-4 Question Madium Idikoko owns a provision shop at Obuasi. On 31 December, 2020 the following trial balance was extracted from her books: Dr. Cr. GH GH Capital (1/1/2020) Motor van cost) 960,000 680,000 Equipment (cost) 320.000 Accumulated depreciation: Motor van 128,000 Equipment 104,000 Inventory (1/1/2020) 120,000 Purchases and sales 450,000 1520,000 Returns 27.000 12,000 Carriage outwards 48,000 Carriage inwards 20,400 Trade Receivables 290,000 Trade payables 120,000 Allowance for receivables 16.000 Bad debts 60.000 Wages and Salaries 270,000 Discounts 54,000 88.000 Postage and Stationery 132.000 Utility Bills 42,000 10% Loan 160300 Rent & Rates +28,000 Sundry expenses 100,000 Cash 40,000 Bank 239,400 Personal drawings 88,000 3.108.800 3.108.800 LA The following additional information was made available: 1) Inventory at 31 December, 2020 was valued at GH 176,000 ii) Depreciation at the rate of 40% on cost for Motor Van and 50% on Equipment on reducing balance method basis An amount of GHe 28,000 is accrued in respect of Postage and Stationery at 31" December, 2020 iv) Allowance for receivables is to be adjusted to GHe 10,000 at 31 December, 2020 as a result of improvement in debt recovery efforts. Rent and rates pre-paid amounted to Gh425,600. The loan was contracted on January, 2020. Provision should be made for the interest on loan Required: a) Prepare the income statement for the year ended 31 December, 2020 b) Prepare the Statement of financial position as at 31 December, 2020 (20 marks) QUESTION 4 Study the table carefully and answer the question that follows. Column Column II a. Conservatism 1. The measurement basis used to record and report economic activity b. Consistency 2. The normal basis used to account for assets. c. Cost principle d. Entity assumption e Full disclosure f. Going concem assumption g. Materiality 3. Business activity is separated from the owner's personal activity 4. Measurement of net income and financial position necessarily requires estimates 5. Data can be corroborated by reference to business documents, physical count, and measurements by several qualified persons. 6. The basis for determining when expenses should be recognized 7. The earning process must be completed and an exchange must have taken place. 8. Used to discourage over-optimism in recording assets and net income. 9. An inappropriate assumption for a firm undergoing bankruptcy. 10. Relates to the relative size or importance of an item or event 11. The same accounting methods should be used by a firm from one period to another 12. Financial reports should include all relevant and significant information affecting net income and financial position h. Matching principle i. Monetary unit assumption j. Revenue principle k. Time period as assumption 1. Verifiability (12 Marks) Required: Match the items in Column 1 with the appropriate descriptions in Column II. End of Paper
