Question

2.4 The following is a list of the assets and claims of Crafty Engineering as at 30 June last year:

Trade payables                                                                                    86

Motor vehicles                                                                                     38

Long-term borrowing from Industrial Finance Company                     260

Equipment and tools                                                                           207

Short-term borrowings                                                                       116

Inventories                                                                                          153

Property                                                                                               320

Trade receivables                                                                                185

Required:

(a) Prepare the statement of financial position of the business as at 30 June last year from

the above information using the standard layout. (Hint: There is a missing item that

needs to be deduced and inserted.)

(b) Discuss the significant features revealed by this financial statement.

2.1 On Thursday, the fourth day of his business venture, Paul, the street trader in wrapping

paper (see earlier in the chapter, pages 29–37), bought more inventories for £53 cash.

During the day he sold inventories that had cost £33 for a total of £47.

Required:

Draw up the three financial statements for Paul’s business venture for Thursday

Answer 1

2.4)  a.

Crafty Engineering
Statement of Financial Position as at 30th June 2017
ASSETS
Non-Current Assets
Property	320
Equipments	207
Motor Vehicles	38	565
Current Assets
Inventories	153
Trade Receivables	185	338
Total Assets		903
EQUITY AND LIABILITIES
Equity (which is the missing figure)		441
Non-Current Liabilities
Long-term Borrowings		260
Current Liabilities
Trade Payables	86
Short-term Borrowings	116	202
Total Equity and Liabilities		903

b. The statement of financial position reveals a high level of investment in non-current assts with more then 60% of total assets being non-current. This may be due to the fact that an engineering business may require heavy investment in non-current assets. Current assets are higher than current liabilities resulting in 1.7 times more current assets. The statement of financial position does highlights that Craft Engineering has no cash and appears to be dependent on short term borrowing.