentures (2030) 150
Retained profit 130
Interim dividends paid 40
Share premium 45
Totals 2410 2410
Notes at 31/12/ 2020:
Inventory was valued at £75,000.
Rates prepaid- £5,000.
Salaries owing £3000: audit fee accrued £2000; lighting & heating owing £1000.
Machinery to be depreciated by 20% on reducing balance basis.
Motor vehicles to be depreciated by 25 % on straight line
The directors wish to provide £45,000 for taxation.
The directors propose a dividend of 12p per share.
Required for M plc:
a) Income statement for the year ended 31/12/2020 [20 marks]
b) Statement of financial position as at 31/12/2020 [20 marks]
