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The following trial balance was taken from the books of Cadden Ltd on 31/12/2021, the end of its financial year - Junior Cycle Business Studies - Question 17 - 2022
Question 17
The following trial balance was taken from the books of Cadden Ltd on 31/12/2021, the end of its financial year. The authorised share capital is 400,000 €1 ordinary ... show full transcript
Worked Solution & Example Answer:The following trial balance was taken from the books of Cadden Ltd on 31/12/2021, the end of its financial year - Junior Cycle Business Studies - Question 17 - 2022
Step 1
Complete the Income Statement for Cadden Ltd for the year ended 31/12/2021
Answer
To complete the Income Statement, first calculate the Cost of Sales. This is achieved by summing the beginning stock, cash purchases, and carriage inwards, then subtracting the ending stock:
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Calculate Cost of Sales:
- Beginning Stock: €6,000
- Cash Purchases: €165,000
- Carriage Inwards: €1,000
Total Cost of Sales = Beginning Stock + Cash Purchases + Carriage Inwards - Ending Stock
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Calculate Gross Profit:
- Gross Profit = Cash Sales - Cost of Sales
The completed Income Statement will include:
| Income Statement for Cadden Ltd for the year ended 31/12/2021 | | Cash Sales | €270,000 | | Less Cost of Sales | €167,000 | | Gross Profit | €103,000 |
Step 2
Complete the Statement of Financial Position of Cadden Ltd as at 31/12/2021
Answer
To complete the Statement of Financial Position, list out the assets, liabilities, and equity:
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Identify Assets:
- Cash in Hand: €5,700
- Debtors: €12,000
- Stock: €5,000
- Equipment (after depreciation):
- Original Equipment Value: €40,000
- Depreciation (20% of €40,000): €8,000
- Net Equipment Value: €40,000 - €8,000 = €32,000
- Buildings: €220,000
Total Assets:
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Identify Liabilities:
- Creditors: €9,000
- Bank Overdraft: €5,000
- Nine Year Loan: €81,000
Total Liabilities:
-
Calculate Equity:
- Issued Share Capital: €160,000
- Retained Earnings from the Profit and Loss Balance: €17,000
- Add Gross Profit: €103,000
Total Equity:
The completed Statement of Financial Position will look like:
| Statement of Financial Position of Cadden Ltd as at 31/12/2021 | | Total Assets | €274,700 | | Total Liabilities | €95,000 | | Total Equity | €280,000 |