The accountant of Scampion plc, a retailing company listed on the London Stock Exchange, has produced the following draft financial statements for the company for the year to 31 May 20X7.
Purchases of fixed assets during the year were freehold land and buildings £50,000, fixtures, fittings and equipment £40,000, motor vehicles £20,000. The only fixed asset disposal during the year is referred to in note (x). Depreciation charged during the year was £5,000 for freehold buildings, £18,000 for fixtures, fittings and equipment and £28,000 for motor vehicles. Straight-line depreciation method is used assuming the following lives: Freehold buildings 40 years, fixtures, fittings and equipment 10 years and motor vehicles 5 years.
(ii) A dividend of 10 pence per share is proposed.
(iii) A valuation by Bloggs & Co Surveyors shows the freehold land and buildings to have a market value of £1,350,000.
(iv) Loans are: £20,000 bank loan with a variable rate of interest repayable by 30 September 20X2; £50,000 12 per cent debenture repayable 20X6; £100,000 11 per cent debenture repaid during the year. There were no other loans during the year.
(v) The income from investments is derived from fixed asset investments (shares in related companies) £5,000 and current asset investment (government securities) £10,000.
(vi) At the balance sheet date the shares in related companies (cost £64,000) are valued by the directors at £60,000. The market value of the government securities is £115,000 (cost £103,000).
(vii) After the balance sheet date but before the financial statements are finalised there is a very substantial fall in share and security prices. The market value of the government securities had fallen to £50,000 by the time the directors signed the accounts. No adjustment has been made for this item in the accounts.
(viii) Within two weeks of the balance sheet date a notice of liquidation was received by Scampion plc concerning one of the company’s debtors. £45,000 is included in the balance sheet for this
debtor and enquiries reveal that nothing is likely to be paid to any unsecured creditor. No adjustment has been made for this item in the accounts.
(ix) The corporation tax charge is based on the accounts for the year and there are no other amounts of tax owing by the company.
(x) Reserves at 31 May 20X1 were: £
The revaluation reserve represents the after-tax surplus on a property which was valued in last year’s balance sheet at £400,000 and sold during the current year at book value. Required: A profit and loss account for the year to 31 May 20X2 and a balance sheet at that date for Scampion plc complying with the Companies Acts in so far as the information given will allow. Ignore advance corporation tax. (Association of Chartered Certified Accountants)
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