Question
in-class exercise that confused me today: The following trial balance for the year ended 31 December 2019: Debit () Credit () Capital 105,000 Drawings 95,000
in-class exercise that confused me today:
The following trial balance for the year ended 31 December 2019:
Debit () | Credit () | |
Capital | 105,000 | |
Drawings | 95,000 | |
Purchases | 126,740 | |
Sales | 262,900 | |
Inventory (1 Jan 2019) | 10,500 | |
Fixtures and Fittings at cost | 64,000 | |
Provision for depreciation: fixtures and fittings | 6,400 | |
Motor Car | 20,000 | |
Provision for depreciation: motor car | 7,500 | |
Rent | 6,500 | |
Heat and light | 3,520 | |
Wages and salaries | 14,445 | |
Motor expenses | 3,250 | |
Insurance | 3,600 | |
Bank | 15,250 | |
Cash | 215 | |
Loan (J. Lender) | 15,000 | |
Bad debts | 325 | |
Provision for doubtful debts | 525 | |
Accounts receivable | 36,500 | |
Accounts payable | 2,500 | |
Discounts allowed | 100 | |
Discounts received | 120 | |
399,945 | 399,945 |
The business has also provided you with the following information which is not reflected in the trial balance above:
-
Inventory at 31 December 2019 has been valued at 12,300.
-
Loan interest is 5% per year on the 15,000 borrowed.
-
They made a payment of 1,500 for rent on 1 November 2019, which was for the quarter ended 31 January 2020.
-
Estimated cost of gas and electricity owing at the year-end was 150.
-
The wages for the last week in December, amounting to 450 had not yet been paid.
-
The business makes a provision for bad debts of 1% of the outstanding receivables at the year end.
-
Depreciation is charged on fixtures and fittings at 10% on cost and on motor vehicles at 25% using the reducing balance method.
The business has used the balance of 15,250 for the bank which is the balance per their accounting records. The balance shown on the business bank statement at 31 December 2019 is 15,580. You identify the following when comparing the bank statement to Kellys accounting records and note that the business has not produced a bank reconcilation:
-
Amounts received in the last few days of December 2019 totalling 220 did not clear in the bank until 2 January 2020.
-
the business paid a garage bill by cheque on 23 December for 550. The cheque had not been cleared through the bank at the year end.
Prepare the businesss income statement, statement of financial position for the year ended 31 December 2019 and a bank reconciliation as at 31 December 2019.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started