You have been recently appointed as the Accounting Supervisor of Turners Trading Establishment. As at 30 September 2018 the bookkeeper was unable to balance the trial balance which showed that the Debit column totaled $1,796,100 and the Credit column $1,852,817. In the interest of time, you advised the bookkeeper to prepare draft financial statements, inserting the difference as a balancing figure in the statement of financial position. Based on this instruction, the draft statement of profit or loss showed a profit of $141,280 for the year ended 30 September 2018. The bookkeeper was also advised to open a suspense account for the difference and to begin to check through the accounting records to find the difference.

A thorough investigation revealed the following errors:

1. the total of $8,980 in the sales returns book for September 2018, had been credited to the purchases returns account.
2. $9,600 paid for an item of plant purchased on 1 April 2018 had been debited to plant repairs account. The company depreciates its plant at 20% per annum on a straight line basis, with proportional depreciation in the year of purchase.
3. The cash discount totals for the month of September 2018 had not been posted to the general ledger accounts. The figures were: Discount allowed $836 Discount received $919. For discounts allowed, it was not anticipated that these customers would take advantage of these cash discounts when the invoices were first issued.
4. insurance prepaid at 30 September 2017 for $580 had not been brought down as an opening balance.
5. The balance of $38,260 on the telephone expense account had been omitted from the trial balance.
6. A car held as a non-current asset had been sold during the year for $4,800. The proceeds of sale were entered in the cash book but had been credited to the sales account in the general ledger. The original cost of the car $12,000, and the accumulated depreciation to date $8,000, were included in the motor vehicles account and the accumulated depreciation account. The company depreciates motor vehicles at 25% per annum on a straight line basis with proportionate depreciation in the year of purchase but none in the year of sale.

You are required to:

1. Prepare the journal entries necessary to correct the errors. (12 marks)

2. Explain the error(s) for (iv) above and the rationale for the related journal entries in (a). (3 marks)

3. Construct a suspense account to eliminate the errors revealed. Narratives are not required. (4 marks)

4. Draw up a statement showing the revised profit after correcting the above errors. (11 marks)