SECTION B

Answer question 1 and not more than one further question from this section. Question

1.
Jagger plc prepares its financial statements for the year ended 31 March. The company has
extracted the following trial balance at 31 March 2017:

£000 £000
6% Preference Shares (redeemable 2020) 10,250
Trade payables 8,120
Trade receivables 9,930
Accumulated depreciation at 1 April 2016:
Plant & Equipment 6,460
Vehicles 1,670
Administrative expenses 16,141
Bank 456
Purchases returns 106
Distribution costs 9,060
Dividends paid 5,800
Dividends received 850
Equity shares, 20p each, fully paid 19,000
Dividend paid on Preference Shares 615
Inventories at 1 April 2016 4,852
Investments non-current 15,000
Plant & equipment, at cost 27,315
Proceeds from issue of share capital 1,500
Provision for doubtful debts at 1 April 2016 600
Purchases 94,160
Retained earnings at 1 April 2016 13,677
Sales 125,900
Taxation 4
Vehicles, at cost 5,720

£188,59 £188,593
3

The following further information is available.

1. Non-current assets are to be depreciated as follows:

Plant & equipment 20% per annum straight-line
Vehicles 25% per annum reducing balance

2. An invoice for telephone charges for the quarter ended 1 May 2017 for £15,000 was
received by the company after the above trial balance was extracted. Telephone expenses
are included in administrative expenses.

3. The company paid £156,000 insurance premiums for the year 1 November 2016 to 30
October 2017. This amount is included in administrative expenses.
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4. The closing inventory at 31 March 2017 was £5,180,000.

5. Subsequent to drawing up the trial balance, the company has been

informed that a major customer owing £348,000 has gone into
administration, and Jagger plc will receive only 25% of the amount
owing. Jagger plc has also decided to change its provision for doubtful
debts to 5% of the remainder of receivables balances.

6. Tax due for the year to 31 March 2017 is estimated at £30,000. The
taxation balance in the trial balance relates to an overestimate of the tax
charge in the year ended 31 March 2016.

7. On 1 October 2016, Jagger plc issued 5,000,000 20p equity shares at

a premium. The proc
share capital account’.

8. The Directors have proposed a final equity dividend for the year ended
31 March 2017 div of 5p per share payable in May 2017.

Required:
(a) Prepare Jagger plc’s (£000s to one place of decimals):

i) Income Statement for the year ended 31 March 2017.

(10 marks)

ii) Statement of Changes in Equity for the year ended 31 March 2017.
(4 marks)

iii) Statement of Financial Position at 31 March 2017

. (10 marks)

(b) Explain, and justify, the different treatments of preference shares and
equity and the related dividends in the financial statements.
(6 marks)