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6 Goldberg plc
The following trial balance was extracted from the nominal ledger of Goldberg plc on
31 December 20X1:
£ £
Sales 2,284,900
Inventories at 1 January 20X1 71,000
Purchases 1,052,100
Distribution costs 172,100
Administrative expenses 437,000
Irrecoverable debts expense 29,000
Loan interest paid 4,500
Land and buildings cost 800,000
Plant and equipment cost 224,000
Motor vehicles cost 48,800
Land and buildings accumulated depreciation at 1 January 20X1 33,000
Plant and equipment accumulated depreciation at 1 January 20X1 44,800
Motor vehicles accumulated depreciation at 1 January 20X1 24,400
Trade receivables 226,900
Cash at bank 12,600
Ordinary share capital (£1 shares) 150,000
Share premium 125,000
Irredeemable 5% preference shares 100,000
Bank loan 150,000
Retained earnings 101,800
Dividends paid 25,000
Trade payables 89,100
3,103,000 3,103,000

The following adjustments have yet to be accounted for:

(1) The company depreciates all its non-current assets on a straight-line basis with zero residual
values. Land included in non-current assets cost £250,000 and buildings are depreciated
over 50 years.
Plant and equipment is depreciated over 5 years and Motor vehicles are depreciated over
four years.
Depreciation is charged as follows:
Depreciation on: Charged to:
Buildings Administrative expenses
Motor vehicles Distribution expenses
Plant and equipment Cost of sales
(2) Goldberg plc sells three products (Product Z1, Product Z2 and Product Z3). Inventory
at 31 December 20X1 is made up of the following:
Item Z1 Z2 Z3
Units 1,100 2,000 1,200
Cost per unit (£) 25 15 18

70 Accounting: Electronic Question Bank ICAEW 2024

 100 of the units of Z3 sustained minor damage when being moved from one inventory area to
another. As a result these will only be sold for half of their normal selling price of £30 per unit.

70 Accounting: Electronic Question Bank ICAEW 2024

 (3) Goldberg plc rents offices at a cost of £48,000 per year and pays quarterly in arrears. The
last rental payment made during 20X1 covered the quarter ending 31 October 20X1. The
invoice for the following quarter to 31 January 20X2 is yet to be received. Rent is charged to
administrative expenses.
(4) Trade receivables at 31 December 20X1 include a balance of £2,300 in relation to a
customer having severe financial difficulties. Goldberg considers it very unlikely this amount
will ever be recovered and have decided to write the debt off as irrecoverable. The
Irrecoverable debts expense is included in other operating expenses.
(5) The company received the bank loan on 1 February 20X1. The loan is repayable in full on
31 July 20X9. Interest is charged at a fixed rate of 6% per annum.
(6) A company employee dismissed during the year initiated a legal action against Goldberg in
November 20X1. The likely outcome is an out of court settlement for £20,000. Provisions
are charged to administrative expenses.
(7) Income tax for the year ended 31 December 20X1 is yet to be provided for. It is estimated that
£140,000 of income tax will be payable.
(8) The dividends paid represents £5,000 paid in respect of irredeemable preference shares and
£20,000 paid in respect of ordinary shares.
Requirement
Prepare the statement of profit or loss for Goldberg plc for the year ended 31 December 20X1 and
the statement of financial position at that date.
Statement of profit or loss for the year ended 31 December 20X1
£
Revenue Cost of
sales Gross profit
Distribution costs
Administrative expenses
Other operating
expenses Operating
profit / (loss) Finance
costs
Profit / (loss) before tax
Income tax expense
Profit / (loss) for year

ICAEW 2024 Question bank 71