Question 1
Edwards has recently retired and wishes to sell his house 'The Larches' for £250,000 and purchase 'Rose Cottage' for £140,000. There is a mortgage on 'The Larches' of £25,000. He instructs Able and Co, solicitors, to act on the sale and purchase.
The following events and transactions take place.
The rate of VAT is to be taken at 17.5%.
| 200- | |
| 6 February | Received cheque from Edwards for £200 on account of costs generally. |
| 20 February | HIP fee re 'The Larches' is paid from office account, amounting to £400 plus VAT. The invoice is made out to Edwards. The balance on client account is transferred to office account. |
| 22 February | As Edwards has no readily available cash for the deposit on 'Rose Cottage' a bridging loan is arranged with his bank, Abbey Bank PLC. The bank forwards a cheque for £14,000 to be used for the deposit. |
| 3 March | Contracts are exchanged for the sale of 'The Larches', the deposit of £25,000 being paid to Able and Co as stakeholders. Contracts are also exchanged on the purchase of 'Rose Cottage' and a cheque for the deposit of £14,000 is forwarded to the seller's solicitors, who are also holding as stakeholder. |
| 20 March | A completion statement is sent to the buyer's solicitors in respect of the sale of 'The Larches' showing the balance due being £225,000. The solicitors for the seller of 'Rose Cottage' confirm that the balance due on completion will be £126,000. |
| 23 March | An invoice is received from the estate agent acting for Edwards, showing commission due of £4,000 plus VAT. |
| 29 March | Bills of costs in respect of the sale and purchase are sent to Edwards, being £680 plus VAT in respect of the sale of 'The Larches' and £360 plus VAT in respect of the purchase of 'Rose Cottage'. |
| 2 April | Completed sale of 'The Larches' and purchase of 'Rose Cottage'. The bridging loan is repaid to the Abbey Bank PLC together with interest of £80. The mortgage of 'The Larches' is redeemed, being £24,500, taking into account payments made and including interest due. |
| Stamp duty of £1,400 is paid. | |
| 8 April | Paid the estate agent's commission plus VAT. Paid the Land Registry fees of £120. Transfer costs and disbursements from client account to office account, having received confirmation that Edwards agrees the costs. |
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Question 1
Draw up a financial statement for Edwards and show the ledger card of Edwards on the books of Able and Co, making all the necessary entries to deal with the events and transactions. Both the sale and purchase should be dealt with on one ledger account for Edwards. Use this Word document to compile your answer. Have you completed the financial statement and ledger card? |
