Prepare income statement and financial position from following:Show all workings You are given the following information:i.The land was purchased in 2008 for £2,000,000. It was externally valued at£4,000,000 on 31 December 2020. The directors wish to include this figure in theThe balances below have been extracted from the accounting records of Nelson Ltdat 31 December 2020:accounts.ii.Inventory at 31 December 2020 cost £300,000. This includes some slow-movingitems which cost £18,000 which would normally sell for £22,000 but which thedirectors have decided to sell at £14,000 to clear them.DrCr£8% Debenture loan: repayable in 2026Prepayment on building insuranceBank accountRetained profits at 1 January 20202,000,00080,000267,000i.The company's depreciation policy is to provide a full year's depreciation in theyear of acquisition and no depreciation in the year of disposal with the followingrates applicable to the non-current assets:2,058,0002,000,0008,000,000Freehold landBuildings: costBuildings: accumulated depreciation at 1 January2020a. Freehold land – no depreciation required.b. Buildings – 2% per year on a straight-line basis.c. Plant and machinery – 10% on a reducing balance method.2,000,000Plant & machinery: costPlant & machinery: accumulated depreciation at 1January 2020Trade payablesTrade receivablesReturn outwards3,750,000iv.2,340,000A bad debt of £20,000 is to be written off. The company has decided to maintainthe provision for doubtful debts at 5% of remaining trade receivables.520,000V.The prepayment on building insurance on 31 December 2020 was £100,000.450,00038,000vi.Corporation Tax of £25,000 on the current year's profits is to be provided. An1 January 2020238,000ventoryRevenuePurchasesaudit fee for £13,000 would also need to be provided.5,006,0003,200,00080,00066,000vii.The company issued 12,000 additional shares at £2.50 each on 30 December2020. The proceeds were paid as Christmas bonuses to employees. No entrieshave been made in the company's accounting records in respect of thistransaction.Debenture interestReturn inwards65,000Provision for doubtful debtsDistribution costsAdministrative expensesOrdinary shares of £1 eachShare premium382,000514,000There was no movement on the debenture account in 2020. Any unpaid interesthas yet to be accrued for.vii.4,500,000500,000Required:19,027,00019,027,000(a) Prepare the Statement of Financial Position and the Income Statement for theyear ended 31 December 2020 for the directors.

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Description: Prepare income statement and financial position from following:Show all workings You are given the following information:i.The land was purchased in 2008 for £2,000,000. It was externally valued at£4,000,000 on 31 December 2020. The directors wish to

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Answered: Prepare income statement and financial…

Business

Accounting

Prepare income statement and financial position from following: Show all workings

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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