Question

The following balances have been extracted from the books of XYZ Company for the year to
31/12/2019

Dr Cr
US$ US$

Cash at bank and in hand 10,000
Plant and equipment:
At cost 70,000
Accumulated depreciation (at 31.12.19) 25,000
Retained earnings (at 1.2.2020) 15,000
Profit for the financial year (to 31.12.19) 20,000
Share capital (issued and fully paid) 50,000
Inventory (at 31.12.19) 27,000
Trade payables 17,000
Trade receivables 20,000

127,000 127,000

Additional information:
1 Corporation tax owing at 31 December 2019 is estimated to be $3000.
3 A dividend of 10p per share is proposed but not paid as of 31.12.2019
Prepare XYZ (1) statement of profit or loss and (2) statement of retained earnings, and (3)
a statement of financial position for the year to 31 December 2019.

Answer 1

Note : in absence of relavant information as to face value of the share or nos of shares of the company its been assumed that share are of face value of 1 $. Hence nos of share = 50,000$ / 1$ = 50,000 nos

Summary of the information provided in the question in tabular fomate are as follows:

	DR	CR
Cash at bank and in hand	$           10,000
Plant and equipment: At cost	$           70,000
Accumulated depreciation		$           25,000
Retained earnings		$           15,000
Profit for the financial year		$           20,000
Share capital (issued and fully paid)		$           50,000
inventory (at 31.12.19)	$           27,000
Trade payables		$           17,000
Trade receivables	$           20,000
total	$       1,27,000	$       1,27,000

Adjustments:

a. Corporation tax owing at 31 December 2019 is estimated to be $3000.

b. A dividend of 10p per share is proposed but not paid as of 31.12.2019

1) statement of profit or loss for the year to 31 December 2019
Profit for the financial year	$           20,000
Less :
Provision for taxes	$           -3,000
net profit to be included in retained earning	$           17,000

(2) statement of retained earnings for the year to 31 December 2019
Retained earnings	$           15,000
add :net profit of the year	$           17,000
	$           32,000
Less: proposed dividend (10p*50,000 shares/100p)	$           -5,000
Retained earning closing	$           27,000

3) a statement of financial position for the year to 31 December 2019
Share capital (issued and fully paid)	$           50,000	Plant and equipment: At cost	$           70,000
Retained earning closing	$           27,000	Less accunulated depreciation	$         -25,000
Proposed dividend	$             5,000	Plant and machinery net	$           45,000
Provision for tax	$             3,000
Trade payables	$           17,000	Trade receivables	$           20,000
		Cash at bank and in hand	$           10,000
		inventory (at 31.12.19)	$           27,000
	$       1,02,000		$       1,02,000