PLEASE PROVIDE EXPLANATION Clive started business on 1 January 2020. Although he had purchased goods early during the year in anticipation for projected sales, his sales plans did not materialise because of lockdowns caused by Covid-19. His accountant has extracted his trial balance at 31 December 2020: Andrew's Trial Balance as at 31 December 2019 Capital 16.000 Purchases 21,000 15,000 Sales Bank 400 6.900 Trade creditors Trade debtors 5.000 Equipment at cost Rent Telephone expenses 8.000 2.000 1.500 37,900 Total 37.900 The following information was obtained after the trial balance had been prepared: i) Stock at 31 December 2018: 10.500 ii) Equipment is to be depreciated at a rate of 15 per cent on cost iii) At 31 December 2019. Andrew owed 500 for telephone expenses, and rent had been prepaid by 200 iv) Bad debts of 1,000 should be written off and it is Andrew's policy to maintain a provision for doubtful debts of 5% of remaining debtors (after bad debts have been written off) QUESTIONS The gross profit and the net book value of furniture reported in the financial statements are respectively A B. The gross profit is 4,500 and the net book value of equipment is 8.800 The gross profit is 4,500 and the net book value of equipment is 1.200 The gross profit is 10,500 and the net book value of equipment is 8.800 The gross profit is 10,500 and the net book value of equipment is 1,200 C. D. |