Section A - Answer BOTH questions in this section Q1. Mutt and Monster (M&M) is a sole trader that commenced business on 01 December 2021, with the first financial year ending on the 30 November 2022. Management are unaware of general accounting practices so have recruited you to account for the transactions that occurred in the first month of activity. The transactions for December 2021 were: 01 Dec The owner of M&M invested 1,000,000 of cash into the business 01 Dec M&M sourced additional funding from the local bank in the form of a loan to the value of 3,000,000 01 Dec M&M purchased land to the value of 500,000 01 Dec M&M has secured the services of some builders to build a warehouse on the land amounting to 250,000. This will be built in the forthcoming week and he has paid for this in full. 01 Dec M&M purchased Equipment for 30,000 and a Vehicle for 40,000. Both were purchased for cash. 02 Dec M&M purchased supplies on credit from Mini-Me amounting to 300,000. The policy of the supplier is that if a customer pays their account within 30 days, they can obtain 10% discount on the amount outstanding. 02 Dec Paid We-R-Consultants 20,000 to undertake a strategic plan for the business 07 Dec Paid weekly wages amounting to 3,000 Paid the annual insurance policies for the business amounting to 36,000. This policy covers the whole financial year. Paid weekly wages amounting to 4,500 M&M decided to pay the outstanding amount to Mini-Me to take advantage of the discount on offer 19 Dec The owner withdrew 20,000 from the company's bank account for personal use 21 Dec Paid weekly wages amounting to 5,000 28 Dec Purchased supplies on credit from Ja-Ja & Co to the value of 250,000 28 Dec Paid 5,000 for that week's wages 31 Dec Paid the electricity bill for the month which amounted to 300 Paid an outstanding amount to Mole-Hill Co-Operative for General Expenses amounting to 3,275. 08 Dec 14 Dec 18 Dec 31 Dec 31 Dec Revenues for the month totalled 3,867,456. All sales were made on 60-days credit. M&M offer their customers a 5% discount for early payment and half the outstanding Trade Receivables for the month accepted this offer. The following information is available at the end of the first month of trading: 31 Dec Revenues for the month totalled 3,867,456. All sales were made on 60-days credit. M&M offer their customers a 5% discount for early payment and half the outstanding Trade Receivables for the month accepted this offer. The following information is available at the end of the first month of trading: 1) Closing inventory was valued at 40% of stock purchased during the month 21 Depreciation policies for M&M are: The Warehouse and Buildings are depreciated at a rate of 2% per annum using the straight line method of depreciation. The Equipment is depreciated at a rate of 10% (straight line method) annually and is not expected to have any residual value at the end of its useful life Motor Vehicles are depreciated at a rate of 40% using the reducing balance method 3) Management are concemed about a customer who has not paid their overdue amount of 100,000, and have decided to write this off as a bad debt. 4) After month end, M&M received an invoice for water which was used during July, and has not been accounted for. The invoice amounted to 4,500. 5) During the month M&M purchased 500 of fuel from the local petrol station. An invoice for 500 was received after month-end for this fuel. 6) Wages for the final three days of the month have not been paid, and amount to 2,000. 7 The Bank Loan accrues interest at a rate of 5% per annum. The interest for December has not been accounted for in the financial accounts. 8) The Loan is to be repaid in ten equal installments with the first instalment being paid on the 1" December 2022. 9) M&M is liable for tax amounting to 20% of Profit before Tax (PBT). Required: a) Prepare the December 2021 Income Statement for M&M [18 Marks) b) Prepare the Statement of Financial Position of M&M at the end of the period [17 Marks] c) Create the Bank Ledger Account (in the form of a T-Account) for the period [15 Marks) [Total: 50 Marks) Page 4 of 10 MN30170 Section A - Answer BOTH questions in this section Q1. Mutt and Monster (M&M) is a sole trader that commenced business on 01 December 2021, with the first financial year ending on the 30 November 2022. Management are unaware of general accounting practices so have recruited you to account for the transactions that occurred in the first month of activity. The transactions for December 2021 were: 01 Dec The owner of M&M invested 1,000,000 of cash into the business 01 Dec M&M sourced additional funding from the local bank in the form of a loan to the value of 3,000,000 01 Dec M&M purchased land to the value of 500,000 01 Dec M&M has secured the services of some builders to build a warehouse on the land amounting to 250,000. This will be built in the forthcoming week and he has paid for this in full. 01 Dec M&M purchased Equipment for 30,000 and a Vehicle for 40,000. Both were purchased for cash. 02 Dec M&M purchased supplies on credit from Mini-Me amounting to 300,000. The policy of the supplier is that if a customer pays their account within 30 days, they can obtain 10% discount on the amount outstanding. 02 Dec Paid We-R-Consultants 20,000 to undertake a strategic plan for the business 07 Dec Paid weekly wages amounting to 3,000 Paid the annual insurance policies for the business amounting to 36,000. This policy covers the whole financial year. Paid weekly wages amounting to 4,500 M&M decided to pay the outstanding amount to Mini-Me to take advantage of the discount on offer 19 Dec The owner withdrew 20,000 from the company's bank account for personal use 21 Dec Paid weekly wages amounting to 5,000 28 Dec Purchased supplies on credit from Ja-Ja & Co to the value of 250,000 28 Dec Paid 5,000 for that week's wages 31 Dec Paid the electricity bill for the month which amounted to 300 Paid an outstanding amount to Mole-Hill Co-Operative for General Expenses amounting to 3,275. 08 Dec 14 Dec 18 Dec 31 Dec 31 Dec Revenues for the month totalled 3,867,456. All sales were made on 60-days credit. M&M offer their customers a 5% discount for early payment and half the outstanding Trade Receivables for the month accepted this offer. The following information is available at the end of the first month of trading: 31 Dec Revenues for the month totalled 3,867,456. All sales were made on 60-days credit. M&M offer their customers a 5% discount for early payment and half the outstanding Trade Receivables for the month accepted this offer. The following information is available at the end of the first month of trading: 1) Closing inventory was valued at 40% of stock purchased during the month 21 Depreciation policies for M&M are: The Warehouse and Buildings are depreciated at a rate of 2% per annum using the straight line method of depreciation. The Equipment is depreciated at a rate of 10% (straight line method) annually and is not expected to have any residual value at the end of its useful life Motor Vehicles are depreciated at a rate of 40% using the reducing balance method 3) Management are concemed about a customer who has not paid their overdue amount of 100,000, and have decided to write this off as a bad debt. 4) After month end, M&M received an invoice for water which was used during July, and has not been accounted for. The invoice amounted to 4,500. 5) During the month M&M purchased 500 of fuel from the local petrol station. An invoice for 500 was received after month-end for this fuel. 6) Wages for the final three days of the month have not been paid, and amount to 2,000. 7 The Bank Loan accrues interest at a rate of 5% per annum. The interest for December has not been accounted for in the financial accounts. 8) The Loan is to be repaid in ten equal installments with the first instalment being paid on the 1" December 2022. 9) M&M is liable for tax amounting to 20% of Profit before Tax (PBT). Required: a) Prepare the December 2021 Income Statement for M&M [18 Marks) b) Prepare the Statement of Financial Position of M&M at the end of the period [17 Marks] c) Create the Bank Ledger Account (in the form of a T-Account) for the period [15 Marks) [Total: 50 Marks) Page 4 of 10 MN30170