Dickson Swartz is a final-year accounting student. During the second semester of his first year at university, he realised that he was in need of some extra cash. As a result, he started to sell cell phone covers from his residence room. Based on a lecture he attended, he started trading as a sole proprietor under the name Whale Traders (Whale). Whale is not a registered VAT vendor.

Dickson Swartz has recently decided that he would like to operate his business on a full-time basis once he has finished his studies at the end of this year. In order to pursue this dream, he will need some additional funding. He has approached ABC Bank to provide him with the necessary finance. The bank has requested financial statements for Whale. Although Dickson Swartz is an accounting student, he has missed a few classes due to his business and has therefore approached you to assist him in drafting the necessary documentation for the loan application.

Dickson Swartz has provided you with the following information in relation to Whale for the year ended 30 September 2021:

1. Whale had cash and credit sales during the year under review. Credit sales amounted to N$80 000 after taking into account N$4 000 in trade and early settlement discounts granted. At the end of the year, there were no outstanding debtors for which settlement discounts are expected to be granted.

2. Whale charges a 20% profit on the cost of goods in relation to cash sales and 25% profit on the cost of goods in relation to credit sales. Due to the increased profit margin, no interest is charged on credit allowed.

3. Whale uses the perpetual inventory system.

4. Whale had two employees, Peter and Paul, during the year. Peter was out of the country around year-end and requested that his salary of N$1 800 for September 2021 should only be paid upon his return. Peter replaced Paul after he left unannounced. Upon Pauls departure, it was noted that some of the inventory was missing. Dickson Swartz was, however, unable to determine the total loss in inventory. He decided to include any loss in the accounts as an expense.

5. Whale has rented a small shop in close vicinity to the campus since 1 April 2021 at a monthly rental of N$1 000. Rent is paid in advance at the end of the month for the following month.

6. Upon signing of the lease agreement, Dickson Swartz realised that they will need a cash register for capturing transactions and safe keeping of cash in the new rented space. Whale did not have the necessary cash on hand and Dickson Swartz approached his dad to provide Whale with the necessary funding. Mr Swartz agreed to provide a loan to Whale at 15% interest per annum. The loan is repayable within three years from the date that the loan was granted.

7. Equipment is depreciated over five years. The only equipment purchased was the cash register.

8. Upon moving into the new rented space, Whale bought some stationery to use for business purposes. At year-end, there was still some stationery on the premises with a value of N$500.

9. All inventories are bought on credit. Inventory is the only purchases that are made on credit. All other expenses are paid in cash or via EFT (electronic fund transfer).

10. One of Whales customers cancelled his studies during the year and Dickson Swartz was unable to locate him, as a result his debt of N$200 was written off.

11. Dickson Swartz kept an Excel spreadsheet with the details of all debtors; the spreadsheet, however, became corrupted and he is unable to access this information; he is therefore unable to determine the debtors closing balance at year-end.

An analysis of the years bank statement reflects the following:

30 Sept 2021

N$

DEPOSITS Cash sales180 000Debtor payments57 800Long-term loan: Mr Swartz?PAYMENTS Creditors100 000Salaries19 260Rent paid7 000Stationery1 050Sundry operating expenses700Equipment (1 April 2021)20 000

The following balances were available:

30 Sept 202030 Sept 2021 N$N$Inventory34 50032 500Trade receivables25 000?Trade payables27 000147 500

REQUIRED

MARKSSub totalTotal1.

Prepare the statement of profit or loss and other comprehensive income of Whale for the year ended 30 September 2021.

Communication skills layout and structure

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TOTAL MARKS 15 Note: Comparatives are not required