Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Dave Delightful is the owner of a fast food outlet, Daves Deli, which sells takeaways in High Street, Exeter. Dave has asked you to assist

Dave Delightful is the owner of a fast food outlet, Daves Deli, which sells takeaways in High Street, Exeter. Dave has asked you to assist with the preparation of his financial records, as he wishes to ask the bank for a loan to allow him to expand his business.

The following is an alphabetical list of the accounts in the pre-adjustment Trial Balance for Daves Deli as at 31 December 2020.

image text in transcribed

The following additional information must still be taken into account:

1. Interest income of 225 had incorrectly been included in the sales figure.

2. A Trade Receivable, Annie Plinkerton, had been given a trade discount of 75 on a large order of takeaways which was to be paid on 5 January, but as the bookkeeper did not know what was required, this order was recognised at its full value.

3. A donation of 500 to a local school had incorrectly been debited to Daves drawings account.

4. The business has rented the current premises since 1 July 2018. Rental was initially set at 2,500 per month and it was agreed that this would increase by 250 per month on 1 July each year. Dave was not sure whether the rent had been fully paid for the current year.

5. A bonus of 5% of the net sales figure is to be shared equally amongst all members of staff. This amount must still be calculated, the relevant transactions passed, and payments will be made in due course.

6. Dave was unaware that any inventory taken from the business for his personal use needed to be recorded. Goods with a selling price of 1,500 had been taken by Dave for his personal use. The business uses a mark-up of 50% on the cost price of all merchandise.

7. Depreciation must still be calculated as follows: Equipment: Depreciation on equipment is calculated at 20% p.a. using the straight line basis. Equipment is expected to have a 2,500 residual value at the end of its useful life. No equipment had been bought or sold during the current financial year. Vehicles: Depreciation on vehicles is calculated at 15% p.a. using the straight line basis, with no residual value. A vehicle with a cost price of 25,000 and a carrying amount of 9,375 was sold on 31 December 2020 for 10,000 cash. A new vehicle with a cost price of 50,000 was purchased for cash on 31 December 2020. The bookkeeper was uncertain how to account for the purchase and sale of the vehicles and consequently only recorded the cash transactions as a debit or a credit with the corresponding contra-entries being debited and credited to the capital account.

8. The business maintains a Provision for Doubtful Debts of 2% of the Trade Receivables balance at each year end.

9. A delayed telephone bill for 2020, totalling 1,450, was received after the end of the financial year and is outstanding.

10. Stationery on hand amounted to 550 at the end of the financial year.

Required:

1. Prepare the necessary journal entries to ensure that the businesss accounts correctly reflect the income and expenditure relevant to the 2020 financial year end. Narrations are not required. Where necessary round off to the nearest pound.

2. Prepare the Non-current Assets section of the Statement of Financial Position as at 31 December 2020.

DR CR 59 250 146 875 14 500 1 352 750 975 000 3 750 5 500 200 000 6 250 34 425 1 000 000 Accumulated Depreciation: Equipment (1 January 2020) Accumulated Depreciation: Vehicles (1 January 2020) Bad Debts Expense Capital Cost of Sales Depreciation Drawings Equipment at cost Fixed Deposit Inventory (31 December 2020) Land and Buildings at cost Provision for Doubtful Debts (1 January 2020) Rent Expense Salaries and Wages Sales Sales Returns Stationery Expense Stationery on Hand (1 January 2020) Telephone Expense Trade Payables Trade Receivables Vehicles at cost Water and Electricity Expense 4 025 31 000 305 000 1 209 200 4 500 7 000 1 250 20 000 326 200 252 250 225 000 12 875 3 098 300 3 098 300

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting, Representation And Responsibility

Authors: Niels Joseph Lennon

1st Edition

0367540436, 9780367540432

More Books

Students also viewed these Accounting questions

Question

a. Did you express your anger verbally? Physically?

Answered: 1 week ago