Question Two 50 marks

The following list of balances is from the ledger of G. Lea, a sole trader as at March 31, 2006.

Purchases $224,000

Sales $419,700

Stock April 1, 2005 $51,600

Capital April 1, 2005 $72,000

Bank Overdraft $43,500

Cash $900

Carriage Inwards $4,600

Discount Allowed $14,400

Discount Received $9,300

Return Inwards $8,100

Return Outwards $5,700

Carriage Outwards $21,600

Rent and Insurance $17,400

Provision for doubtful debts $6,600

Office Equipment $20,000

Delivery Vans $27,000

Debtors $119,100

Creditors $61,200

Bad Debt Written off $400

Wages and Salaries $89,000

General Office Expenses $4,500

Provision for depreciation:

Office Equipment $8,000

Delivery Vans $5,400

You are required to:

1. Prepare a trial balance from the information provided (5 marks)
2. Using the following additional information:

1. Stock at March 31, 2006 was valued at $42,900
2. Wages and salaries accrued $2,100 and office expenses owing $200 at March 31, 2006
3. Rent Prepaid was $1,800
4. Provision for doubtful debts to be adjusted to $5,100
5. Provide for depreciation on the delivery vans at 20% per annum using the reducing balance method
6. Provide for depreciation on the office equipment at 20% per annum using the straight line method

1. Prepare an Income Statement for G. Lea for the year ended March 31, 2006

(15 marks)

2. Prepare the statement of financial position as at March 31, 2006 (20 marks)

3. Explain the importance of Income Statement and Statement of Financial position to G. Lea. (5 marks)
4. From the information gathered in the Income Statement and Statement of Financial position, provide G. Lea with an analysis of his business performance. (5 marks)