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Lesley


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Wonder if anyone can help me with a mock question query where I cannot for the life of me see where they get their answer

1st January 2009 balance sheet as below

redraft the balance sheet

Total assets - current liabilities            850000

Long term liability

8% debentures                                   100000

Net assets                                           750000

Equity

170000 ordinary shares £1 each       170000

share premium                                   30000

revenue reserves                              450000

8% Preference shares                       100000

                                                          750000

 

During the year the following took place

  • retained profit for the year £145000
  • On 30 June a piece of land valued at cost £120,000 was revalued to £160,000
  • On 31 March a further 20,000 ordinary shares were issued at £1.30 and these were fully paid (cash was received and banked)
  • On 30th September 50% debentrues were redeemed at par

New totals assets less current liabilities will be ?

I took 850000 + 40000 (revaluation increase) + 26000 (shares sold and banked) = 916000 but answer is 1011000

Please can anyone help here no



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Spamkebab


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Hi Lesley,

Net assets are 75000 so that is your starting figure.



I've got:

Net Assets 750000
Ret Profit 145000
Reval 40000
Shares 26000
50% Deb. 50000

Total 1011000

With the debentures, you have decreased the amount by 50% the liability was 100000 now its 50000 leading to an increase in net assets.

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Lesley


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Thank you very much that all makes sense now - I knew that it had to be something to do with the debentures.

Lesley



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Spamkebab


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Hi Lesley, what course are you studying?


Neil.

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Lesley


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its ICB level 3 manual book-keeping course



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Spamkebab


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Oooo you start to get to the nitty gritty of it all around level 3.

I am AAT myself, same subject matter, different governing body.


Good luck.

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Lesley


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sorry to ask you another quick question

why would you start with the net assets and not the total assets less current liabilities figure?

Lesley



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Spamkebab


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It's just the way i worked it out Lesley.


I should have said deduct the 50000 debentures from your Total asset - Current Liability figure of 850000 leaving 800000 + 145000 + 26000 + 40000 = 1011000.


I didn't read the question properly, well i did but i didn't give the explanation needed.

You have basically used 50000 asset (credit) to cancel out the 50000 Debenture (debit)

Oops my bad.

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