Based on the balance sheet below:

Use your trial balance and the additional information below to prepare:

a. the statement of profit or loss for the two months ended on 31 December

2018 (in a vertical format).

b. the statement of financial position as at 31 December 2018 (classify assets

and liabilities into non-current and current).

Additional information at the year-end requiring adjustments in the financial

statements:

a)Depreciation on office equipment is recorded on the straight-line basis and

calculated per month. The equipment is estimated to have the residual value of

6,000. The useful life is 3 years. Consider November as a full month.

b)) Salaries owed to employees for December are 8,500.

c) The bank loan has an interest rate of 6% per annum. No interest has been paid

yet.

d) Closing inventory as at 31 December is 7,000.

e) Show rent expense incurred by and rent prepayment as at 31 December.

(The average gross profit margin in the given

industry is 37%). What recommendations would you give to Rob Rowan, the

owner of the business for the future?

Working - Journal Entries:
Date	Account	Debit	Credit
Nov 1	Cash and Bank	60,000
Nov 1	R.Rowan - Capital		60,000
Nov 2	Rent Expense	4,000		(12000/6*2)
Nov 2	Prepaid Rent	8,000
Nov 2	Cash and Bank		12,000
Nov 3	Office Equipment	24,000
Nov 3	Cash and Bank		24,000
Nov 5	Purchases/Inventory	15,000
Nov 5	Trade Payable		15,000
Nov 10	Trade Receivable	14,000
Nov 10	Sales Revenue		14,000
Nov 15	Purchases/Inventory	10,400
Nov 15	Trade Payable		10,400
Nov 18	Trade Payable	15,000
Nov 18	Cash and Bank		15,000
Nov 19	Cash and Bank	14,000
Nov 19	Trade Receivable		14,000
Nov 30	Cash and Bank	30,000
Nov 30	Bank Loan Payable		30,000
Dec 1	Trade Receivable	18,000
Dec 1	Sales Revenue		18,000
Dec 5	Salaries Expense	7,000
Dec 5	Cash and Bank		7,000
Dec 7	Trade Payable	5,200		10400/2
Dec 7	Cash and Bank		5,200
Dec 16	R.Rowan - Drawing	15,000
Dec 16	Cash and Bank		15,000
Dec 30	Utility Expense	800
Dec 30	Cash and Bank		800

Part a and b:

Cash and Bank
Debit		Credit
Nov 1	60,000	Nov 2	12,000
Nov 19	14,000	Nov 3	24,000
Nov 30	30,000	Nov 18	15,000
		Dec 5	7,000
		Dec 7	5,200
		Dec 16	15,000
		Dec 30	800
Ending	25,000
Trade Receivable
Debit		Credit
Nov 10	14,000	Nov 19	14,000
Dec 1	18,000
Ending	18,000
Purchases/Inventory
Debit		Credit
Nov 5	15,000
Nov 15	10,400
Ending	25,400
Office Equipment
Debit		Credit
Nov 3	24,000
Ending	24,000
Bank Loan Payable
Debit		Credit
		Nov 30	30,000
		Ending	30,000
Trade Payable
Debit		Credit
Nov 18	15,000	Nov 15	10,400
Dec 7	5,200	Nov 5	15,000
		Ending	5,200

R Rowan Capital
Debit		Credit
Nov 1	60,000
Ending	60,000
R Rowan Drawing
Debit		Credit
		Dec 16	15,000
		Ending	15,000
Sales Revenue
Debit		Credit
		Nov 10	14,000
		Dec 1	18,000
		to Income Summary	32,000
Salaries Expense
Debit		Credit
Dec 5	7,000
to Income Summary	7,000
Rent Expense
Debit		Credit
Nov 2	4,000
to Income Summary	4,000
Prepaid Rent
Debit		Credit
Nov 2	8,000
Ending	8,000
Utilities Expense
Debit		Credit
Dec 30	800
to Income Summary	800

Part c

Accounts	Debit	Credit
Cash and Bank	25,000
Trade Receivable	18,000
Prepaid Rent	8,000
Purchases/Inventory	25,400
Office Equipment	24,000
Trade Payable		5,200
Bank Loan Payable		30,000
R.Rowan - Capital		60,000
R.Rowan - Drawing	15,000
Rent Expense	4,000
Salaries Expense	7,000
Sales Revenue		32,000
Utility Expense	800
Total	127,200	127,200