Zahra and Panya hold the shares in, and act as directors of, Q Limited. The directors of Q Limited have given the following trial balance.
Q Limited
Trial balance on 31 January 2024
Debit / Credit totals:
Revenue $78 000 (credit)
Purchases $38 200
Rent and insurance $10 600
Directors’ salaries $19 000
General expenses $3 420
Advertising $5 400
Dividends paid $2 500
Fittings at cost $18 000
Provision for depreciation of fittings $5 400 (credit)
Inventory at 1 February 2023 $2 950
Cash at bank $915
Trade payables $2 288 (credit)
Ordinary share capital $13 000 (credit)
Retained earnings $2 297 (credit)
Further information:
1 Inventory at 31 January 2024 was valued at $4720.
2 Depreciation on fittings is to be charged at 10% per annum using the straight-line method.
3 Payment for advertising, $75, is outstanding at 31 January 2024.
4 No dividends were outstanding at 31 January 2024.
(a)[6]
Prepare the income statement for Q Limited covering the year ended 31 January 2024.
(b)[3]
Calculate the retained earnings as at 31 January 2024.
(c)[6]
Prepare the statement of financial position for Q Limited on 31 January 2024.
(d)[5]
Advise Zahra and Panya on whether they should proceed with the 100% rise in spending on advertising or not. Support your answer with two arguments for and two arguments against this increase.
Worked solution & mark scheme
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