Urgent help needed: Anyone know the answer to this Income statement exam question?
The question is as follows:
1 Saleco Ltd is a retailing company; its trial balance at 31 March 2010 is as follows:
£ £
Ordinary shares of 20p each fully paid 130,000
10% Loan notes (issued 2006) 50,000
Retained earnings - 1 April 2009 26,400
Revenue 240,000
Purchases 146,000
Carriage inwards 4,200
Returns outwards 3,000
Selling and distribution costs 19,800
Administrative expenses 16,500
Land at cost and buildings at cost (land 30,000) 110,000
Buildings depreciation - 1 April 2009 16,000
Plant and machinery at cost 165,000
Plant and machinery depreciation - 1 April 2009 45,000
Trade payables 28,000
Trade receivables 30,000
Bad debt provision – 1 April 2009 500
Inventory - 1 April 2009 34,500
Bank 1,600
Dividends paid 12,000
Loan interest paid 2,500
540,500 540,500
The following notes are relevant:
(i) Inventory was valued at cost of £42,000 on 31 March 2010. An item of inventory has been damaged and was expected to sell for £3,000 which is only one third of its original cost.
(ii) Land was revalued at £50,000 on 1 April 2009.
(iii) The buildings are depreciated over a 20 year life. Plant and machinery is depreciated by 15% per annum on the reducing balance basis. All depreciation is to be treated as cost of sales.
(iv) A bad debt provision (included as selling and distribution costs) of 4% of receivables at 31 March 2010 should be made.
(v) Included in administrative expenses was an amount of £4,500 for the annual rent of an office paid up to 31 July 2010.
(vi) Provide for the outstanding interest on the loan notes.
(vii) A provision for corporation tax for the year ended 31 March 2010 of £12,500 is required.
Required: for Saleco Ltd for the year ended 31 March 2010, prepare:
a) The income statement (16 marks)
The answer is:
1 (a) Saleco income statement year ended 31 March 2010
£ £
Revenue 240,000
Opening inventory 34,500
Purchases (146,000 - 3,000) 143,000
Carriage inwards 4,200
Depreciation (4,000 + 18,000) 22,000
Closing inventory (42,000 – 6,000) (36,000) (167,700)
Gross profit 72,300
Selling and distribution (19,800 + 700 bad debt provision) (20,500)
Administrative costs (16,500 – (4,500 x 4/12)) (15,000)
Loan interest (2,500 + 2,500) (5,000)
Profit before tax 31,800
Taxation (12,500)
Profit for the period 19,300
My question is... Where are the Depreciation figures in the answer, in bracket that I highlighted in bold coming from? Thanks! My exams tomorrow and im just trying to figure it out.
The question is as follows:
1 Saleco Ltd is a retailing company; its trial balance at 31 March 2010 is as follows:
£ £
Ordinary shares of 20p each fully paid 130,000
10% Loan notes (issued 2006) 50,000
Retained earnings - 1 April 2009 26,400
Revenue 240,000
Purchases 146,000
Carriage inwards 4,200
Returns outwards 3,000
Selling and distribution costs 19,800
Administrative expenses 16,500
Land at cost and buildings at cost (land 30,000) 110,000
Buildings depreciation - 1 April 2009 16,000
Plant and machinery at cost 165,000
Plant and machinery depreciation - 1 April 2009 45,000
Trade payables 28,000
Trade receivables 30,000
Bad debt provision – 1 April 2009 500
Inventory - 1 April 2009 34,500
Bank 1,600
Dividends paid 12,000
Loan interest paid 2,500
540,500 540,500
The following notes are relevant:
(i) Inventory was valued at cost of £42,000 on 31 March 2010. An item of inventory has been damaged and was expected to sell for £3,000 which is only one third of its original cost.
(ii) Land was revalued at £50,000 on 1 April 2009.
(iii) The buildings are depreciated over a 20 year life. Plant and machinery is depreciated by 15% per annum on the reducing balance basis. All depreciation is to be treated as cost of sales.
(iv) A bad debt provision (included as selling and distribution costs) of 4% of receivables at 31 March 2010 should be made.
(v) Included in administrative expenses was an amount of £4,500 for the annual rent of an office paid up to 31 July 2010.
(vi) Provide for the outstanding interest on the loan notes.
(vii) A provision for corporation tax for the year ended 31 March 2010 of £12,500 is required.
Required: for Saleco Ltd for the year ended 31 March 2010, prepare:
a) The income statement (16 marks)
The answer is:
1 (a) Saleco income statement year ended 31 March 2010
£ £
Revenue 240,000
Opening inventory 34,500
Purchases (146,000 - 3,000) 143,000
Carriage inwards 4,200
Depreciation (4,000 + 18,000) 22,000
Closing inventory (42,000 – 6,000) (36,000) (167,700)
Gross profit 72,300
Selling and distribution (19,800 + 700 bad debt provision) (20,500)
Administrative costs (16,500 – (4,500 x 4/12)) (15,000)
Loan interest (2,500 + 2,500) (5,000)
Profit before tax 31,800
Taxation (12,500)
Profit for the period 19,300
My question is... Where are the Depreciation figures in the answer, in bracket that I highlighted in bold coming from? Thanks! My exams tomorrow and im just trying to figure it out.
