LIPC1150 Assignment Brief
1. You have been asked by a client to advise on the financial position of two companies in a similar trade sector. You have been supplied with the following financial statements. Income Statement for the year ended 31 March 2024
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James Ltd |
Smith Ltd |
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Notes |
£000 |
£000 |
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Revenue |
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638 |
493 |
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Cost of sales |
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(331) |
(297) |
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–––––– |
–––––– |
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Gross profit |
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307 |
196 |
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Distribution costs |
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(36) |
(29) |
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Administrative expenses |
1 |
(99) |
(46) |
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–––––– |
–––––– |
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Profit before taxation |
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172 |
121 |
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Taxation |
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(21) |
(22) |
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–––––– |
–––––– |
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Profit for the year |
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151 |
99 |
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====== |
====== |
Statement of Financial Position as at 31 March 2024
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Notes |
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James Ltd |
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Smith Ltd |
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Non‐current assets (NBV): |
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£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
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Property, plant and equipment |
1 |
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198 |
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111 |
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Current assets: |
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Inventory |
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60 |
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58 |
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Trade and other receivables |
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35 |
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43 |
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Cash and cash equivalents |
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2 |
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– |
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–––– |
97 |
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–––– |
101 |
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–––– |
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–––– |
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Total assets |
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295 |
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212 |
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Equity and liabilities: |
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==== |
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==== |
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Share capital (£1 share each) |
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50 |
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30 |
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Retained earnings |
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161 |
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66 |
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–––– |
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–––– |
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Non‐current liabilities: |
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211 |
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96 |
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Borrowings |
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– |
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20 |
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Current liabilities: |
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Trade and other payables |
2 |
74 |
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74 |
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Current tax payable |
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10 |
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12 |
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Bank overdraft |
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– |
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10 |
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–––– |
84 |
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–––– |
96 |
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–––– |
84 |
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–––– |
116 |
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–––– |
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–––– |
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Total equity and liabilities |
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295 |
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212 |
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==== |
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==== |
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Submit Your Assignment Questions & Get Plagiarism Free Answers.
Order Non Plagiarized Assignment Notes to the financial statements: The non‐current assets held by the companies are as follows:
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James Ltd |
Smith Ltd |
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£000 |
£000 |
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Land and buildings |
97 |
43 |
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Fixtures and fittings |
28 |
17 |
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Motor vehicles |
73 |
51 |
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–––– |
–––– |
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198 |
111 |
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Trade and other payables for both companies include a proposed dividend. James Ltd has proposed a dividend of £50,000 and Smith Ltd a dividend of £40,000.
Required:
Calculate appropriate ratios (at least 2 from each group) and critically appraise the current financial position of each of the two companies. 2. Write down the main sources of finance available to the company and discuss them in detail. 3. Khan Limited trial balance at 31 March 2024 was as follows.
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Dr. (£) |
Cr. (£) |
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Plant and Machinery (cost) |
14,000 |
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Plant and Machinery- accumulated depreciation |
3,100 |
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Equipment (cost) |
9,500 |
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Equipment – accumulated depreciation |
2,000 |
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Motor vehicle (purchased 1 April 2023) |
12,000 |
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Motor vehicle- accumulated depreciation |
4,200 |
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Opening inventory (stock) |
5,600 |
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Trade receivables |
12,000 |
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Trade payables |
17,000 |
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Cash in hand / Bank |
15,610 |
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Ordinary Share Capital of £1 share each |
26,660 |
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Revenue |
167,150 |
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Purchases |
54,100 |
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Returns outwards |
1,200 |
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Water bills |
4,150 |
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Delivery Cost |
3,600 |
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Discount allowed to customers |
2,150 |
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Wages and Salaries |
42,100 |
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Rent |
14,300 |
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Insurance |
5,600 |
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Miscellaneous expenses |
26,600 |
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221,310 |
221,310 |
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The following additional information is also available at 31 March 2024:
- Closing inventory (stock) is £7,120
- Salaries and wages of £3,610 were unpaid.
- £670 of Rent was paid in advance at 31-03-2024.
- Depreciation for the year to 31 March 2024 is to be provided as follows:
Plant and Machinery – 10% straight line method. Equipment – 5% straight line method. Motor vehicle – on a reducing balance basis at 10% per year.
- Tax for the year was £3,200.
Required:
- Prepare the Income Statement for the year ending 31st March 2024.
- Prepare the Statement of Financial Position for the year ending 31st March 2024.
4. Explain the following accounting concepts with examples: (1) Business Entity (2) Prudence
Learning Outcomes of LIPC1150
- LO1: Demonstrate knowledge of the major accounting concepts and users of financial statements.
- LO2: Show an understanding of the various adjustments made in financial statements and an appreciation of the effect these adjustments have on the measurement of profit and valuation of assets.
- LO3: Calculate and report financial ratios.
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