The Ferryman Limited prepared the following trial balance as at 31st December 20

Question

The Ferryman Limited prepared the following trial balance as at 31st December 2016 Debit Credit Sales Purchases Inventory 1st January 2016 Administration expenses Selling expenses Financial expenses Trade receivables Cash at bank Trade pavables Share Capital (ordinary shares of 1 each) Share premium account Machinery at cost Accumulated Depreciation -machinery Motor Vehicles at cost Accumulated Depreciation-Motor Vehicles Interim dividend paid Retained Earnings 590,000 281,500 67,000 62,250 12,100 10,900 24,200 130,300 125,500 160,000 30,000 275,000 200,000 6,750 55,000 80,000 29,500 1070,000 1070,000 The following additional information is also provided: 1) Inventory at 31st December 2016 was 74,000 2) Bad Debt of 10,300 to be written off 3) A bad debts provision of 2% of trade receivables is to be provided 4) Selling expenses to be prepaid in the amount of 3,000 5) Administration expenses in the amount of 8,000 to be accrued 6) Corporation tax to be provided for the year is 7,950

Explanation / Answer

A) INCOME STATEMENT FOR THE YEAR ENDED 31-12-2016 PARTICULARS AMOUNT AMOUNT PARTICULARS AMOUNT AMOUNT TO OPENING STOCK 67000 BY SALES 590000 TO PURCHASES 281500 BY CLOSING INVENTORY 74000 TO ADMINISTRATION EXPENSES:        ADMINISTRATIVE EXP 62250    ADD: ACCURED EXP 8000 70250 TO SELLING EXPENSES:          SELLING EXP:        24200          LESS: PREPAID EXP 3000 21200 TO FINANCIAL EXPENSES 12100 TO BAD DEBTS 10300 TO PROVISION FOR BAD DEBTS 130300*2/100 2606 TO DEPRECIATION:         MACHINERY   275000*10% 27500         MOTOR VECHICLES (200000-80000)*20% 24000 51500 TO TAX PAYABLE 7950 TO INTERIM DIVIDEND PAID 6750 TO NET PROFIT C/F TO BALANCE SHEET 132844 664000 664000 B) BALANCE SHEET AS AT 31-12-2016 LIABILITIES AMOUNT ASSETS AMOUNT SHARE CAPITAL 160000 MACHINERY 275000 SHARE PREMIUM 30000 MOTOR VECHICLES 200000 RETAIN EARNINGS 29500 INVENTORY 74000 NET PROFIT FOR THE YEAR 132844 162344 PREPAID EXPENSES 3000 TRADE PAYABLES 125500 TRADE RECEIVABLES: ACCUMULATIVE DEP- MACHINERY: TRADE RECEIVABLES 130300 OPENING 55000 LESS: BAD DEBTS 10300 DEPRECIATION FOR THE YEAR 27500 82500 LESS: PROVISION FOR BAD DEBTS 2606 117394 ACCUMULATIVE DEP- MOTOR VEHICLES: CASH AT BANK 10900 OPENING 80000 DEPRECIATION FOR THE YEAR 24000 104000 ACCURED ADMINISTRATIVE EXPENSES 8000 TAX PAYABLE 7950 680294 680294 C) Orinary shares means equity shares . Equity share holders are the real owers of the company. These are having right enjoy the company earnings and these are responsible to bear the company losses Preference share are preference shares. These shares are having fixed return. Theses shares are have preference than equity when profit share or at the time disolution of the company.

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