Question 3

The following trial Balance was extracted from the books of Trump You Out on 31 December 2016:

Trial Balance as at 31 December 2016

Debit Credit

$ $

Capital (1 January 2016) 30 000

Drawings 1 675

Stock (1 January 2016) 13 000

Purchases60 000

Debtors 3 800

Creditors 4 490

Sales 80 800

Premises 25 000

Office Equipment 3 500

Bank 1 655

Sales Returns 435

Purchases Returns600

Salaries 6 000

Commission 2 700

Insurance 395

Advertising 1 350

Carriage inwards 240

Carriage outwards 400

Discount allowed 230

Discount received 140

Bad debt300

Water and Electricity 750

118 730 118 730

The following additional information should be taken into account:

i. Stock on 31 December 2016 was valued at $12 500

ii. Accrued salaries amounted to $500.

iii. Prepaid insurance amounted to $125.

iv. Office Equipment is to be depreciated at 20% per annum.

v. Provision for doubtful debts at 5% of the debtors A/c is to be created.

You are required to prepare the:

i. Income Statement for the year ended 31 December 2016

ii. Balance Sheet as at 31 December 2016. (Total 30 marks)