Question 1
Petronella Ltd
Trial balance on 31 December 2022
The following additional information is pertinent but not reflected in the trial balance:
Closing inventory as of 31 December 2022 is £2,250,000. Irrecoverable receivables to be written off amount to £92,000. The allowance for receivables is to be set at 5% of net receivables at the financial year’s end. Petronella Ltd’s depreciation policy is as follows: Equipment is to be depreciated at 10% on a straight-line basis. Vehicles are to be depreciated at 25% on a reducing balance basis. No depreciation has been charged for the year ended 31 December 2022. In October 2022, Petronella Ltd paid £60,000 of rent for the three-month period from 1 November 2022 until 31 January 2023. This amount is included in the figure for administrative expenses shown in the trial balance. The audit fee relating to the year ended 31 December 2022 is estimated to be £72,900. This has not been paid as of 31 December 2022. Irrecoverable receivables, depreciation on office equipment, marketing expenses, and audit fee are to be allocated to administrative expenses. Depreciation on vehicles is to be recorded under distribution costs. The 8% bank loan is repayable in ten years’ time. Interest is paid once per year and has not been paid as of 31 December 2022. The corporation tax rate for the year ended 31 December 2022 is 30%.
Question 2
The financial statements for Petal Ltd are provided below.
Petal Ltd
The following details are relevant:
During the year, plant and equipment were sold. The equipment had originally cost £12,000, and the accumulated depreciation on the date of disposal was £5,000. The proceeds were £15,000. The depreciation charge for the year amounts to £51,000. Investment income pertains solely to interest.