Question
Nour Youssef operates as a sole trader. Below is a trial balance extracted from her books as at 31 December 2020. Trial balance for Nour
Nour Youssef operates as a sole trader. Below is a trial balance extracted from her books as at 31 December 2020.
Trial balance for Nour Youssef as at 31 December 2020
| Debit | Credit |
| _ . | |
Sales revenue |
| 685,000 |
Inventory (as at 1 January 2020) | 95,800 |
|
Purchases | 624,200 |
|
Non-current assets at cost: |
|
|
Equipment | 100,000 |
|
Motor vehicle | 110,000 |
|
Accumulated depreciation: |
|
|
Equipment |
| 20,000 |
Motor vehicle |
| 10,000 |
Insurance | 14,700 |
|
Rent | 30,000 |
|
Heating and lighting | 10,000 |
|
Salaries and wages | 40,000 |
|
Motor expenses | 15,300 |
|
Miscellaneous expenses | 28,000 |
|
Receivables | 100,000 |
|
Allowance for receivables |
| 4,000 |
Payables |
| 100,0 00 |
Cash | 71,000 |
|
Bank loan |
| 100,000 |
Capital |
| 320,000 |
Total | 1,239,000 | 1,239,000 |
Additional information is provided for use in preparing the companys adjustments:
- The value of closing inventory is 90,000.
- On November 1, Nour Company borrowed 100,000, at 6% annual interest, from the National Bank. Nour has 120 days before the first payment is required.
- Nour has paid her rent until 31 May 2021. Her annual rent is 24,000.
- Office equipment has a useful life of ten years and a residual value of 0. It is to be depreciated by 20% on reducing balance basis.
- The motor vehicle has a useful life of eight years and an estimated residual value of 30,000.
- Nour finds that receivables of 8,000 need to be written off as irrecoverable.
- The allowance for receivables is to be set at ten per cent of the remaining outstanding receivables as at 31 December 2020.
- The heating bill will arrive on 7 January and about 3,000 is expected to relate to the period until 31 December.
Required:
- Make the end-of-period adjustments entries
- Prepare Nours income statement for the year ended December 31, 2020.
- Prepare Nours balance sheet as at December 31, 2020.
- How do the adjusting entries differ from other journal entries?? Explain why adjusting entries are needed.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started