Leaving Cert Accounting Published Accounts: Published Accounts

Capital plc

Question

Published Accounts

Capital plc has an authorised share capital of €800,000 divided into 600,000 ordinary shares at €1 each and 200,000 8% preference shares at €1 each. The following trial balance was extracted from the books at 31/12/2017:

Delivery vans at cost	€280,000
Delivery vans - accumulated depreciation on 01/01/2017	€116,000
66% Investments (purchased 01/04/2017)	€300,000
Buildings at cost	€760,000
Buildings - accumulated depreciation on 01/01/2017	€81,300
Investment income	€8,400
Debtors and creditors	€139,000
Stock 01/01/2017	€91,000
Patent 01/01/2017	€42,000
Administrative expenses	€48,000
Distribution costs	€6,600
Carriage in	€20,300
Returns inwards	€28,000
Rental income	€87,000
Dividends paid	€55,000
Bank	€82,000
VAT	€34,200
Profit and loss account at 01/01/2017	€42,500
Issued capital
Ordinary shares	600,000
8% Preference shares	€120,000
Provision for bad debts	€28,500
7% Debentures 2022/2023	€300,000
Discount	€39,000
Debenture interest paid	€13,300

€3,350,700	€3,350,700

The following information is relevant:
(i) Stock on 31/12/2017 was €86,000.
(ii) The patent was acquired on 01/01/2014 for €63,000. It is being amortised over 9 years in equal instalments. This amortisation is to be included in cost of sales.
(iii) Provision should be made for debenture interest, investment income due, auditors' fees €16,000, director's fees €32,000 and corporation tax €49,000.
(iv) Included in distribution costs is the receipt of €15,000 from car sales.
(v) During the year, land adjacent to the company's premises, which cost €80,000 was sold for €160,000. At the end of the year the company revealed this building to €850,000 and wishes to revalue it.
(vi) Depreciation on buildings is to be provided at the rate of 2% p.a. straight line, and is to be allocated over stocks of stores under administration expenses. There was no purchase or sale of buildings during the year. Delivery vans are to be depreciated at the rate of 20% per annum reducing balance basis.
(vii) The company is being sued by a former employee who is claiming unfair dismissal and is seeking damages of €100,000. Company legal advisors have stated there is reasonable chance of winning this case, therefore no provision should be made, as it’s not considered to be a liability.
(viii) Capital expenditure commitments note:
The company has entered into a preliminary contract with Stewart Ltd for the building of an extension to its premises for the cost of €400,000. They also intend to carry out further capital improvements to existing premises at a cost of €120,000.

Required:
(a) Prepare the published profit and loss account for the year ended 31/12/2017 and a balance sheet as at that date in accordance with the Companies Acts and appropriate accounting standards showing the following:
1. Accounting policy note for tangible fixed assets and stock
2. Operating profit
3. Dividends
4. Capital expenditure commitments note
5. Tangible fixed assets

(b) Explain how an auditor safeguards the interests of shareholders.

Item	Amount (€)
Turnover	1,780,000
Cost of Sales:
- Opening Stock (01/01/2017)	91,000
- Add: Purchases (including returns)	1,170,000
- Less: Closing Stock (31/12/2017)	(86,000)
Gross Profit	1,188,600
Distribution Costs	(197,880)
Administration Expenses	(267,120)
Other Operating Income	82,000
Investment Income	8,400
Operating Profit	813,000
- Interest Payable	(21,000)
Profit on Ordinary Activities Before Taxation	792,000
- Tax on Profit on Ordinary Activities	(238,000)
Profit on Ordinary Activities After Taxation	554,000
- Dividends Paid	(45,400)
Retained Profit	508,600
Profit and Loss Balance (01/01/2017)	42,500
Profit and Loss Balance (31/12/2017)	551,100

Assets	Amount (€)
Fixed Assets
- Tangible Assets	981,200
- Land and Buildings:	850,000
- Delivery Vans:	131,200
- Financial Assets	300,000
Current Assets
- Stock	86,000
- Debtors	115,600
- Bank	82,000
Total Assets	1,347,900

Equity and Liabilities
- Called Up Share Capital	720,000
- Revaluation Reserve	186,500
- Profit and Loss Balance	551,100
- Creditors: Amounts falling due within 1 Year	251,900
- 7% Debentures (Due after 1 Year)	300,000
Total Equity and Liabilities	1,347,900

Published Accounts Capital plc has an authorised share capital of €800,000 divided into 600,000 ordinary shares at €1 each and 200,000 8% preference shares at €1 each - Leaving Cert Accounting - Question 6 - 2018

Worked Solution & Example Answer:Published Accounts Capital plc has an authorised share capital of €800,000 divided into 600,000 ordinary shares at €1 each and 200,000 8% preference shares at €1 each - Leaving Cert Accounting - Question 6 - 2018

Prepare the published profit and loss account for the year ended 31/12/2017

Published Profit and Loss Account of Capital plc for the year ended 31/12/2017

Prepare a balance sheet as at 31/12/2017

Balance Sheet of Capital plc as at 31/12/2017

Explain how an auditor safeguards the interests of shareholders

1. Independent Verification

2. Compliance with Regulations

3. Accountability

4. Risk Assessment

5. Reporting to Shareholders

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