22 Howard Plc has produced the following account balances at

22. Howard Plc has produced the following account balances at 31 December 2016 E\'000 27,505 2,458 150 175 200 3,283 19,254 800 800 50 7,210 4,320 20,800 6,000 5,000 3,408 3,210 2,653 5,000 Revenue Selling and distribution expenses Provision for doubtful debts Interim preference dividend Debenture interest Administrative expenses Purchases Bank overdraft Inventory at 1 January 2016 Cash Motor vehicles (cost) Accumulated depreciation on motor vehicles Land (cost) Ordinary shares of £1 each 8% Debentures 2020 Trade receivables Trade payables Retained profits Preference shares of £1 each Share premium account 3,000 Additional information: 1. 2. 3. Inventory at 31 December 2016 is valued at £950,000. The land were revalued on 31 December 2016 at £25 million. The motor vehicles are to be depreciated at 10% per annum using the reducing balance method. The company has a policy of not depreciating the land.

Solution

Statement of Profit & Loss for the year ending 31st Dec 2016

Particulars

Debit Amt

£\'000

Particulars

Credit Amt

£\'000

To Administration Exp. 3283

Less: Prepaid Insurance 60*1/3

* Provision for doubtful debts required = 3408( Closing trade receivables)- 8(Bankrupt)= 3400*5%=£170(\'000)

Already existing balance=£150(\'000)

Thus, provision to be made= £20(\'000)

Statement of Financial Position as on 31/12/2016 (Extract)

Particulars	Debit Amt £\'000	Particulars	Credit Amt £\'000
To opening stock	800	By Revenue	27505
To Ppurchases	19254	By closing stock	950
To Gross Profit	8401
To debenture intt+ outstanding on 31dec (8%*5000*1/2)	400	By Gross Profit	8401
To Administration Exp. 3283 Less: Prepaid Insurance 60*1/3	3263	By Revaluation on land(2500-20800)	4200
To selling & Distribution exp	2458
To provision for doubtful debts *	20
To interim preference dividend	175
To depreciation on motor vehicles (7210-4320)*10%	289
To Preference Dividend	175
To ordinary dividend	600
To retained profit carried to balance sheet	5221
	12601		12601