Balance Sheet Preparation
1. Authorized share capital of the company is 100 000 ordinary shares of $ 1 each, of which 75,000 were issued and fully paid at $ 1.15 per share.
2. All fixed assets were bought on 1 June 2002,the date the company was incorporated.
Depreciation is applied as follows.
(i) Motor vehicles– 40 % reducing balance.
(ii) Equipment– 20 % straight line,after taking into account a 10 % residual balance.
3. A dividend of $ 0.12 per share has been proposed for the year ended 31 May 2005.
4. A provision for doubtful debts of 5% of debtors at 31 May 2005 is to be created.
5. Stock costing $ 2500 had been sent to a customer on a sale or return basis on 25
May 2005.It had been neither returned nor sold by the year end and no entries regarding it had been made in the accounts.
(a) James De first Ltd’s balance sheet as at 31 May 2005 in vertical format.