Chapter 2

Level I

E2.8Time allowed – 45 minutes

His background and experience more than adequately equipped William Bunter to set up Bunter’s Tuck Shop close to a large local school, Greyfriars. The Tuck Shop sold individual buns to children at lunch and break times and in bulk to another shop, Singh’s Cakes, on the other side of town. Billy’s mother had financed the Tuck Shop project by transferring £15,000 into the Tuck Shop bank account on 31 December 2004.

During January 2005, the first four weeks of business, the Tuck Shop recorded the following transactions: £

Receipt of transfer from Mrs Bunter15,000 week 1

Purchase of a 5 year lease on the shop by cheque10,000week 1

Purchase of shop fittings by cheque 2,500week 1

Purchase of a computer on 2 weeks credit 1,500week 2

Cash paid for till rolls and computer stationery 325week 2

Purchases of buns from Master Baker Ltd, payable one week later 1,400weeks 1,

(3,500 buns at 40p each) 2, 3 &4

Sales of buns to children for cash 1,050weeks 1,

(1,500 buns at 70p each) 2, 3 &4

Sales of buns to Singh’s Cakes, receivable one week later 1,080 weeks 1, (1,800 buns at 60p each) 2, 3 &4

Purchases of buns from Master Baker Ltd, payable one week later 1,080week 4

(2,700 buns at 40p each)

Prepare a simple profit and loss account in tabular format for each of the first four weeks of

business and show the weekly cumulative profit or loss and the four week totals.

E2.9Time allowed – 45 minutes

Using the data from Exercise E2.8 prepare a simple cash flow statement in tabular format

for each of the first four weeks of business and show the weekly opening and closing

balances and the four week totals.

E2.10Time allowed – 45 minutes

Using the data from Exercise E2.8 prepare a simple balance sheet in tabular format for each

of the first four weeks of business and show the four week totals.

E2.11Time allowed – 30 minutes

The trial balance of Archibald Ltd extracted at 31December 2004 is as follows:

£000
Bank overdraft / 203
Electricity paid in advance / 15
Computer system / 104
Share premium account / 80
Amount for final payment on factory machine due March 2006 / 84
Trade debtors / 370
Goodwill / 68
Ten-year lease on factory (fixed asset) / 110
Prepaid expenses and accrued income / 295
Retained earnings at 31 December 2004 / 241
Stocks of materials / 209
Computer software (fixed asset) / 18
Furniture and fixtures / 243
Finished product / 28
Long-term loan / 250
Trade creditors / 419
Petty cash / 3
Share capital / 520
Computer printers / 25
Plant and equipment / 309

You are required to

(i)identify the debit and credit balances

(ii)confirm that the trial balance is in balance

(iii)prepare a balance sheet for Archibald Ltd at 31 December 2004 using a vertical format.

Level II

E2.12Time allowed – 60 minutes

You are required to prepare a balance sheet for Optical plc as at 31 December 2004 using the trial balance and the additional information shown below.

Trial balance at 31 December 2004 / Debit / Credit
£000 / £000
Share capital (400,000 £1 ordinary shares) / 400
Share premium / 100
Revaluation reserve / 100
Profit and loss account / 200
Debentures (interest at 15% per annum) / 200
Land at valuation / 350
Buildings at cost / 200
Buildings depreciation provision / 24
Plant at cost / 450
Plant depreciation provision / 180
Stocks / 225
Trade debtors / 200
Provision for doubtful debts / 20
Trade creditors / 220
Accruals / 11
Prepayments / 10
Bank / 20 / ____
1,455 / 1,455

Additional information not yet shown in the trial balance: During the year 2004

1.The company has issued 100,000 £1 ordinary shares at a £1 premium.

2.The company has purchased plant costing £100,000

3.A customer owing £10,000 went into liquidation, with massive debts and few assets.

  1. The company re-valued its land at £330,000 and decided to adjust its accounts.

5. £50,000 of debentures were repaid at par.