Question1
The Earl sports Ltd has been approached by the Duke Ltd who run a small schain of stores in the London area, to supply them on a monthy basis with team kits. The business has had a number of defaults on payments by small retailers, and the Earl sports Ltd is keen to establish the viability of the Duke Ltd, who wish to buy on 30 days’ credit.
The summaries of the income statement and statement of financial position of the Duke Ltd are given below.
|
The Duke Ltd |
||||
|
Income statements for the year ended 30 June |
||||
| 2019 | 2018 | |||
|
£’000 |
£’000 |
£’000 |
£’000 |
|
| Sales |
388 |
360 |
||
| Cost of sales | ||||
| Opening inventories |
40 |
20 |
||
| Purchases |
310 |
300 |
||
| Closing inventories |
47 |
40 |
||
|
303 |
280 |
|||
| Gross profit |
85 |
80 |
||
| Expenses(including interest) |
72 |
70 |
||
| Profit for the years |
13 |
10 |
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