Remember that the trial balance has been prepared at the end of the year, but note that the retained earnings and inventories balances included are still those figures relating to the start of that year.
An inventory count established that the value of closing inventories on 31 December 2009 was £6,000.
All of the dividends declared during 2009 (and charged as an expense) were paid in that same year, as was the interest expensed for 2009.
Statement of financial position as of 31 December 2008
Less: Accumulated depreciation (8,000)
Accounts receivables 5,000
Cash and cash equivalents 68,000
Accounts payable 25,000
Tax payable 5,000
Net current assets 47,000
Total assets less current liabilities 76,000
Common stock 50,000
Retained earnings 26,000
Trial Balance: 31 December 2009 £ £
Accounts Debit Credit
Cash and cash equivalents 57,000
Sales revenues 95,000
Long-term investment 15,000
Accounts payable 19,000
Opening inventory (01.01.09) 4,000
Accumulated depreciation 9,000
Accounts receivable 10,000
Depreciation expense 1,000
Utilities expense 20,000
Tax expense 3,000
Interest expense 1,000
Tax payable 2,000
Wages expense 40,000
Common stock 50,000
Retained earnings at start of year (01.01.09) 26,000
Totals 201,000 201,000
1. Using the above information, prepare an income statement for the company for the year to 31 December 2009.
2. Prepare a statement of financial position for the company as at 31 December 2009.
3. Prepare a cash flow statement for the company for the year to 31 December 2009, using the indirect method and in accordance with IAS 7.
4. Discuss what inferences can be drawn from the above three statements in relation to the company’s financial position.
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