(a) Prepare the journal entries to correct the trial balance and deal with all of the year-end adjustments. You should clearly state all relevant assumptions made, show all of your workings and show the suspense account clearance. (60 marks) (b) Produce a statement of profit or loss for the year, a statement of changes in equity and a statement of financial position for Willis Ltd as at 31 January 2021, in a form suitable for publication. (40 marks) Total: 100 marks
EC3076 – Coursework 2 1 INSTRUCTIONS – READ CAREFULLY Your coursework MUST be: • Handwritten • Using blank sheets of paper (i.e. do not use the pro formas given on Blackboard) • Presented in ONE document file You need to scan your work onto ONE document in the correct order (preferably in pdf format) • Clearly label your work with your University ID number at the top of each sheet of paper but not your name • Submit BEFORE: 3 pm on Wednesday 10th March 2020 (Late submissions will be penalised in line with senate regulations) EC3076 – Coursework 2 2 QUESTION Willis Ltd is a retail business and Mohammed, the finance director, has produced the following trial balance for the year ended 31 January 2021. The company has had a difficult year due to the pandemic and the trial balance produced does not balance so he has asked for your help. Willis Ltd Trial Balance as at 31 January 2021 Dr Cr £’000 £’000 Accumulated depreciation – Office equipment at 1 February 2020 1,926 Accumulated depreciation – Factory buildings at 1 February 2020 2,641 Accumulated depreciation – Vans at 1 February 2020 480 Allowance for receivables at 1 February 2020 36 Carriage inwards 182 Carriage outwards 242 Directors remuneration 2,840 Discounts allowed 280 Discounts received 240 Dividends paid 120 Insurance 1,864 Inventory at 1 February 2020 2,640 Irrecoverable and impaired debts 263 Land and factory buildings – Cost 16,800 Light and heat 2,860 Loan from bank at 6% 16,000 Loan interest paid 720 Office equipment – Cost 2,560 Office expenses 80 Overdraft 1,200 Payables 3,980 Purchases 36,732 Receivables 8,920 Retained earnings at 1 February 2020 15,084 Returns inwards 244 Returns outwards 424 Sales 41,848 Share capital (shares have nominal value of 20p) 96 Share premium account 384 Vans – Cost 2,000 Wages 3,942 ––––––– ––––––– 83,469 84,159 ======= ======= Additional information: 1. Willis Ltd sold some equipment on 31 July 2020 for £150,000. The finance director has debited the bank account with the £150,000 but has done nothing else. The equipment cost £360,000 on 1 November 2016. 2. The land and buildings figure in the trial balance includes £7,500,000 for the land. EC3076 – Coursework 2 3 3. The depreciation policy for Willis Ltd is as follows: Factory buildings – straight line basis over 50 years. Office equipment – 20% per annum on a reducing balance basis. Vans – straight line basis over 5 years. The vans are used to deliver goods to customers. The factory buildings depreciation is charged to cost of sales and office equipment to administrative expenses. 4. A debt of £260,000 is to be written off and an allowance made for a further debt of £130,000. The debt of £36,000 for which allowance was made in the previous financial statements has now been paid in full. 5. Willis Ltd employ 54 staff, of which 27 work in the factory, 12 are delivery drivers and 15 work in administration. 6. An accrual for light and heat for the month of January 2020 is needed – it was a particularly cold month. 7. A payment for delivery costs to customers for £84,000 has been debited to the carriage inwards account and credited to the cash at bank account. 8. A cash payment to a supplier for £600,000 has been credited to payables and credited to the cash at bank account. 9. A 25 year bank loan was taken out on 1 February 2012. The loan capital is being repaid in equal instalments starting on 31 January 2013 and on 31 January each year thereafter. 10. Insurance includes £640,000 for the year to 30 April 2021. 11. An invoice for goods purchased for resale totalling £84,000 has been debited to insurance and credited to payables. 12. Taxation for the year is estimated at £630,000. 13. A dividend for shareholders of 50p per share was proposed on 15 February 2021 but has not yet been paid. 14. On 31 January 2021 there was a fire in the warehouse and all of the inventory and the inventory records were destroyed. In addition to the information above and in the trial balance, you know that: • all sales are made based on a gross profit mark-up of 15% on the purchase cost of goods sold, and • Willis Ltd has an insurance policy which covers the sales value of any items of inventory that are lost. Required: (a) Prepare the journal entries to correct the trial balance and deal with all of the year-end adjustments. You should clearly state all relevant assumptions made, show all of your workings and show the suspense account clearance. (60 marks) (b) Produce a statement of profit or loss for the year, a statement of changes in equity and a statement of financial position for Willis Ltd as at 31 January 2021, in a form suitable for publication. (40 marks) Total: 100 marks