Leaving Cert Accounting Service Firms: The following were included in t

Question

The following were included in the assets and liabilities of Fitpro Fitness Centre Ltd on 01/01/2016:

Buildings and grounds at €600,000, equipment at cost €80,000, furniture at cost €40,000, stock in shop €5,000, stock of heating oil €1,800, contract cleaning prepaid €200, investment interest due €300, creditors for supplies to the fitness centre €2,000, members’ fees paid in advance €3,000. The authorised capital of the company was €500,000 and the issued capital was €350,000.

All fixed assets have 3 years accumulated depreciation on 01/01/2016.

The following is a receipts and payments account for the year ended 31/12/2016:

Receipts and Payments Account of Fitpro Fitness Centre Ltd for year ended 31/12/2016

Balance at bank 01/01/2016 €59,300
Members’ fees €270,000
Interest on 3% investments €3,000
Shop receipts €85,000
Sale of furniture (cost €20,000) €10,000
Wages and salaries €83,000
Telephone and broadband €1,700
Insurance €1,200
Purchases €38,600
Contract cleaning €8,300
Light and heat €3,000
Purchase of adjacent building on 01/04/2016 €150,000
Furniture €11,600
Laundry €2,200
Bank loan plus 15 months interest at 4% per annum on 01/04/2016 €63,000
Balance at bank 31/12/2016 €3,300

The following information and instructions are to be taken into account:

(i) Closing stock at 31/12/2016: shop €1,800, heating oil €400.

(ii) Cleaning is done under contract payable monthly in advance and includes a payment of €600 for January 2017.

(iii) Members’ fees include €4,200 for 2017. Members’ fees in arrears at 31/12/2016 were €2,700.

(iv) The closing bank figure does not take into account bank charge €110 and a dishonoured cheque €950 received from a member in respect of fees.

(v) The payment for laundry includes €2,700 for three weeks paid to a replacement fitness instructor. Provide for a further two weeks wages due.

(vi) Wages and salaries include €24,000 per annum paid to the secretary, who also runs the shop. It is estimated that 60% of this salary and €300 of the light and heat, €650 of the insurance and €400 of the telephone and broadband is attributable to the shop.

(vii) Creditors for supplies at 31/12/2016 were €3,600.

(viii) Depreciation is to be provided as follows:

Buildings and grounds 2% cost from date of purchase.
Equipment 20% of cost.
Furniture held on 31/12/2016 is depreciated at 20% of cost. No depreciation is charged for the current year in the year of disposal.

Required:

(a) Prepare a statement of the company’s reserves (profit and loss balance) on 01/01/2016.

(b) Calculate the profit/loss from the shop for the year ended 31/12/2016.
Show workings.

(c) Prepare a profit and loss account for the year ended 31/12/2016.

(d) Prepare a balance sheet on 31/12/2016.

(e) Fitpro Fitness Centre Ltd have decided to purchase and install new gym equipment. They have received a quote of €225,000. Can Fitpro Fitness Centre Ltd afford this investment? Explain your answers.

Prepare a statement of the company’s reserves (profit and loss balance) on 01/01/2016.

Calculate the profit/loss from the shop for the year ended 31/12/2016. Show workings.

Prepare a profit and loss account for the year ended 31/12/2016.

Prepare a balance sheet on 31/12/2016.

Fitpro Fitness Centre Ltd have decided to purchase and install new gym equipment. Can Fitpro Fitness Centre Ltd afford this investment? Explain your answers.

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