Itita Selfridge is a retailer who had not kept a full set of accounting records. The following is a summary of her bank transactions in her cash book for the year ended December 31, 2006. Receipts $ Payments $ Debtors 1,384,500 Trade Creditors 745,540 Cash Sales 950,080 Rent 312,000 Loan 300,000 Electricity 40,720 Loan Principal 100,000 Water 13,780 Salary 613,600 Accounting Fee (2005) 32,000 Telephone 23,080 Computer Equipment 300,000 Drawings 4,000 Cash purchases 301,440 2,634,580 2,486,160 You are given the following information 1 Favourable bank balance per cash book on January 1, 2006 amounting to $106,920 2 During the financial year discounts allowed by trade creditors amounted to $440 and those allowed to trade debtors $800. 2 3 During the financial year goods returned by trade debtors amounted to $1,600 and goods returned to trade creditors amounted to $6,900. 4 During the financial year a trade debt of $1,200 owed by Linda Gray was set off against the $2,000 owing to the same Linda Gray a trade creditor. 5 Jane Hutt, a cash sales customer returned goods during the financial year amounting to $700. Jane Hutt was repaid her $700 from the daily cash sales. 6 Itita Selfridge grants a credit period of 30 days to trade debtors. The closing trade debtors balance includes a debt of $800 from Fay Brown. The goods were sold to Fay in November 2005. Fay went to the United Kingdom for a two (2) weeks vacation in February 2006. On December 31,2006 Fay was still in the USA. 7 The amount of cash received from cash sales were all paid into the bank with the exception of: $2,800 Plumbing repairs $4,000 Donation to community Christmas party 8 Itita Selfridge keeps a cash float of $10,000 for change in her retail outlet. 9 Itita Selfridge agreed to pay her daughter Victoria, a commission of 5% of the net profit after charging such commission, for working in the retail outlet on Sundays. (Round to the nearest dollar) 10 The computer equipment was purchased on April 9, 2006. Depreciation should be calculated on the computer equipment on the straight line basis at a rate of 20% per annum on cost. It is the policy of the business to charge a full months depreciation in the month of acquisition or disposal. 11 The accounting fee for preparing the 2006 financial statements is estimated at $35,200. 12 On April 1, 2006 Itita Selfridge received a loan of $300,000 from her mother Giselle Selfridge. Interest should be charged on the reducing balance at a rate of 10% per annum. The first interest payment is to be made on March 31, 2007. The principal is being paid in equal instalments of $100,000 on September 30, 2006, September 30, 2007 and September 30, 2008. 13 December 31,2005 December 31, 2006 $ $ Stock 138,400 77,300 Furniture (at cost) 100,000 100,000 Allowance for depreciation furniture 30,000 40,000 Trade debtors 6,900 2,360 Trade creditors 1,420 5,200 Rent paid in advance - 24,000 Accrued electricity 3,500 3,660 Required: 3 (a) Prepare the Trade Debtors Control Account (3 marks) (b) Prepare the Trade Creditors Control Account (3 marks) (c) Prepare the Statement of Affairs as at December 31, 2005 (6 marks) (d) Prepare the Income Statement for the year ended December 31, 2006 (11 marks) (e) Prepare the Balance Sheet as at December 31, 2006