- 20 Marks
Question
Mr. Ken Stevenson keeps single entry books of account. He had the following balances on 1 January, 2013:
| N |
|---|
| Inventory |
| Payables |
| Prepaid insurance |
| Bank overdraft |
| Furniture |
| Motor vehicles |
| Receivables |
| Borrowings |
The following information is extracted from his cash book in respect of the year ended 31 December 2013:
| DR N | CR N |
|---|---|
| Revenue | 279,500 |
| Receipt from trade receivables | 536,400 |
| 815,900 | 815,900 |
He had the following balances on 31 December 2013:
| N |
|---|
| Motor vehicles |
| Inventory |
| Furniture |
| Receivables |
| Payables |
| Borrowings |
Additional information:
(i) Interest on Borrowings to be accrued for at 5% per annum.
(ii) Bad debts of N12,600 are to be written off while 5% allowance is to be made on the net receivables at 31 December, 2013.
(iii) Depreciation is to be charged on the non-current assets at the rate of 10% per annum.
You are required to prepare:
a. Receivables control account (2 Marks)
b. Payables control account (2 Marks)
c. The opening capital (2 Marks)
d. Statement of Profit or Loss for the year ended 31 December 2013 (8 Marks)
e. Statement of Financial Position as at 31 December 2013 (6 Marks)
Answer
(a) Receivables control account
| N | N |
|---|---|
| Bal b/f 458,500 | Receipt from trade receivables 536,400 |
| Credit revenue (Difference) 581,600 | Bad debt 12,600 |
| Bal c/d 491,100 | |
| 1,040,100 | 1,040,100 |
| Bal b/d 491,100 |
(b) Payables control account
| N | N |
|---|---|
| Payments to trade payables 284,000 | Bal b/f 258,600 |
| Bal c/d 336,600 | Purchases (Difference) 362,000 |
| 620,600 | 620,600 |
| Bal b/d 336,600 |
(c) Opening capital
| N |
|---|
| Assets: |
| Motor vehicles |
| Furniture |
| Inventory |
| Receivables |
| Prepaid insurance |
| Total assets |
| Less: Liabilities |
| Payables |
| Bank overdraft |
| Borrowings |
| Total liabilities |
| Opening capital |
(d) Statement of Profit or Loss for the year ended 31 December 2013
| N | N | N |
|---|---|---|
| Revenue (Wk 1) | 861,100 | |
| COST OF SALES: | ||
| Opening inventory | 64,800 | |
| Purchases (Wk 2) | 449,300 | |
| 514,100 | ||
| Closing inventory | (72,200) | |
| (441,900) | ||
| GROSS PROFIT | 419,200 | |
| OPERATING EXPENSES: | ||
| Insurance (Wk 3) | 12,000 | |
| Loan interest (Wk 4) | 32,500 | |
| Increase in allowance for bad debt (Wk 5) | 24,555 | |
| Miscellaneous | 43,800 | |
| Electricity | 26,500 | |
| Salaries | 150,000 | |
| Bad debt | 12,600 | |
| Depreciation: | ||
| Motor vehicles | 80,000 | |
| Furniture | 32,790 | 112,790 |
| Total operating expenses | (414,745) | |
| NET PROFIT | 4,455 |
(e) Statement of Financial Position as at 31 December 2013
| Cost | Depreciation | Carrying Amount |
|---|---|---|
| Motor vehicles | 800,000 | 80,000 |
| Furniture | 327,900 | 32,790 |
| Total non-current assets | 1,127,900 | 112,790 |
CURRENT ASSETS:
| N |
|---|
| Inventory |
| Trade receivables |
| Allowance for bad debt (Wk 5) |
| Cash and bank balances |
| Total current assets |
TOTAL ASSETS: 1,677,655
EQUITY AND LIABILITIES:
| N |
|---|
| Opening capital |
| Net profit |
| Total equity |
| Less: Drawings |
| Closing equity |
NON-CURRENT LIABILITIES:
| N |
|---|
| Borrowings |
CURRENT LIABILITIES:
| N |
|---|
| Trade payables |
| Accrued Borrowings interest (Wk 4) |
| Total liabilities |
TOTAL EQUITY AND LIABILITIES: 1,677,655
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