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The financial position of Watt Ltd, a grocer, on 01/01/2014 is shown in the following balance sheet: Balance sheet as at 01/01/2014: Fixed Assets Goodwill (cost €5,000) € Land & buildings €690,000 15,000 634,900 Equipment €8,600 2,800 716,400 Current Assets Stock 73,600 Insurance prepaid 1,000 Debtors €29,200 127,500 Less Creditors: amount falling due within 1 year €32,820 Creditors 82,300 Bank 11,900 29,600 Expenses due 3,700 791,000 Financed by Capital and Reserves Authorised - 700,000 ordinary shares @ €1 each Issued - 480,000 ordinary shares @ €1 each €480,000 Share premium €75,000 Profit and loss balance €236,000 791,000 The following transactions took place during 2014: Jan Watt Ltd bought an adjoining business on 01/01/2014 which included buildings €240,000, delivery van €42,000 and creditors €54,000 - Leaving Cert Accounting - Question 3 - 2015
Question 3
The financial position of Watt Ltd, a grocer, on 01/01/2014 is shown in the following balance sheet: Balance sheet as at 01/01/2014: Fixed Assets Goodwill (cost €5... show full transcript
Worked Solution & Example Answer:The financial position of Watt Ltd, a grocer, on 01/01/2014 is shown in the following balance sheet: Balance sheet as at 01/01/2014: Fixed Assets Goodwill (cost €5,000) € Land & buildings €690,000 15,000 634,900 Equipment €8,600 2,800 716,400 Current Assets Stock 73,600 Insurance prepaid 1,000 Debtors €29,200 127,500 Less Creditors: amount falling due within 1 year €32,820 Creditors 82,300 Bank 11,900 29,600 Expenses due 3,700 791,000 Financed by Capital and Reserves Authorised - 700,000 ordinary shares @ €1 each Issued - 480,000 ordinary shares @ €1 each €480,000 Share premium €75,000 Profit and loss balance €236,000 791,000 The following transactions took place during 2014: Jan Watt Ltd bought an adjoining business on 01/01/2014 which included buildings €240,000, delivery van €42,000 and creditors €54,000 - Leaving Cert Accounting - Question 3 - 2015
Step 1
Tabular Statement Reflecting Transaction Effects and Balance as of 31/12/2014
Answer
To complete the tabular statement, we will outline the changes to each asset and liability as a result of the described transactions.
Initial Balance Sheet (as of 01/01/2014)
| Assets | Initial Value | Adjustments | Final Value |
|---|---|---|---|
| Goodwill | €5,000 | €0 | €5,000 |
| Land & Buildings | €690,000 | €0 | €690,000 |
| Equipment | €8,600 | €0 | €8,600 |
| Stock | €73,600 | €0 | €73,600 |
| Insurance Prepaid | €1,000 | €0 | €1,000 |
| Debtors | €29,200 | +€127,500 | €156,700 |
| Cash/Bank | €11,900 | +€0 | €11,900 |
| Total Assets | €809,300 | €127,500 | €936,800 |
Liabilities
| Liabilities | Initial Value | Adjustments | Final Value |
|---|---|---|---|
| Creditors | €32,820 | -€2,500 | €30,320 |
| Expenses Due | €3,700 | €0 | €3,700 |
| Total Liabilities | €36,520 | -€2,500 | €34,020 |
Capital and Reserves
| Equity | Initial Value | Adjustments | Final Value |
|---|---|---|---|
| Share Capital | €480,000 | €0 | €480,000 |
| Share Premium | €75,000 | €0 | €75,000 |
| Retained Earnings | €236,000 | +€20,000 (from profit) | €256,000 |
| Total Equity | €791,000 | +€20,000 | €811,000 |
Summary of Total Assets and Liabilities
At the conclusion of 31/12/2014 after accounting for all the transactions, the total assets and liabilities are as follows:
- Total Assets: €936,800
- Total Liabilities: €34,020
Thus, the equity will amount to:
Equity = Total Assets - Total Liabilities
This represents a strong financial position for Watt Ltd as of the end of the year.