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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:

  1. Inventory at 31 December 2019 has been valued at 12,300.

  2. Loan interest is 5% per year on the 15,000 borrowed.

  3. They made a payment of 1,500 for rent on 1 November 2019, which was for the quarter ended 31 January 2020.

  4. Estimated cost of gas and electricity owing at the year-end was 150.

  5. The wages for the last week in December, amounting to 450 had not yet been paid.

  6. The business makes a provision for bad debts of 1% of the outstanding receivables at the year end.

  7. 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:

  1. Amounts received in the last few days of December 2019 totalling 220 did not clear in the bank until 2 January 2020.

  2. 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.

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