Profit/Loss

[ant98]

Hi, Can anyone assist with this P/L scenario?

As the business is small they do not employ a full-time accountant, but pay a local firm to prepare their accounts after the end of the accounting period from information they supply. You are on a summer work placement with this firm and have been asked to prepare a first draft of the accounts for Ketchum Ltd for the year ending 31st December 2019.
A list of closing balances reported in Ketchum Ltd’s statement of financial position as at 31st December 2018 is set out below:

Ketchum Ltd. Statement of Financial Position 31st December 2018​
	£​	£​
Shop premises (cost)	56,250​	​
Shop premises (accumulated depreciation)	3,375​	​
Fixtures and fittings (cost)	12,500​	​
Fixtures and fittings (accumulated depreciation)	3,750​	​
Inventories of books at cost	42,375​	​
Trade receivables	39,000​	​
Prepayment	500​	​
Total assets	​	143,500​
Trade payables	6,962.50​	​
Accruals	1,250​	​
Bank overdraft	6,250​	​
Bank loan repayable in 2022	33,750​	​
Total liabilities	​	48,212.50​
Share capital (£1 ordinary shares)	62,500​	​
Retained profits	32,787.50​	​
Total equity	​	95,287.50​

Further information:

• The shop premises were acquired under a 50-year lease on 1st January 2016 and are being depreciated to a zero residual value.
• The fixtures and fittings were also bought on 1st January 2016 and are being depreciated over 10 years to a zero residual value.
• Depreciation is provided on a straight line basis for both the shop premises and the fixtures and fittings.
• The business pays its insurance premium annually on 1st July to cover the following twelve month period. This is the only prepayment as at 31st December 2018.
• The accrued expenses relate to the accountant’s fees for preparing last year’s accountants, paid in March 2019. This is the only accrual as at 31st December 2018.
• All profits earned are subject to a 20% corporate income tax paid on 31st December of the year in which they are earned.

During the year to 31st December 2019, the following transactions and events took place:

• The business made cash sales of £107,375. It also made credit sales to internet retailers of £76,787.50.
• Inventory costing £94,725 was bought during the year. All items were bought on credit. Suppliers were paid £96,437.50 over the course of the year.
• The inventory of books as at 31st December 2019 cost £34,375.
• During the year some fixtures that had cost £2,500 when purchased were sold for £1,375. New fixtures were acquired for cash at a cost of £3,750 and are also being depreciated over 10 years to a zero residual value. No depreciation is charged in the year of disposal but a full year’s depreciation is charged in the year of acquisition.
• The part-time shop assistant was paid wages of £13,625 over the year.
• Receipts from credit customers totalled £68,162.50.
• Electricity bills totalling £2,287.50 were paid during the year. The company has recently changed its electricity supplier and is now being billed quarterly in arrears. At the end of December 2019 the bill for the quarter ended on 31st January 2020 had not yet been received, but was estimated to be £862.50.
• You have been told that the fees charged for preparing the accounts will be the same as last year. The bill will be sent out in March 2020.
• The insurance premium of £1,125 for the year to 30th June 2020 was paid during July 2019.
• In December 2019 £10,000 was paid off the bank loan, and interest of £1,000 was paid on 31st December 2019. Overdraft interest of £118.75 was charged and paid.
• Administrative expenses of £1,581.25 were paid as they arose.
• Ernest and Mary received directors’ wages of £1,250 per month each.

 

[JeffM]

You must be kidding. Please show us your work and explain where you are having trouble. How can we guess what help you need when we are totally in the dark about what you have already done and where you are stuck.