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The following is the trial balance of Lift Ltd as at 31 December 20x9

Lift Ltd :Trial balance as at 31 December 20X9

$ $

Issued ordinary share capital ( $ 1 shares ) 250,000

Issued preference shares ( $ 1 share ) 50,000

Retained earnings 36,313

Freehold land 320,000

Other non-current assets 195,000

Sales revenue 315,300

Purchases 165,090

Inventory 1.1.20X8 29,808

Rent 43,080

Salaries 32,877

General expenses 8,780

Directors' remuneration 15,000

10% Debenture 100,000

Debenture interest 10,000

Debtors and Creditors 23,976 21,211

Bank 29,013

General reserve 65,000

Provision for depreciation of other non-current assets 45,800

Interim dividends

11,000

883,624

883,624

Additional information:

1. Inventory held at 31 December 20X9 was $23,444.

2. Depreciation is to be provided on other non-current assets at 5% using reducing balance. The company does not charge depreciation on freehold land.

3. Taxation for the year to be $9,100.

4. A transfer of $10,000 was to be made to the general reserve.

5. Salaries accrued at the year-end were $2,233.

6. Rent prepaid for the following year was $820.

Required:

1. Prepare the income statement of Lift Ltd for the year ended 31 December 20x9.

(18 marks)

2. Prepare the statement of changes in equity of Lift Ltd for the year ended 31 December 20x9. (7 marks)

3. Prepare the balance sheet of Lift Ltd as at 30 December 20x9. (25 marks)

Question 2 The trial balance of Harris as at 31 December 20x1 showed a difference which was posted to a suspense account. Drafted final accounts for the year ended 31 December 20x1 were prepared showing a net profit of $47,240. The following errors were subsequently found: 1. 3. 4. 5. Sales of $450 to Thomas Chan had been debited to Thomson Chan. A payment of $275 for electricity charges had been entered on the debit side of the electricity account as $375. The sales journal had been undercast by $2,000 Repairs to a machine amounting to $390 had been charged to Machinery account. A cheque for $1,500 being rent received from Atlas Ltd had only been entered in the Cash Book. Purchases from K Ltd of $765 had been completely omitted. 6. Required: 1. Prepare journal entries, without narratives, necessary to correct the above errors. (20 marks) 2. Show the effect of each of these adjustments on the net profit in the drafted financial statements and the corrected profit for the year ended 31 December 20x1. (15 marks)