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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 cost89,000
Provision for depreciation - office equipment34,500
Bad debts1,450
Purchases480,000
Sales645,000
Returns outwards5,600
Return inwards12,500
Carriage inwards48,500
Carriage outwards23,400
Salaries and wages96,200
Stationery and printing4,200
Lighting and heating charges8,400
Telephone charges7,200
Inventory 1 January 201962,000
Provision for doubtful debts - 1 January 20192,200
Drawings25,000
Sales commission12,900
Advertising charges9,600
Office rent33,000
Accounts receivable72,500
Accounts payable42,800
Bank overdraft53,750

Additional information:

  1. Inventory at 31 December 2019: RM84, 000.
  2. Office furniture and equipment are to be depreciated at 10% per annum on cost.
  3. 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.
  4. 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.
  5. Advertising charges include RM500 paid on 31 December 2019 for advertising made on 2 January 2020.
  6. Accrued expenses are:
 RM
Salaries and wages1,250
Lighting and heating charges600
Telephone charges550
Office rent3,000
Bank overdraft interest1,850

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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