Question $1$

Your friend Tim runs his own retail business. At year$-$end, his accounting technician resigned and after you told him about the course you are doing he has asked for your help in completing his company$$s financial statements for the year ended $31$ December $2016.$

Before the accounting technician resigned she had started preparing some of the financial statements and left the following information behind for you to start with:

$$ The business is called Tim$$s Trading and is a private company.

$$ The business$$s accounting period is one year and runs from $1$ January to $31$ December each year.

$$ Tim accounts for inventory using the periodic method.

$$ Tim has chosen to present all non$-$current at net carrying value on the face of the Statement of Financial Position.

$$ Tim$$s business prepares the Statement of Cash Flows using the direct method.

$$ The Statement of Cash Flows discloses Interest paid as a cash flow from financing activities.

$$ Assume all sales and purchases are made on credit.

$$ In September Tim prepaid R$87000$ rent. No other rent payments were made during the year.

Before the accountant left she prepared the final post$-$closing trial balance for the year:

Post closing

DEBITS CREDITS

Balance sheet section

Fixed assets @ cost $1200000$

Investments $300000$

Accumulated depreciation $840000$

Prepaid rent $21000$

Accounts receivable $88000$

Accrued service income $12000$

Inventory $90000$

Bank $289480$

Long term loan $250000$

SARS $($Taxation liability$)92000$

Accrued expenses $4200$

Accounts payable $80000$

Share Capital $200000$

Retained income $534280$

Nominal accounts section

Telephone expense

Rent expense

Salaries expense

Depreciation expense

Interest expense

Taxation expense

Sales

Purchases

Bad debts expense

Service income

Consumables expense

$20004802000480$

A small extract of the Statement of Financial Position as at $31$ December $2015$ is given below:

Current assets $442380$

Prepaid rent $18000$

Accounts receivable $70000$

Accrued income $15000$

Inventory $75000$

Bank $264380$

Current liabilities

$192100$

SARS $($Taxation liability$)107600$

Accrued expenses $8500$

Accounts payable $76000$

In addition you have been provided with the Statement of Comprehensive Income for the current year:

Statement of Comprehensive Income of Tim's Trading $($Pty$)$ Ltd as at $31$ December $2016$:

$2016$

Sales $760000$

Cost of sales $(355000)$

Beginning inventory $75000$

Purchases $370000$

Closing inventory $90000$

Gross profit $405000$

Other income $30000$

Service income $30000$

Selling, admin & general expenses $(336000)$

Salaries & wages expense $(70000)$

Rent expense $(84000)$

Consumables expense $(15000)$

Depreciation $(120000)$

Bad debts expense $(30000)$

Telephone expense $(17000)$

Profit before interest and tax $99000$

Interest expense $(22500)$

Profit before tax $76500$

Tax expense $(21420)$

Net profit $55080$

$1\mathrm{.}1$ Prepare the Statement of Financial Position as at $31$ December $2016$ in the appropriate format for Tim$$s Trading $(2015$ is not required, only $2016).($Max$.25$ lines$)$

$(10$ marks$)$

Statement of Financial Position of Tim's Trading $($Pty$)$ Ltd as at $31$ December $2016$:

Non$-$current assets $660000$

Fixed Assets Net $360000$

Investments $300000$

Current assets $500480$

Prepaid rent $21000$

Accounts Receivable $88000$

Accrual Service Income $12000$

Inventory $90000$

Bank $289480$

Total assets $1160480$

Non$-$current liabilities $250000$

Long term loan $250000$

Current liabilities $176200$

SARS $($Taxation Liability$)92000$

Accrued Expenses $4200$

Accounts Payable $80000$

Equity $734280$

Share Capital $200000$

Retained Income $534280$

Total equity & liabilities $1160480$

$1\mathrm{.}2$ Prepare the following T$-$accounts for Tim$$s Trading for the year ended $31$ December $2016$ using the information provided above. Use the templates provided below.

$(15$ marks$)$

Accounts receivable

$01-$Jan Opening Balance $7000031-$Dec Bad Debts Expense $30000$

$31-$Dec Sales on Credit $76000031-$Dec Balance c$/$d $830000$

$31-$Dec Service Income $30000$

$860000860000$

$01-$Jan Balance b$/$d $830000$

Accounts payable

$01-$Jan Opening Balance $76000$

$31-$Dec Balance c$/$d $44$Your friend Tim runs his own retail business. At year$-$end, his accounting technician resigned

and after you told him about the course you are doing