13.1 Wren received a legacy of 200,000 on 1 January 20X3 and on that date purchased a...
Question:
13.1 Wren received a legacy of £200,000 on 1 January 20X3 and on that date purchased a small retail business. The completion statement from the solicitor revealed the following:
£
Freehold shop property 100,000 Goodwill 20,000 Stock in trade 16,000 Trade debtors 4,000 Shop fixtures 26,000 Rates in advance to 31 March 20X3 1,000
£167,000 The legacy was used to discharge the amount due on completion and the balance was paid into a newly opened business bank account.
Wren had not kept proper records of his business transactions but was able to supply the following information:
1. A summary of the cash till rolls showed his shop takings for the year to be £255,050; this includes all cash received from debtors including those at 1 January 20X3.
2.The takings had been paid periodically into the bank after payment of the following cash expenses:
£
Wrapping materials 5,250 Staff wages and National Insurance 34,230 Purchases for resale 1,650 Petrol and oil 2,360 3. Personal cash drawings were estimated at £200 per week and goods taken for own use at £20 per week.
4. A summary of the bank statements showed:
£ £
Legacy - residual balance 33,000 Purchases for resale 148,630 Sale of fixtures (cost £2,000)
1,300 Motor expenses 7,280 Loan at 10 per cent p.a. Robin 20,000 Delivery van (cost - 1 April 20X3)
12,000 Cash banked 199,000 General expenses 6,250 Loan interest (6 months to 30 September)
1,000 Private cheques 13,290 Electricity 2,280 Rates (year to 31 March 20X4)
5,000 Balance per statement (on 31 December 20X3)
57,570 £253,300 £253,300 A cheque drawn on 28 December 20X3 of £1,250 for goods purchased was presented at the bank on 4 January 20X4.
5. During the year bad debts of £2,230 arose and were irrecoverable. The trade debtors on 31 December 20X3 amounted to £6,370 of which £1,000 is doubtful and for which provision should be made.
6. On 31 December 20X3 there were £
Stock in trade 23,600 Stock of wrapping materials 530 Trade creditors - purchases 3,580 Electricity accrued 500 Accountancy fees accrued 1,000 Cash float in till 1,800 7. The difference arising on the cash statement was discussed with Wren but remained unexplained and was dealt with in an appropriate manner.
8. Depreciation is to be provided at the rate of 10 per cent per annum on the fixtures and 20 per cent per annum on the van.
You are required to prepare in vertical form:
(a) Trading and profit and loss account for the year ended 31 December 20X3; and
(b) Balance sheet as on that date.
Step by Step Answer:
Principles Of Financial Accounting
ISBN: 9780273676300
3rd Edition
Authors: Ian Gillespie, Richard Lewis, Kay Hamilton