ACCA · Question 60 · Interpretation of financial statements

Section B - Case 2: Single Entity Accounts & Ratio Analysis

*Scenario: Horizon Wind Farms Ltd has prepared draft financial statements for the year ended 31 December 20X8. The draft net profit is $850,000. Draft Revenue is $4,000,000 and Cost of Sales is $2,200,000. The following adjustments have not yet been processed:

1. Depreciation on new turbines of $50,000 was omitted.
2. An annual insurance premium of $12,000 paid on 1 July 20X8 was expensed in full.
3. Closing inventory was overvalued by $30,000.
4. An irrecoverable debt of $15,000 needs to be written off.
   Equity comprises Share capital $1,000,000 and Retained earnings $2,000,000. There is a long-term loan of $1,500,000.*

Calculate the Gearing Ratio using the unadjusted draft equity figures. (Formula: Debt / (Debt + Equity). Enter as a percentage to one decimal place, e.g., 30.5)