In each of the following situations, discuss whether the item would be included in the profit and loss account for the year to 31 December 1990 and at what amount. The business is that of a builder and builder's merchant.

(a) Sales of general building materials by the builder's merchant to third parties amounted to £26 000 of which £24 000 was received in cash by 31 December 1990 and the remainder was received in January 1991.

(b) Three house conversions were started and completed during the year at a price of £24 000 each. These amounts were received in full by 31 December 1990.

(c) One office conversion which had been 60'% complete at the end of 1989 was completed in 1990 at a price of £40000.

Invoices on account amounting to £24 000 had been sent out in 1989.

(d) The building materials sold to third parties during the year had cost

£14000 of which all but £1000 had been paid for by December 1990.

(e) The building materials used on the three houses referred to in (b)

had cost £18 000 and had all been paid for by December 1990.

(f) Wages paid in respect of the houses mentioned in

(b) amounted to

£20 000 for the year.

(g) The costs relating to the office mentioned in

(c) were as follows:

Wages paid in 1989 Wages paid in 1990 Materials used in 1989 Materials used in 1990

£8000

£6000

£8000

£7000

(h) The storemen's wages in the yard amounted to £8000 for the year.

( i) The owner who worked full time in the business paid himself a salary of £9000 and also withdrew £1000 in cash from the business to pay a pressing personal debt.

(j) The motor expenses paid in the year were broken down as follows:

Annual road tax on three vans paid I April Annual insurance on vans paid I April Repairs and petrol for vans Annual road tax on owner's car paid 1 June Annual road tax on owner's wife's car paid 1 June Annual insurance on owner's car paid I June Annual insurance on owner's wife's car paid I June Repairs and petrol for the two cars

£300*

£480*

£600

£100*

£100

£120'

£120*

£800

*The charge for road tax had gone up by £2() per vehicle in the previous year and insurance premiums had risen by 20°1<>. All these charges are paid annually in advance.

(k) The following bills were also paid during the year:

Electricity (payable at end of each I February quarter) I May Rent for 1 year to I April 1991 TV licence to I April 1991 I August I November I Aprill990 I April 1991

£54

£45

£45

£60

£400*

£60*

*The rent had remained the same as in 1989 but the TV licence had gone up from £50 to £60.