Financial statements

CLERC
You are about to commence preparation of the financial statements of Clerc for the year
ended 31 December 20X9. The entity’s trial balance as at 31 December 20X9 is shown
below.
Debit Credit
$ $
Share capital
Share premium
100,000
20,000
Revaluation reserve at 1 January 20X9 50,000
Trade and other payables 13,882
Land & buildings – value/cost 210,000
accumulated depreciation at 1 January 20X9 30,000
Plant and machinery – cost 88,000
accumulated depreciation at 1 January 20X9 16,010
Trade and other receivables 8,752
Accruals 3,029
5% bank loan repayable 20Y3 40,000
Cash and cash equivalents 6,993
Retained earnings at 1 January 20X9 23,893
Sales 178,833
Purchases 130,562
Distribution costs 7,009
Administrative expenses 7,100
Inventories at 1 January 20X9 17,331
Bank interest received 100

(i) The interest for the year on the bank loan has not yet been paid or accrued.
(ii) Land, which is non-depreciable, is included in the trial balance at a value of $110,000.
At 31 December 20X9 it was revalued to $150,000 and this revaluation is to be
included in the financial statements.
(iii) Depreciation is to be provided for the year to 31 December 20X9 as follows:
Buildings 10% per annum Straight line basis
Plant and machinery 20% per annum Reducing balance basis
As part of the buildings contains the office accommodation and part of the buildings
contains the plant and machinery, the depreciation for the ‘Buildings’ should be
allocated between cost of sales and administrative expenses as follows:
%
Cost of sales 40
Administrative expenses 60
(iv) Included in trade receivables is a balance of $1,720 that is considered to be
irrecoverable due to the customer going into administration and the Directors of
Clerc have decided to write off this receivable.
(v) Inventories at the close of business on 31 December 20X9 were valued at cost of
$19,871. Included in this amount was an inventory line at a cost of $4,000 that, due
to change in legislation, is now illegal. Clerc could rectify the items at a cost of
$2,500 and plans to do so. The items usually retail to customers at $6,000.
(vi) The tax charge for the year has been calculated at $7,162.

Hi. Should we substract accruals which shown in trial balance from gross profit when we preparing SOPL?
Thank you in advance