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QUESTION 1 10 MARKS You applied for a vacation work at one of the big four audit firms, UWC Inc. During the interview process, you

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QUESTION 1 10 MARKS You applied for a vacation work at one of the big four audit firms, UWC Inc. During the interview process, you were asked if you know the requirements of preparing proper financial statement in terms of the regulated standards. At the end of the interview session, each one of you was given a task to complete in order to test your basic knowledge of accounting. You were presented with the following financial statement to rectify. This information relates to Booby (Pty) Ltd, one of the biggest clients of UWC Ltd. Booby (Pty) Ltd Income statement as at 28 February 2020 2017 Income Revenue 1 400 230 Cost of sales (705 125) Gross profit 695 105 Trade and other receivables 40 600 Interest income 2 040 Service income 196 780 Inventory on hand 46 664 Settlement discount received 1 063 Carriage on sales 2 500 Total income 229 141 Expenses (1 567 154) Depreciation 32 700 Credit losses 9 520 Bank overdraft 36 600 Investment purchased 138 500 Revaluation surplus 62 500 Carriage on purchases 3 500 Audit fees 144 000 Advertising costs 12 640 Directors fees paid to attend board meetings 6 850 Salaries and wages 520 500 Long term loan @ 5.5%: Friko Bank 600 000 Total comprehensive income for the year 434 639 Additional information: The company uses the periodic inventory system and values inventory on the first-in- first-out basis. 60% of the salaries and wages are in respect of the admin staff. The balance was paid to the personnel dedicated to the distribution section.The long term loan from Friko Bank was initially acquired on 01 March 2018. The agreement stipulates that the loan be repayable in seven annual equal instalments as of 28 February 2022. Interest on the loan for the current year was paid in full but it has not yet been recorded. Included in the Trade and other receivables is an amount of R4 000, which represents a portion of advertising costs paid for a television commercial to be screened on 1 July 2020. Depreciation costs comprises an amount of R12 500 for the office equipment and the balance is in respect of the delivery vehicles. Marks REQUIRED Sub- Total total (a) Prepare the statement of profit or loss and other comprehensive income for the year ended 28 February 2020, using the function of 9 the expenses method, in compliance with the requirements of IAS 1: Presentation of financial statements. No comparative figures and notes are required. Communication skills - presentation and layout 1 10 TOTAL MARKS 10

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