Question (100 marks)

Question

David, the owner of Dee Trading, started his business in 2021. His accountant has prepared the unadjusted trial balance as at 31 October 2022.

Unadjusted Trial Balance as at 31 October 2022

Account	Dr ($)	Cr ($)
Cash at Bank	90,250
Trade payables		280,000
5% Bank Loan, due in 2030		300,000
Trade receivables	371,550
Motor Vehicles	274,600
Accumulated depreciation - Motor Vehicles		107,140
Equipment	320,000
Accumulated depreciation - Equipment		110,280
Property	800,000
Sales		2,128,600
Capital - David		404,800
Drawings - David	16,000
Inventory, 1 November 2021	85,800
Purchases	855,160
Returns inwards	128,000
Carriage outwards	32,980
Carriage inwards	29,070
Rent income		40,800
Advertising expense	36,650
Utilities expense	91,500
Insurance expense	42,700
Salaries and wages expense	180,000
Commission expense	26,730
Interest expense	3,750
Discount	26,000	10,400
Returns outwards		28,720
	3,410,740	3,410,740

The following additional information was made available before the end of the financial year.

1. Purchase of a fax machine of $3,100 was debited to the Purchases account in error.

2. On 26 October 2022, Dee Trading paid a cheque of $45,000 to a credit supplier who gave a 10% cash discount for early payment. This transaction was not recorded.

3. David issued a personal cheque of $6,000 to pay the September office utility bill. The accounts clerk has yet to record the transaction.

4. Dee Trading rented out its shop space at $5,100 per month from 1 January 2022. The outstanding rent income is to be recorded.

5. The advertising expense was paid on 1 March 2022 for 10 months.

6. The 5% bank loan was taken on 1 May 2022. The remaining interest expense has yet to be accounted for.

7. Annual depreciation on fixed assets were as follows:

Equipment - $25,100

Motor Vehicles - $34,800

8. A credit customer returned some defective inventory of $2,500 to Dee Trading. This transaction was still unrecorded at year end.

9. A customer has paid a deposit of $28,000 for goods to be delivered on 2 November 2022. The bookkeeper recorded it in the sales account.

10. A physical count on 31 October 2022 revealed stocks on hand to be $101,500.

Required: (a) Prepare the necessary general journal entries to record transactions (1) to (9). Narrations are not required. (Hint: For some transactions, you will need to create new accounts which are not shown on the trial balance.)

(b) Prepare the following financial statements for Dee Trading:

(i) Statement of Comprehensive Income for the year ended 31 October 2022

(ii) Statement of Financial Position as at 31 October 2022