1.5. Preparation of financial statements
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
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AB Limited is a wholesaler of household goods. The following information has been extracted from the books of account at 31 December 2018. $ 6% debenture (2023–25) 80 000 Administrative expenses 111 700 Buildings Cost 80 000 Provision for depreciation at 1 January 2018 28 800 Land at cost 65 000 Motor vehicles Cost 46 000 Provision for depreciation at 1 January 2018 9 200 Warehouse fixtures and fittings Cost 12 900 Provision for depreciation at 1 January 2018 8 900 Carriage inwards 1 200 Cash and cash equivalents (credit balance) 5 300 Distribution costs 184 800 Finance costs 2 200 Inventory at 1 January 2018 56 500 Ordinary share dividend paid 1 700 Purchases 310 600 Retained earnings 19 100 Returns inwards 8 300 Revenue 670 400 Share capital ordinary shares of $1 each 80 000 Share premium 35 000 Trade and other payables 36 600 Trade and other receivables 92 400 REQUIRED Prepare the income statement for the year ended 31 December 2018. AB Limited Income Statement for the year ended 31 December 2018 $ Revenue Cost of sales Gross profit for the year Administrative expenses Distribution costs Profit from operations Finance costs Profit for the year Workings: Prepare the statement of financial position at 31 December 2018. Use the space provided on the next page for your workings. AB Limited Statement of financial position at 31 December 2018 Workings: Additional information The directors of AB Limited wish to raise an additional $100 000 capital for expansion. They are considering either a rights issue of ordinary shares or an issue of a further debenture. REQUIRED Advise the directors which option they should choose. Give reasons for your answer. Identify two internal stakeholders with an interest in the financial statements of a limited company. Additional information The directors of AB Limited use ratio analysis to assess the performance of the business. REQUIRED Name two ratios that a business may use to assess: profitability liquidity.
9706_w19_qp_21
THEORY
2019
Paper 2, Variant 1
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