MarmadukeMuffett once had a girlfriend who ran an antiques business in London'sKings Road. Ever since then, he has been hooked on the furniture trade and now runsMarmaduke'sMarvellous Mart, a furniture emporium in Riming-on-Sea specialising inantique and 'feature' furniture especially appealing to the tourists who frequent the resortin the summer months. He buys considerable stock from his cousin Albert's 'Spiderman'workshop - and indeed has invested £70,000 in Albert's company this year.
His bookkeeper has written up the books, extracted the trial balance and sent it togetherwith the additional information to George King FCCA, the accountant who acts forMarmaduke (as well as his cousin Albert) with a request to draw up the accounts quicklysince Marmaduke has made an appointment next week to see Roy Scot, his bankmanager, to review the overdraft limit.him out by preparing Marmaduke's profit and loss account for the year ended February28, 19X8 and his balance sheet on that day. George warns you that occasionallyMarmaduke's bookkeeper gets the trial balance a bit mixed up and to be careful aboutchecking it out.
George is, as usual, rushed off his feet, together with all his staff, and asks you to help
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MARMADUKE'S MARVELLOUS MART: TRIAL BALANCE
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at February 28, 19X8
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Assets and
Expenses
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Liabilities, Capital
and Income
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£
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£
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Trade debtors
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16,000
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Trade creditors
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18,000
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Purchases
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65,000
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Invoiced sales
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174,000
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Opening stock at 1/3/X7
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21,000
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Loans from directors - repayable 28/2/Y3
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27,000
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Bank overdraft
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28,000
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Equipment and furnishings (cost)
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25,000
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Premises (cost)
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100,000
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Accumulated depn on equipment at 1/3/X7
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15,000
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Motor vehicles (cost)
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34,000
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Accumulated depn on vehicles at 1/3/X7
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14,000
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Share capital
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70,000
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Investment in Albert Muffett Limited
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70,000
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Directors' salaries
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20,000
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Shop salaries
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12,000
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Administration expense
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6,000
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Promotion expense
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21,000
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Interest paid to bank
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2,000
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Profit and loss account 1/3/X7
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46,000
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£ 392,000
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£392,000
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Additional information
- Stock on hand at February 28, 19X8 is valued at cost £28,000.
- Depreciation on equipment for 19X8 is calculated at 20% on cost per annum.
- Depreciation on motor vehicles is calculated at 25% of net book value (cost less depreciation) per annum.
- Accruals for administration expense - telephone, stationery and electricity - are estimated at £2,000.
- Administration expense includes £1,500 for insurance paid a year in advance on November 1, 19X7.
- Provide for tax at 25% of net profit.
- Provide a final dividend of £5,000.
You are required to:
a. list the adjustments needed to correct the trial balance.
b. prepare the profit and loss account and balance sheet in appropriate format for publication