FA – May 2014 – L1 – SB – Q5 – Preparation of Financial Statements

Preparation of profit and loss statement and statement of financial position for Gowell Limited.

Question

The following balances were extracted from the books of Gowell Limited as at 31 December 2012 after the preparation of the Trading account:

Item	N’000
Share capital: Authorised, issued, and fully paid: 300 million ordinary shares of N1 each	300,000
Cash at bank and in hand	750
Inventories as at 31 December 2012	91,800
Trade receivables	28,657
Trade payables	22,513
Gross profit from trading account	193,413
Revenue reserve as at 1/1/2012	50,000
Salaries and wages	42,645
Prepayments	900
Bad debts	750
Accrued expenses	789
Directors’ current account	3,750
Finance cost	900
Rents and insurance	2,280
Sundry expenses	6,150
6% Loan notes	30,000
Electricity	1,965
Postages and telephones	1,200
Motor vehicle (cost N37.5 million)	22,500
Office fittings and equipment (cost N98.25 million)	63,525
Retained earnings as at 1 January 2012	33,450
Land and buildings	369,893

Additional Information:
(i) Office fittings and equipment to be depreciated at 15% per annum on cost and motor vehicles at 20% on cost.
(ii) Provisions are to be made for:

Directors’ fees N12,000,000
Audit fees N5,000,000
(iii) N822,000 in respect of electricity consumed up to 31 December 2012 has not been posted to the ledger.
(iv) The Directors have recommended that N30,000,000 be transferred to revenue reserves.

You are required to prepare:
a. The Statements of Profit and Loss of Gowell Limited for the year ended 31 December 2012.
b. The statement of financial position as at 31 December 2012.

Answer