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Below is the trial balance of Tommys Trailers at 5 April 2020. Trading account: Sales 1,420,000 Opening inventory 137,000 Purchases 914,000 Carriage inwards 1,770 Other

Below is the trial balance of Tommys Trailers at 5 April 2020.

Trading account:
Sales 1,420,000
Opening inventory 137,000
Purchases 914,000
Carriage inwards 1,770
Other revenues and expenses:
Income from repair services 14,520
Rent 33,000
Insurance 4,650
Advertising expense 2,910
Heating and lighting 4,120
Shop and office expenses 36,000
Salaries and wages 49,705
Discounts allowed 3,650
Carriage outwards 3,234
Balance sheet accounts:
Fixtures and fittings at cost 325,000
Fixtures and fittings accumulated depreciation at 6 April 2019 60,000
Motor vehicles at cost 148,000
Motor vehicles accumulated depreciation at 6 April 2019 51,600
Receivables 71,248
Allowance for receivables (at 6 April 2019) 3,100
Bank 19,200
Payables 49,325
Loan 50,000
Capital 144,000
Drawings 39,058
1,792,545 1,792,545

The following information is relevant.

  1. The closing inventory at 5 April 2020 is valued at 129,350.
  2. On 5 January 2020 Tommy sold a motor vehicle for 9,000. The customer was due to pay Tommys Trailers on 5 April 2020 but had not paid at the year-end. Nothing regarding the disposal transaction has been recorded in the accounts. This motor vehicle had been bought on 6 April 2017 for 16,000.
  3. On 5 October 2019, Tommy bought a new motor vehicle for 22,000 on cash terms. Tommy mistakenly recorded the purchase in the accounts as DR Fixtures & Fittings 22,000 / CR Bank 22,000.
  4. Depreciation on motor vehicles is provided at 20% per annum using the reducing balance basis on a monthly pro-rata basis. Depreciation on fixtures and fittings is provided at 15% per annum on the straight line basis, assuming no residual value. There were no purchases or disposals of fixtures and fittings during the year.
  5. Tommy estimates that 2,280 due from customers will be irrecoverable and must be written off.
  6. The allowance for receivables is to be set at 5% of net receivables at 5 April 2020.
  7. Rent includes a prepayment of 780.
  8. Insurance includes a prepayment of 960.
  9. The heating bill will arrive on 5 June 2020 and about 390 is expected to relate to the period until 5 April 2020.
  10. The long-term loan is repayable in 10 years time. Interest payable on the loan is 7% and will be paid once per year.

Required:

  • a.Prepare the income statement for Tommys Trailers for the period ended 5 April 2020. Show your workings, including a full non-current assets note.

    (25 marks)

  • b.Prepare the balance sheet for Tommys Trailers as at 5 April 2020. Show your workings.

    (15 marks)

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