Question

The following draft trial balance has been produced for Bodurm plc for the year to 30 April 2020.

	£000	£000
Revenue		6,475
Opening inventory	1,200
Purchases	2,570
Administrative expenses	420
Distribution costs	227
Cash at bank	112
6% Bank loan repayable in 2026		1,050
Bank loan interest paid	63
Interim dividend paid	170
Land cost	2,100
Buildings cost	2,350
Plant and equipment cost	1,077
Motor vehicles cost	252
Accumulated depreciation at 1 May 2019:
Buildings		564
Plant and equipment		621
Motor vehicles		84
Retained earnings at 1 May 2019		333
Ordinary share capital		2,310
Trade receivables/payables	1,400	677
Intangible assets	400
Intangible amortisation at 1 May 2019		80
Under provision of income tax in the previous year	19
Deferred tax at 1 May 2019		133
Suspense		33
	12,360	12,360

You are given the following information:

1. Depreciation for the year has not been provided. The depreciation policy is as follows:

Plant and equipment        25% reducing balance, charged to cost of sales

Buildings                            2% straight-line, charged to administrative expenses

Motor vehicles                   Straight line over a 6-year life, charged to distribution costs

Depreciation is charged in full in the year of purchase, but none is charged in the year of disposal

2. The directors of Bodurm plc have decided to adopt a policy of revaluing all its buildings to reflect current fair values. The fair value of the buildings is determined by an independent surveyor to be £2,625,000 as at 30 April 2020. The revaluation does not give rise to a deferred tax liability.

3. Intangible assets, representing a customer list acquired in the year to 30 April 2019, are being amortised straight-line over their remaining life of 5 years. Amortisation is to be charged to administrative expenses.

4. Corporation tax for the year to 30 April 2020 is to be provided at £220,000, and the deferred tax liability should be decreased by £28,000.

5. At 30 April 2020 Bodurm plc disposed of an item of plant for £33,000. The disposed plant had a cost of £131,000 and a carrying value of £56,000. The only entry made into the accounts were the disposal proceeds recorded in the cash at bank account with the corresponding entry into the suspense account.

6. At 30 April 2020 the company adopted a new accounting policy regarding the measurement of inventories. If the new policy had been applied last year, the company’s inventory at 30 April 2019 would have been £350,000 higher than the amount originally calculated. This new policy has not been updated in the account balances above.

7. Inventory at 30 April 2020 is £1,200,000 reflecting the new valuation policy.

YOU ARE REQUIRED TO:

Prepare in a format suitable for publication for Bodurm plc:

1. A Statement of profit or loss and other comprehensive income for the year ended 30 April 2020;

                                                                                     

2. A Statement of changes in equity for the year ended 30 April 2020;

                                                                                     

3. A Statement of financial position at 30 April 2020.

                                                                                     

All calculations should be to the nearest £000

Type or paste question here

Answer 1

Bodurm plc
Income Statement for the year ended Apil 30, 2020
	April 30,202
	£000
Revenue	6475
Expenses
Cost of sales	2684
Changes in Inventory (Opening inventory - ClosingInventory)	350
Gross profit	3441
Distribution costs	269
Administrative expenses	547
Finance cost	63
Loss on Sale of Asset	23
Profit before tax	2539
Income tax expense
Underprovision of tax for the previous year	19
Current Year Tax Expenses	220
Deferred Tax	-28
Profit for the year	2328

Bodurm plc
Statement of changes in equity for the year ended April 30, 2020
	Share capital	Retained earnings	OCI - Revaluation Surplus	Total equity
	£000	£000	£000
Opening Balance	2310	333		2643
Changes in accounting policy		350		350
Restated balance	2310	683	0	2993
Changes in equity for the year 2020
Issue of share capital				0
Dividends		-170		-170
Income for the year		2328		2328
Revaluation gain			886	886
Balance at April 30 , 2020	2310	2841	886	6037

Bodurm plc
Statement of financial position as at April 30, 2020
		April 30,
		2020
		£000
Assets
Non-Current Assets
Property, Plant & Equipment ( Refer Schedule 1)		5,137
Intangible Assets		240
		5377
Current Assets
Inventories		1200
Trade Receivables		1400
Cash and cash equivalents		112
		2712
Total Assets		8089
Equity and Liabilities
Equity
Share Capital ( Refer SOCE)		2310
Retained Earnings ( Refer SOCE)		2841
Revaluation Reserve		886
Total Equity		6037
Non-current liabilities
Long-term borrowings		1050
Deferred Tax Liability		105
Total of Non Current Liabilities		1155
Current Liabilities
Trade and other payables		677
Short-term borrowings
Current portion of long-term borrowings
Current tax payable		220
Total current liabilities		897
Total liabilities		2052
Total equity and liabilities		8089

	Bodurm plc
Schedule 1: Fixed Assets
Partulars	Unadjusted Balance as on April 30, 2022	Accumulated Depreciation as on April 30, 2022	Net Block as on April 30, 2022	Depreciation provided for the year	Revaluation Adjustment/ Sales	Adjusted Net Block as on April 30, 2022
	£000	£000	£000	£000		£000
Land cost	2,100		2,100			2,100
Buildings cost	2,350	564	1,786	47	886	2,625
Plant and equipment cost	1,077	621	456	114	-56	286
Motor vehicles cost	252	84	168	42		126
Total	5,779	1,269	4,510	203		5,137
Intangibles	400	80	320	80		240

Journal Entries for adjustment

SL No	Particulars	Debit	Credit
1	Deprecation (Cost of sales) Dr	114
	Accumulated Depreciation PPE		114
	being depreciation at the rate of 25% reducing balance, charged to cost of sales
2	Deprecation (Administrative Costs) Dr	47
	Accumulated Depreciation Buildings		47
	being depreciation at the rate of 2% straight-line, charged to administrative expenses
3	Deprecation (Distribution) Dr	42
	Accumulated Depreciation Vehicles		42
	being depreciation on a Straight line over a 6-year life, charged to distribution costs
4	Building A/c Dr	275
	Accumulated Depreciation Dr	611
	To Revaluation Gain		886
	Being revaluation loss charged to SOPL
5	Amortization Expenses ( Administrative Charges )Dr	80
	Accumulated Amortization		80
	being amortized straight-line over their remaining life of 5 years. Amortization is to be charged to administrative expenses.
6	Tax Expenses Dr	220
	To Provision for Tax		220
	(Being provision for corporation tax for the year)
7	Deferred Tax Liability Dr	28
	To Deferred Tax		28
	(Being reduction of deferred tax)
8	Suspense Dr	33
	Accumulated Depreciation Dr	75
	Loss on Sales of Asset	23
	To Fixed Asset - plant		131
	Being asset disposed having a cost of £131,000 and a carrying value of £56,000. The only entry made into the accounts were the disposal proceeds recorded in the cash at bank account with the corresponding entry into the suspense account.
9	Opening Inventory Dr	350
	To Reserves - Accounting Policy Adjustment		350
	he new policy had been applied last year, the company’s inventory at 30 April 2019 would have been £350,000 higher than the amount originally calculated. This new policy has not been updated in the account balances above.