Leaving Cert Accounting FINAL ACCOUNTS - Company: Final Accounts of a Company The

Final Accounts of a Company The following balances were extracted from the books of Moloney Ltd as at 31/12/2020: Share capital Authorised - 950,000 ordinary shares at €1 each Issued - 520,000 ordinary shares at €1 each Delivery vans at cost €85,000 Buildings €700,000 Office equipment €60,000 Patents €74,000 Accumulated depreciation - buildings €35,000 Accumulated depreciation - office equipment €9,000 Stock of goods for resale (01/01/2020) €94,500 Stock of stationery (01/01/2020) €1,500 Advertising €11,400 Stationery €3,700 Purchases €440,000 Sales €790,000 Returns inwards (sales returns) €21,200 Creditors €93,000 Debtors €86,000 VAT €17,400 Light and heat €10,600 Provisions for bad debts €3,000 Directors’ fees €28,800 10% Debentures (issue 01/04/2020) €100,000 Debenture interest €2,400 Profit and loss balance 01/01/2020 €61,800 Rent and rates €24,900 Insurance €16,600 Commission €17,400 €1,661,400 €1,661,400 You are given the following additional information: (i) Stock of goods for resale on 31/12/2020 was €75,400 - Leaving Cert Accounting - Question 1(B) - 2021

Question 1(B)

Final Accounts of a Company The following balances were extracted from the books of Moloney Ltd as at 31/12/2020: Share capital Authorised - 950,000 ordinary share... show full transcript

Worked Solution & Example Answer:Final Accounts of a Company The following balances were extracted from the books of Moloney Ltd as at 31/12/2020: Share capital Authorised - 950,000 ordinary shares at €1 each Issued - 520,000 ordinary shares at €1 each Delivery vans at cost €85,000 Buildings €700,000 Office equipment €60,000 Patents €74,000 Accumulated depreciation - buildings €35,000 Accumulated depreciation - office equipment €9,000 Stock of goods for resale (01/01/2020) €94,500 Stock of stationery (01/01/2020) €1,500 Advertising €11,400 Stationery €3,700 Purchases €440,000 Sales €790,000 Returns inwards (sales returns) €21,200 Creditors €93,000 Debtors €86,000 VAT €17,400 Light and heat €10,600 Provisions for bad debts €3,000 Directors’ fees €28,800 10% Debentures (issue 01/04/2020) €100,000 Debenture interest €2,400 Profit and loss balance 01/01/2020 €61,800 Rent and rates €24,900 Insurance €16,600 Commission €17,400 €1,661,400 €1,661,400 You are given the following additional information: (i) Stock of goods for resale on 31/12/2020 was €75,400 - Leaving Cert Accounting - Question 1(B) - 2021

Step 1

Prepare a trading and profit and loss account for the year ended 31/12/2020.

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Answer

To prepare the Trading and Profit and Loss Account, we will follow these steps:

Sales

Total Sales: €790,000
Less: Returns inwards: €21,200

Net Sales: $ext{Net Sales} = ext{Sales} - ext{Sales Returns} = 790,000 - 21,200 = 768,800$

Cost of Sales

Opening Stock: €94,500
Purchases: €440,000
Less: Closing Stock: €75,400

Cost of Sales Calculation: $ext{Cost of Sales} = ext{Opening Stock} + ext{Purchases} - ext{Closing Stock}$ $ext{Cost of Sales} = 94,500 + 440,000 - 75,400 = 459,100$

Gross Profit

$ext{Gross Profit} = ext{Net Sales} - ext{Cost of Sales} = 768,800 - 459,100 = 309,700$

Less Expenses

Administration:
- Stationery: €3,700
- Light and heat: €10,600
- Directors’ fees: €28,800
- Rent and rates: €24,900
- Insurance: €12,450 (adjusted)
- Depreciation:
  - Buildings: 2% of €700,000 = €14,000
  - Office Equipment: 10% of (€60,000 - €9,000) = €5,100
  - Delivery Vans: 10% of €85,000 = €8,500
Selling and Distribution:
- Advertising: €12,900 (adjusted)
- Provision for bad debt: increase by €1,000 to total €4,300
Total Expenses sum to:
- €3,700 + €10,600 + €28,800 + €24,900 + €12,450 + €14,000 + €5,100 + €900 + €4,300 + €1,000 + €8,500 = €440,350

Operating Profit

$ext{Operating Profit} = ext{Gross Profit} - ext{Total Expenses} = 309,700 - 440,350 = (130,650)$

Additional Income

Commission: €17,400
Less Loan Interest: €7,500
Net Profit for the year: $ext{Net Profit} = ( ext{Operating Profit} + ext{Commission}) - ext{Loan Interest}$ $ext{Net Profit} = (-130,650 + 17,400) - 7,500 = (120,750)$

Step 2

Prepare a balance sheet as at 31/12/2020.

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Answer

To prepare the balance sheet, we categorize the assets, liabilities, and equity as follows:

Assets

Fixed Assets

Intangible Assets:
- Patents: €74,000
Tangible Assets:
- Buildings: €700,000
- Office Equipment: €60,000
- Delivery Vans: €85,000
Total Fixed Assets Calculation: $ext{Total Fixed Assets} = ext{Patents} + ext{Buildings} + ext{Office Equipment} + ext{Delivery Vans}$ $ext{Total Fixed Assets} = 74,000 + 700,000 + 60,000 + 85,000 = 919,000$

Current Assets

Closing Stock: €75,400
Debtors: €86,000
Less: Bad Debts Provision: €4,300
Cash: €17,400
Other:
Total Current Assets: $ext{Total Current Assets} = ext{Closing Stock} + ext{Debtors} - ext{Bad Debts} + ext{Cash}$ $ext{Total Current Assets} = 75,400 + 86,000 - 4,300 + 17,400 = 174,500$

Total Assets:

$ext{Total Assets} = ext{Total Fixed Assets} + ext{Total Current Assets} = 919,000 + 174,500 = 1,093,500$

Liabilities

Current Liabilities

Creditors: €93,000
Bank: €17,400
Loan Interest Due: €4,300
Total Current Liabilities: €114,700

Long-term Liabilities

Loan: €100,000

Total Liabilities:

$ext{Total Liabilities} = ext{Current Liabilities} + ext{Long-term Liabilities} = 114,700 + 100,000 = 214,700$

Equity

Share Capital: €520,000
Retained Earnings: €242,050

Total Equity:

$ext{Total Equity} = ext{Share Capital} + ext{Retained Earnings} = 520,000 + 242,050 = 762,050$

Total Liabilities and Equity:

$ext{Total Liabilities and Equity} = ext{Total Liabilities} + ext{Total Equity} = 214,700 + 762,050 = 976,750$