The trial balance of Greenwoods Limited, a company involved in the production of garden equipment, as at 31 March 2019, is given below:


Trial Balance

  Debit (£) Credit (£)
Allowance for receivable   1,800
Salaries and wages 98,420  
Inventory at 1 April 2018 42,300  
Dividends paid 3,000  
Purchases 473,194  
Sales   765,490
Administrative expenses 38,740  
General distribution costs 22,225  
Reserve   5,600
Land at cost 80,000  
Motor vehicles at cost 23,700  
Motor vehicles accumulated depreciation at

1 April 2018

£1 Ordinary Shares   30,000
Retained earnings   28,100
Buildings at cost 92,400  
Buildings accumulated depreciation at 1

April 2018

Bank 23,960  
Share Premium   3,500
8% Loan notes   75,000
Loan note interest paid 3,000  
Trade receivables 52,720  
Trade payables   24,560
  953,659 953,659


The following information should also be taken into account:

  1. Motor Vehicles are depreciated at 25% per annum using the reducing balance method.
  2. Buildings are to be depreciated at 5% per annum using the straight-line method.
  3. The closing inventory was valued at £52,830.
  4. Corporation tax on profits was estimated at £8,700.
  5. Administrative expenses accrued were £3,760.
  6. A customer who owed £2,600 has gone bankrupt and Greenwoods Limited has decided to treat the amount as a bad debt.
  7. Distribution costs prepaid amounted to £1,850.
  8. The allowance for receivables is to be adjusted so as to represent 5% of the trade receivables.



Prepare the following statements for Greenwoods Limited:

  1. Income Statement for the year ended 31 March 2019
  2. Statement of Financial Position as at 31 March 2019




Mark and Jenny are sole traders. Both are wholesalers dealing in furniture industry. Summaries of Income Statement and Statement of Financial Position for the same year have been made available to you as follows:


Income Statement for the year ended 31 December 2019

  Mark £000s Jenny £000s
Sales Revenue 300 400
Cost of goods sold (225) (312)
Gross profit 75 88
Administration expenses (32) (31.5)
Distribution expenses (14) (20)
Depreciation -equipment and vehicle (5) (10)
                                                 – building 0 (2.5)
Operating profit 24 24
Finance costs 10 1
Net profit 14 23



Statement of Financial Position as at the end of the year


  Mark £000s Jenny £000s
Buildings 14.5 23.5
Equipment and vehicles 31 38
Inventory 28 26
Accounts receivables 37.5 33.5
Bank and cash 4 0
  115 121
Capital plus reserves

Accounts payables





Bank overdraft

Long term loan





  115 121



  1. Calculate the following ratios for both Mark and Jenny:
    1. Gross profit margin
    2. Net profit margin
    3. Return on capital employed
    4. Inventory turnover (in days)
    5. Accounts receivables turnover (in days)
    6. Accounts payables turnover (in days)
    7. Current ratio
    8. Quick ratio
  2. Compare the performance and position of the two businesses on the basis of the above figures.




IDS plc, who are a major sports equipment manufacturer, have recently developed and tested a new trail running shoe. The management are now considering a limited launch of the new shoe over a six-month period. As the project manager for the development of the new product you have compiled and collated the following sales and cost information for the review period.

1. Expected sales are:

Month Number of shoes
January 200
February 200
March 260
April 300
May 350
June 400


Projected selling price is £40.

All sales are expected to be on credit and customers are to pay in the month following the month of sale.


2. The number of shoes produced each month is based on expected sales. It is planned to keep stock levels constant at their current level throughout the trial period.

3. Each pair of shoes requires 0.2 kg of raw materials, which costs £10 per kg. All purchases of materials are on credit and suppliers are to be paid in the second month following the month of purchase.

4. To produce one pair of shoes requires two hours of direct labour at £6 per hour. Wages are paid in the month the shoes are produced.

5. Variable production overheads are to be charged at the rate of £2 per unit (pair of shoes) produced. These are to be paid in the month the units are produced.

6. Fixed monthly production overheads are as follows:

Rent and rates £1000
Insurance £400
Heat and light £800
Other £250

These are to be paid in the month the units are produced.


7. Other monthly fixed overheads are as follows:

Manager’s salary £2000
Selling/distribution £1000

These are to be paid in the month the units are produced/sold.



Prepare a cash budget for the period from January until June. Assume the initial cash balance is zero.

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