INSTRUCTION: You must attempt this question Question 1 (40 marks) On 1 January 2015 Plunkett Manufacturing Company Limited was formed to make and sell widgets. The following information is available for its first year of trading. 1. On 1" January, 2 million ordinary shares were sold at their par value of 1 2. On 1st January 1.6 million was borrowed short-term from a bank, at 6% ending 31 December 2015: each. per year interest. The interest was paid at the end of December. No 3. In early January 200,000 was paid in cash for two years' premises 4. In early January a machine was purchased for 2,400,000. The machine interest on positive cash balances was received during the year. rental. will last for 10 years and have a zero residual value at the end of this period. The straight line method of depreciation will be used 5. During 2015, 6,000 widget castings were bought at 100 each. 480,000 was paid in cash during the year, and the rest was still owing at the year-end. 6. Operators' wages of 480,000 were paid. 7. During 2015, all 6,000 widget castings were machined by the operators into finished widgets. 8. During 2015, 5,000 finished widgets were sold at 400 each. 1,800,000 cash was received, and 200,000 was still receivable at year-end. Of the year-end receivables, 20,000 was not expected to be collected as the company had gone bankrupt. 9. Inventory must be valued at full cost, and hence an appropriate proportion of both operators' wages and depreciation must be included 10. Managers' salaries of 240,000 were paid. 11.At the end of 2015, 1 million of the bank loan was repaid. 12. Corporate tax for 2015 was provided for at 20% of profit before tax. None of this was paid during 2015 13.A dividend of E160,000 was paid in cash to shareholders during 2015 Page 2 of 1 Required:- () Prepare an Income Statement for Plunkett Manufacturing Company Limited for the year to 31 December 2015. (10 Marks) (i) Prepare a Statement of Financial Position (SoFP) for Plunkett Manufacturing Company Limited at 31 December 2015. (20 Marks) NOTE: Work in 000, rounding where necessary. Show your workings clearly (including the cash balance which should be fully calculated and not just the balancing item in the SoFP), and present a "clean copy of the requested two documents. If you make any assumptions, explain them briefly. (ii) Explain the main reasons why the annual proft reported by a typical manufacturing company may be subject to a significant margin of error. Answer generally, not specific to Plunkett. (10 Marks) Total 40 marks)