At 31 March 2021, the trial balance of HV Limited was presented as follows.
HV Limited
Trial Balance as at 31 March 2021
Debit ($): Inventory at 1 April 2020 5820; Purchases 64900; Rent and insurance 9280; Wages 24750; Operating expenses 8500; Fittings at cost 200000; Trade receivables 12500; Bank 13765; Dividend paid on ordinary shares 5600.
Credit ($): Revenue 145000; Provision for depreciation of fittings 72000; Trade payables 6615; 4% Debentures (repayable 1 April 2031) 30000; Ordinary share capital 70000; Retained earnings 21500.
Totals: Debit **345115**, Credit **345115**.
Further information:
1 Inventory at 31 March 2021 was valued at $6090.
2 Depreciation on fittings is to be charged at 20% per annum using the reducing balance method.
3 Rent includes a payment of $1800 for the 3 months from 1 March 2021 to 31 May 2021.
4 Accrued wages at 31 March 2021 were $2250.
5 No debenture interest has been paid for the year ended 31 March 2021.
6 No dividends were outstanding at 31 March 2021.
7 $2000 is to be transferred to a general reserve on 31 March 2021.
(a)[8]
Prepare an income statement for HV Limited covering the year ended 31 March 2021.
(b)[5]
Prepare the statement of changes in equity for HV Limited for the year ended 31 March 2021.
(c)[3]
Calculate the return on capital employed for the year ended 31 March 2021, and give your answer correct to two decimal places.
(d)[4]
State two ways in which ordinary shares differ from preference shares.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme.