Unit 1: May 2009, Question#2

​Note 1:
Issue of ordinary shares – 30,000 shares x $5.00 = $150,000
Double entry: Debit          Bank Account    $150,000
                          Credit        Ordinary shares Account    $150,000
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Note 2:
​Loan interest – 16% x $100,000 = $16,000
Double entry: Debit        Loan Interest expense Account   $16,000
                          Credit      Bank Account    $16,000

Preference dividends – 10% x $80,000 = $8,000.
​Double entry: Debit        Bank Account    $8,000
                          Credit      Dividends paid Account $8,000

Ordinary dividends – 40¢ x{ [$200,000/$5] + 30,000 shares}  = 40¢ x 70,000 shares = $28,000
Double entry: Debit        Dividends paid  $28,000
                          Credit      Bank Account    $28,000
​

Note 3:

• Depreciation on Buildings - $160,000/50yrs = $3,200 per year. This is the depreciation charge for the Statement of Comprehensive Income.
• Accumulated depreciation charged on Buildings as at 31st December, 2008 - [$16,000 + $3,200] = $19,200. This is the accumulated depreciation figure for the Statement of Financial Position.
• Depreciation on Motor Vehicles -  20% x $80,000 = $16,000 per year. This is the depreciation charge for the Statement of Comprehensive Income
• Accumulated depreciation charged on Motor Vehicles as at 31st December, 2008  - [$8,000 + $16,000] = $24,000. This is the accumulated depreciation figure for the Statement of Financial Position.
• Depreciation on Fixtures and Fittings - 25% x [$180,000 - $86,000] = $23,500 per year. This is the depreciation charge for the Statement of Comprehensive Income.
• Accumulated depreciation charged on Fixtures and Fittings as at 31st December, 2008  - [$86,000 + $23,500] = $109,500. This is the accumulated depreciation figure for the Statement of Financial Position.

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Note 4:
Adjustment on operating expenses for accrued operating expenses= $360,000 + $10,000 = $370,000. The $370,000 is for the Statement of Comprehensive Income and the $10,000 will fall under the Current Liabilities section of the Statement of Financial Position.

Note 5:
​​Corporation Tax expense = 30% x $74,300** = $22,290.
** See calculation of profit before tax (PBT) in the Income Statement.

Note 6:
​The bank loan will fall under the Non Current Liabilities section of the Statement of Financial Position.

Lastly, before the Statement of Comprehensive Income and the Statement of Financial Position can be prepared the Bank account's balance needs to be adjusted for the transactions recorded in Note 1 and Note 2, since both notes clearly state that these transactions were not reflected in the trial balance presented.

Now that all of the additional information has been accounted for the Statement of Comprehensive Income can be prepared.
 

Now that the Statement of Comprehensive Income has been completed the Statement of
Financial Position can be prepared.
 

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