T Mokoka

Trial Balance as at $30$ June $2015$

Debit

Credit

R

R

Overdraft

$1500$

Long$-$term loan

$3550$

Revenue

$28300$

Diesel and oil

$8250$

Taxi repairs and service

$3950$

Radio hire

$3400$

Road and fund licence fee

$2300$

Building at cost

$68000$

Taxis at cost

$34500$

Electricity

$1300$

Telephone

$1250$

Accounts receivables

$100$

Accounts payables

$1800$

Insurance on buildings

$1300$

General expenses

$850$

Wages and salaries

$12600$

Municipal rates

$450$

Bank interest

$150$

$2$

Share capital

$103250$

$138400$

$138400$

You have the following additional information

$10\%$ of the trade receivables are considered irrecoverable.

$$ R$800$ of insurance is prepaid.

$$ There is R$250$ owing for electricity and R$300$ owing for telephone.

$$ Depreciation on taxis is R$8625$ and on buildings is R$1360.$

$$ Mr Mokoka considers all expenses as indirect.

Required

i$.$ Using appropriate method, prepare income statement and balance sheet of T Mokoka for June $2015.(31)$ using General South African accounting processes.

ii$.$ Calculate the working capital and current assets of this business. What strategies can Mokoka employ to improve the liquidity of this business? $(6)$

iii. Calculate the leverage ratios for this business and comment. The benchmark for all leverage ratios is $10\%$ and $8$x for times interest earned. $(9)$

iv$.$ Using the answers to $($b$)$ and $($c$)$ above, briefly explain the risks that Mokoka faces in this business.