Accounting: Financial Statement prepartion
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Hello, this is my first time using Brainmass. I have become stuck on an accounting and bookkeeping module I have taken also for the first time. I have made some progress, but have now hit a brick wall and have a limited time to get the end if module assessment submitted. I would like your help with this subject area, but not requesting completion. Please see below:
Read the case study 'Hendrix Ltd' below and answer the questions which follow.
Hendrix Ltd sells exclusive kitchen appliances in a fashionable area of a large UK city. The business has been incorporated for three years. The sole director of the business, Tim Hendrix, also owns 75% of the shares of the company while his father, Paul Hendrix, owns the balance of the share capital. Tim keeps his own financial records using spreadsheets and gives a draft trial balance to his professionally qualified accountant and friend, Amy Reynolds, who finalises the accounts and ensures that all the legal and regulatory responsibilities of the company are met.
Amy is currently semi-retired from work as an accountant but still does the minimum continuous professional development to keep her status as a professionally qualified accountant. Much of Amy's time currently is writing the final draft of an accounting textbook based on business case studies that Amy is familiar with. Amy is a member of a professional accounting body that signs up to the IFAC Code of Ethics for Professional Accountants.
Below is Hendrix Ltd's Trial Balance as at 31 December 20X3
Long term loan at 5% 50,000
Opening stock at 1 January 20X3 41,000
Retained profit at 1 January 20X3 74,658
Provision for doubtful debts 2,400
Directors remuneration 87,600
VAT liability 11,623
Carriage out 3,480
Cost of office equipment at 1 January 20X3 125,000
Accumulated depreciation on office equipment at 1 January 20X3 80,000
Cost of showroom equipment at 1 January 20X3 112,450
Accumulated depreciation on showroom equipment at 1 January 20X3 35,984
Office expenses 22,400
Office salaries 36,680
Salesforce wages 51,750
Sales expenses 10,962
Rent and rates 20,600
Heat and light 6,733
Issued share capital (at £1 per share) __________ Total 125,000
Total 1,008,660 Total 1,008,660
During the last week of the financial year Tim has finalised the following further information:
The closing stock at 31 December 20X3 was £36,000.
Bad debts of £2,280 needed to be written off at the year end.
The provision for doubtful debts at the yearend was to be kept at 2% of debtors, net of bad debts.
Depreciation of office equipment for the year ended 31/12/20X3 was £5,000.
Depreciation of showroom equipment for year ended 31/12/20X3 was £4,498.
Rent paid in advance as at 31/12/20X3 was £1,800.
Sales expenses owing as at 31/12/20X3 were £800.
Office expenses owing as at 31/12/20X3 were £1,850.
As at 31/12/20X3, corporation tax of £4,750 was owing.
Interest on the long term loan had not been accounted for as at 31/12/20X3.
No dividend has been paid, proposed or declared as at 31/12/20X3.
a) Using the Excel file you created called B190 EMA Qu 2 spreadsheet ans PI followed by your PI number, complete the following tasks in the spreadsheet templates provided.
i.In worksheet 1 of the file, entitled Extended Trial Balance, use the template provided to complete the debit and credit columns for 'Adjustments', 'Profit and loss account' and 'Balance sheet' for Hendrix Ltd for the year ended 31/12/20X3. (15 marks)
(In worksheet 1, an asterisk (*) in a cell indicates that a figure needs to be inserted from the information given. In the cell marked with a double asterisk (**), a detailed working, in the form of an appropriate Excel formula, need to be inserted. In worksheets 2 and 3 below, figures need to be inserted into appropriate blank cells.)
ii. In worksheet 2 of the file, entitled Profit and Loss Account, use the template provided to complete the profit and loss account for Hendrix Ltd for the year ended 31/12/20X3. (4 marks)
iii.In worksheet 3 of the file, entitled Balance Sheet, use the template provided to complete the balance sheet for Hendrix Ltd for the year ended 31/12/20X3. (6 marks)
b) Using the word document you created called B190 EMA Qu 1 and 2 ans PI followed by your PI number, complete the following tasks (350 words max):
i.Explain why the following have an interest in the published accounts of Hendrix Ltd:
the employees of Hendrix Ltd,
HM Revenue & Customs,
the creditors of Hendrix Ltd. (4 marks)
ii.Based on information given in the case study above, state the three fundamental principles of the IFAC Code of Ethics for Professional Accountants with which Amy would find it most difficult to comply. For each of these principles, explain why Amy might find compliance difficult. (6 marks)
ii. Explain why the following have an interest in the published accounts of Hendrix ltd:
i. Paul Hendrix: Every business has interests to be satisfied. The published accounts are the accounts made available for the interested parties to allow them make decisions. For Paul Hendrix, as the proprietor, his main interest would be on how much profit that the company has been able to generate. This is because as the proprietor and owner he would be entitled to some sort of salary and bonus based on profits. Also he would be interested in knowing whether his decisions have been guiding the company along its corporate objective.
ii. The employees of Hendrix ltd: For the employees, as another interested party, their major interest, in the accounts, would be to ensure that the company is still a going concern. As a going concern, they would be ensured of employment for the foreseeable future. This would guarantee the survival of the employees. Also the accounts would tell the staff if any profit has been generated and how much might be expected as potential bonus ...
The problem set deals with issues under accounting: Financial Statement prepartaion.