Question

Section A:

NMD Retail is a company that manufactures and sells tables. Using the company’s financial information provided below, construct their Income Statement and then the Statement of Financial Position for the year ending 31^st March 2018.

                                                                        £’000

• Bank overdraft                                        150
• Cash and cash equivalents                     220
• Cost of goods sold                                 34,020
• Dividends                                               200
• Financing costs                                      21,046
• Fixtures and fittings                                2,875
• Interest received                                     559
• Inventories                                             8,500
• Land and buildings                                 18,718
• Loans                                                     27,946
• Long term investments                           8,514
• Operating expenses                               15,256
• Other receivables                                   10
• Plant                                                      15,012
• Short term investments                           160
• Short term Loans                                    1,310
• Taxation due                                          7,850
• Taxation paid                                         4,782
• Trade payables                                      8,520
• Trade receivables                                   8,420
• Turnover                                                83,254
• Vehicles                                                 1,235
• Year beginning retained earnings           2,256

Note: The dividend amount is outstanding and expected to be paid soon. The shareholders’ equity is not listed, but should be inferred after calculating other amounts.

There is a maximum of 20 marks available for this question, 10 for each of the statements.

Answer 1

Income Statement of NMD Retail for the year ending 31^st March 2018.

Particulars	Amount
Sales/Turnover	83254
(-) Cost of Goods Sold	-34020
Gross Profit/Gross Margin	49,234
(-) Operating Expenses	-15256
Operating Income	33978
Other Incomes & Expenses
Finance Costs	-21046
Interest received	559
Dividends	-200
Profit Before Tax	13291
(-) Taxation Due	-7850
Profit After Tax	5441

Balance Sheet of  of NMD Retail for the year ending 31^st March 2018.

Particulars	Amount
ASSETS
Current Assets
Cash and Cash Equivalents	200
Inventories	8500
Other Receivables	10
Short term Investments	160
Trade Receivables	8420
Total Current Assets	17290
Non-Current Assets
Fixtures & Fittings	2875
Land & Building	18718
Long Term Investments	8514
Plant	15012
Vehicles	1235
Total Non- Current Assets	46354
TOTAL ASSETS	63644
LIABILITIES
Current Liabilities
Loans	27946
Bank Overdraft	150
Short Term Loans	1310
Total Current Liabilities	29406
Non -Current Liabilties	--
Total Liabilities	29406
Shareholder's Equity
Common Shareholder's Equity	26341
Retained Earnings
Beginning	2256
Profit for the year	5441
Total Shareholders Equity	34038
Total Liabilities + Stock	63644

Notes:

1. As per the information given, the turnover amount is accounted as Sales in the Income Statement
2. The Dividend treatment in the accounts is different. Dividends on common stock are usually not reported on the income statement since they are not expenses. However, dividends on preferred stock will appear on the income statement as a subtraction from net income in order to report the earnings available for common stock. Here, for ease of calculation it is assumed as preferred stock. It can be done either way, since the balance in the Balance Sheet of the Company’s Shareholder’s Equity remains the same.
3. Retained Earnings include balance at the beginning as well as the profit for current year.
4. Rest of the transactions are normal in Income Statement and Balance Sheet