Question 1

Consider the following trial balance prepared for the year ended on 31/12/2018:

Dr () Cr ()

cash 6,730

capital 80,000

building at cost 70,000

accumulated depreciation (at 31/12/2017) 16,000

inventory 24,560

prepaid rent (at 31/12/2017) 5,400

rent 24,500

receivables 24,560

electricity 12,350

vehicles at cost 40,000

accumulated depreciation (at 31/12/2017) 12,000

sales 187,500

cost of sales 87,400

Dr () Cr ()

295,500 295,500

Additional information: Vehicles are depreciated by 30% every year using the reducing balance method; the building is depreciated using the straight line method, assuming 30 years of useful life and a resale value of 10,000.

At 31/12/2018 there was an outstanding bill amounting to 3,500 for electricity consumed during 2018. The bill will be paid on 15/01/2019

A receivable for 2,560 is considered irrecoverable and needs to be written off.

The company needs to take a provision for defective goods sold during the year.The estimated amount is 3,200.

The rent account includes 6,000 of prepaid rent for 2019. Prepare the adjusted trail balance at 31/12/2018.

For each adjustment, show your workings and briefly justify them.