Question
The following are ledger balances extracted from the books of Forte Enterprise at 31 December 2019. RM Capital 200,000 Office furniture and equipment at cost
The following are ledger balances extracted from the books of Forte Enterprise at 31 December 2019.
RM | |
Capital | 200,000 |
Office furniture and equipment at cost | 89,000 |
Provision for depreciation - office equipment | 34,500 |
Bad debts | 1,450 |
Purchases | 480,000 |
Sales | 645,000 |
Returns outwards | 5,600 |
Return inwards | 12,500 |
Carriage inwards | 48,500 |
Carriage outwards | 23,400 |
Salaries and wages | 96,200 |
Stationery and printing | 4,200 |
Lighting and heating charges | 8,400 |
Telephone charges | 7,200 |
Inventory 1 January 2019 | 62,000 |
Provision for doubtful debts - 1 January 2019 | 2,200 |
Drawings | 25,000 |
Sales commission | 12,900 |
Advertising charges | 9,600 |
Office rent | 33,000 |
Accounts receivable | 72,500 |
Accounts payable | 42,800 |
Bank overdraft | 53,750 |
Additional information:
- Inventory at 31 December 2019: RM84, 000.
- Office furniture and equipment are to be depreciated at 10% per annum on cost.
- A trade debtor with an outstanding balance of RM3, 500 was declared bankrupt on 31 December 2019 and the amount owed by him is to be written off. Provision for doubtful debts is to be adjusted to 2% of the accounts receivable.
- Returns outwards amounting to RM1, 000 to a supplier was debited to his account but wrongly recorded as returns inwards by debiting his Returns account.
- Advertising charges include RM500 paid on 31 December 2019 for advertising made on 2 January 2020.
- Accrued expenses are:
RM | |
Salaries and wages | 1,250 |
Lighting and heating charges | 600 |
Telephone charges | 550 |
Office rent | 3,000 |
Bank overdraft interest | 1,850 |
You are required to do the following:
(a) Prepare:
(i) A statement of profit and loss for the year ending 31 December 2019
(ii) A statement of financial position at 31 December 2019.
(b) In your opinion, is the financial performance of Forte Enterprise for the year ended 31 December 2019 satisfactory? Discuss possible reasons for the figure obtained. What could have been done to improve the profitability of the business? Your combined answer to Part (b) should be not more than 500 words.
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