FA – Nov 2015 – L1 – SB – Q1 – Financial Statements Preparation

Prepare financial statements for a company, including income and balance sheet, with adjustments for accruals and depreciation.

Question

The following balances remained in the books of Lagbaja Plc at December 31, 2014 after determining the gross profit:

Item	N’000
Share capital, authorised and issued	200,000
Cash at bank and in hand	500
Inventory at December 31, 2014	61,200
Trade receivables	18,005
Trade payables	15,009
Gross profit at December 31, 2014	128,942
Retained earnings	25,000
Salaries & Wages	28,430
Prepayments	600
Bad debts	500
Accrued expenses	526
Director’s account (credit)	2,500
Finance cost on loan note	600
Sundry expenses	4,100
Rates & insurance	1,520
6% Loan notes	20,000
Lighting & cooling	1,310
Postage, telephone and telegrams	800
Motor vehicle (cost N25 million)	15,000
Office fittings and equipment	42,350
Profit at January 1, 2014	22,300
Land and buildings at cost	239,362

The following additional information is relevant:

Office fittings and equipment are to be depreciated at 15% of cost, and Motor vehicles at 20% of cost.
Provisions are to be made for:
- Directors’ Fees N6,000,000
- Audit Fees N2,500,000
The amount of insurance includes a premium of N600,000 paid in September 2014 to cover the company against fire for the period September 1, 2014, to August 31, 2015.
A bill for N548,000 in respect of electricity consumed up to December 31, 2014, has not been posted to the ledger.

Required: a. Prepare the Statement of profit or loss for the year ended December 31, 2014; (10 Marks)
b. Prepare the Statement of financial position as at December 31, 2014. (10 Marks)

Answer