Tag (SQ): Prepayments

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  • 20 Marks

FA – L1 – Q72 – Preparing financial statements of a sole trader

Prepare Zanko Ventures' statement of profit or loss for 20X9 using trial balance and adjustments.

(a) Distinguish between capital expenditure and revenue expenditure.
(b) (i) The following trial balance was extracted from the books of Zanko Ventures, a second-hand bags dealer as at 31st December, 20X9.

Description DR (GH₵) CR (GH₵)
Inventory 120,000
Vehicle (Cost) 150,000
Trade receivables 25,000
Accumulated depreciation: Vehicle 30,000
Accumulated depreciation: Furniture & fittings 10,120
Trade payables 100,000
Drawings 120,000
General expenses 65,000
Allowance for receivables 2,500
Rate & rent 14,000
Insurance 5,000
Irrecoverable debt 7,000
Discount received 25,150
Discount allowed 15,160
Bank balance 165,240
Wages & salaries 250,000
Sundry expenses 6,150
Vehicle running expenses 15,650
Furniture & fittings 50,600
Repairs to the shop 6,500
Purchases 650,120
Sales 1,079,130
Capital 473,520
Total 1,720,420 1,720,420

The following additional information is provided:
(i) Allowance for receivables is to be reduced by 10%.
(ii) Rate and rent has been paid in advance by two (2) months. Note that Zanko Ventures pays GH₵1,000 each month.
(iii) Inventory as at 31st December, 20X9 is GH₵80,150.
(iv) A bill of GH₵6,150 for vehicle running was outstanding as at 31st December, 20X9.
(v) The enterprise provides depreciation as follows:

  • Vehicle: 20% per annum on straight-line basis.
  • Furniture and fittings: 20% per annum on straight-line basis.

You are required to:
(i) Prepare the statement of profit or loss for the year ending 31st December 20X9.

(ii) Prepare the statement of financial position as at 31st December 20X9.

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  • 15 Marks

FA – L1 – Q70 – Preparing financial statements of a sole trader

Prepare Henry's statement of profit or loss for the year ended 31 May 20X9 and statement of financial position as at that date using the trial balance.

The following trial balance has been extracted from the ledger of Henry, a sole trader, as at 31 May 20X9, the end of his most recent financial year.

Henry: Trial balance as at 31 May 20X9

DR GH₵(000) CR GH₵(000)
Land and buildings at cost 90,000
Equipment at cost 57,500
Accumulated depreciation (as at 1 June 20X8)
On land and buildings 12,500
On equipment 32,500
Inventory as at 1 June 20X8 27,400
Sales 405,000
Purchases 259,600
Discounts received 4,420
Wages and salaries 52,360
Irrecoverable debts 1,720
Loan interest 1,560
Other operating expenses 38,800
Trade receivables 46,200
Trade payables 33,600
Allowance for receivables 280
Cash in hand 151
Bank overdraft 14,500
Carriage out 8,680
Drawings 28,930
10% loan 15,600
Capital as at 1 June 20X8 94,501
Total 612,901 612,901

The following additional information as at 31 May 20X9 is available:
(a) Inventory as at 31 May 20X9 was valued at GH₵25,900,000.
(b) Depreciation for the year ended 31 May 20X9 has yet to be provided as follows:

  • Property – 1% using the straight-line method;
  • Equipment – 15% using the straight-line method.
    (c) There are accrued wages and salaries of GH₵140,000.
    (d) Other operating expenses include some prepaid expenses of GH₵500,000 and some accrued expenses of GH₵200,000.
    (e) The allowance for receivables should be adjusted to 5% of trade receivables as at 31 May 20X9.
    (f) The amount for purchases includes goods valued at GH₵1,040,000 which were withdrawn by Henry for his own personal use.

Required
Prepare Henry’s statement of profit or loss for the year ended 31 May 20X9 and his statement of financial position as at that date.

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  • 15 Marks

FA – L1 – Q69 – Preparing financial statements of a sole trader

Prepare Sarah's statement of profit or loss for 20X8 and financial position as at 31 Dec 20X8 using given balances and adjustments.

The following information relates to the business of Sarah for the year ended December 20X8.

GH$ GH$
Capital account, 1 January 20X8 13,640
Freehold properties at cost 7,500
Furniture and fittings at cost 2,000
Motor cars at cost 6,300
Accumulated depreciation to 1 January
Freehold properties 450
Furniture and fittings 800
Motor cars 2,370
Inventory 1 January 6,740
Purchases 54,520
Sales 79,060
Salaries 8,760
Rates 1,170
Office expenses 3,950
Motor expenses 3,790
Drawings 4,800
Allowance for receivables 1 January 600
Loan 4,000
Trade receivables 9,240
Trade payables 10,040
Bank balance 2,190
110,960 110,960

You are also supplied with the following information:
(1) Inventory at 31 December 20X8 was GH$7,330.
(2) Rates paid in advance at 31 December 20X8 amounted to GH$250.
(3) Allowance for receivables is to be made equal to 5% of accounts receivable at 31 December 20X8.
(4) Depreciation is to be provided for the year at the following annual rates calculated on cost at the year end:

  • Freehold properties: 1%
  • Furniture and fittings: 10%
  • Motor cars: 20%
    (5) Interest on the loan at 5% per annum is to be provided.

Required:
Prepare a statement of profit or loss for the year ended 31 December 20X8 and a statement of financial position at that date.

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  • 15 Marks

FA – L1 – Q68 – Preparing financial statements of a sole trader

Prepare Michael Tan's statement of profit or loss for 20X9 and financial position as at 31 May 20X9 using trial balance and adjustments.

The following trial balance was extracted from the main ledger of Michael Tan, a sole trader, as at 31 May 20X9 – the end of his financial year.

Michael Tan: Trial balance as at 31 May 20X9

DR GH$(000) CR GH$(000)
Land and buildings at cost 120,000
Equipment at cost 80,000
Accumulated depreciation (as at 1 June 20X8)
On land and buildings 36,000
On equipment 38,000
Purchases 250,000
Sales 402,200
Inventory as at 1 June 20X8 50,000
Discounts received 4,800
Returns outwards 15,000
Wages and salaries 79,800
Irrecoverable debts 2,100
Loan interest 2,100
Other operating expenses 17,700
Trade payables 36,000
Trade receivables 38,000
Cash in hand 300
Bank 1,300
Drawings 24,000
Allowance for receivables 500
7% long-term loan 30,000
Capital as at 1 June 20X8 121,300
665,300 683,800

The following additional information as at 31 May 20X9 is available:
(a) Inventory as at 31 May 20X9 was valued at GH$42,000,000.
(b) Depreciation for the year ended 31 May 20X9 has yet to be provided as follows:

  • Land and buildings: 1.5% using the straight-line method;
  • Equipment: 25% on the carrying amount at the year-end (i.e., cost less accumulated depreciation at 1 June 20X8).
    (c) There are accrued wages and salaries of GH$800,000.
    (d) Other operating expenses include some prepaid expenses of GH$300,000.
    (e) The allowance for receivables should be adjusted to 2% of trade receivables as at 31 May 20X9.

Required:
Prepare Michael Tan’s statement of profit or loss for the year ended 31 May 20X9 and his statement of financial position as at that date.

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  • 15 Marks

FA – L1 – Q67 – Preparing financial statements of a sole trader

Prepare DOVE's statement of profit or loss for 20X9 and statement of financial position as at 31 Dec 20X9 using given ledger balances and adjustments.

The following balances were extracted from the main ledger of DOVE on 31 December 20X9.

Description GH$(000)
Capital 10,059
Inventory at 1 January 20X9 2,720
Cash in hand 55
Bank overdraft 2,522
Sundry receivables 7,009
Sundry payables 6,735
Motor vans (Cost GH$2,000) 1,500
Drawings in cash 2,459
Fixtures and fittings (Cost GH$4,000) 3,800
Purchases 33,436
Allowance for receivables 162
Sales 50,261
Purchases returns 120
Carriage inwards 546
Rent 626
Salaries and wages 5,226
Motor vehicle expenses 920
Interest on bank overdraft and bank charges 56
Carriage outwards 785
Returns inwards 240
Freehold land 10,300
Irrecoverable debts 240

You are given the following information:
(1) The inventory at 31 December 20X9 was GH$4,270,000.
(2) Wages and salaries payable at 31 December 20X9 were GH$426,000.
(3) Rent paid in advance at 31 December 20X9 amounted to GH$100,000.
(4) The allowance for receivables is to be increased to GH$260,000.
(5) Depreciation is to be charged as follows: motor vans at 25% per year on cost, fixtures and fittings 5% per year on cost.
(6) During 20X9, the owner of DOVE withdrew goods valued at GH$180,000 for his own use. No entry has been made in the accounts for the withdrawal of these goods.
(7) One quarter of the motor vehicle expenses is the cost of the owner’s private motoring, as distinct from expenses for business purposes.

Required:
Prepare a statement of profit or loss for the year ending on 31 December 20X9 and a statement of financial position as at that date.

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  • 10 Marks

FA – L1 – Q42 – Accruals and prepayments

Calculate amounts for profit or loss for a hotel's expenses and revenue for the year ended 30 April 20X9.

A hotel makes up its accounts to 30 April annually. The proprietor, Mrs Amponsah, informs you that she has paid the following amounts during the year to 30 April 20X9:

Item GH₵(000)
Wholesaler 3,945
Butcher 4,261
Building supplies (repairs) 814
Electricity 935
Gas 566
Wages 1,150

She also informs you that she has received GH₵37,550,000 in cash from guests, of which GH₵4,300,000 relates to deposits paid in advance for holidays to be taken after 1 May 20X9.
You discover on further investigation that invoices for April 20X9 from the butcher and wholesaler, amounting to GH₵431,000 and GH₵292,000, were received on 15 May. The electricity bill for the quarter ended 31 May 20X9 totals GH₵220,000, and the chambermaids are paid a week in arrears at GH₵42,000 per week. Gas cylinders are purchased in advance at GH₵17,000 each, and two remain unused at 30 April.

Required
(a) Calculate the amounts to be included in the statement of profit or loss for each of the above items for the year ended 30 April 20X9.

(b) Calculate the relevant statement of financial position amounts at 30 April 20X9.

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  • 12 Marks

FA – L1 – Q41 – Preparing financial statements of a sole trader

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

The following list of account balances was extracted from the books of Kweku at 30 April 20X9.

Dr GH¢(000) Cr GH¢(000)
Revenue 18,955
Purchases 12,556
Inventory 1 May 20X8 3,776
Salaries and wages 2,447
Motor expenses 664
Rent 456
Rates 120
Insurance 146
Packing expenses 276
Lighting and heating expenses 665
Sundry expenses 115
Motor vehicles 2,400
Fixtures and fittings 600
Trade receivables 4,577
Trade payables 3,045
Cash at bank 3,876
Cash in hand 120
Drawings 2,050
Capital 12,844
34,844 34,844

Notes at 30 April:
(1) Expenses which have been prepaid – rates GH¢20,000; Insurance GH¢35,000.
(2) Expenses which are owing – motor expenses GH¢56,000; rent GH¢24,000; sundry expenses GH¢26,000.
(3) Inventory GH¢4,998,000.

Required:
From the list of balances and the notes, prepare Kweku’s statement of profit or loss for the year ended 30 April 20X9 and a statement of financial position at that date.

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  • 10 Marks

FA – L1 – Q40 – Accruals and prepayments

Prepare rent receivable and interest payable ledger accounts for James for 20X9 based on given rental and interest data.

James owns various properties which he rents out under short-term lets; some tenants pay in advance, some in arrears. Similarly with his various borrowings the interest is paid in arrears and in advance.
During 20X9 rent collected was GH₵229,500 and interest charged to the statement of profit or loss was GH₵52,500.
Rents receivable and paid in advance together with amounts of interest prepaid and payable at the statement of financial position dates were as follows.

31 December
20X8 20X9
GH₵ GH₵
Rents owed by tenants 34,200 40,500
Rents prepaid by tenants 20,700 15,300
Prepaid interest 3,500 5,600
Interest payable 9,800 7,000

Required
Write up the rent receivable account and the interest payable account for the year ended 31 December 20X9.

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  • 15 Marks

FA – L1 – Q39 – Preparing financial statements of a sole trader

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

JOHNNY
Johnny is in business as an antique dealer. The trial balance of his business at 1 January 20X9 was as follows.

Dr GH₵(000) Cr GH₵(000)
Capital 5,000
Cash 4,200
Motor van 600
Trade payable – A 200
Trade receivable – B 300
Rates prepaid 100
5,200 5,200

Cash transactions during the period to 31 March 20X9 were

GH₵(000)
Purchases 2,000
Revenue 3,000
Drawings 500
Motor running expenses 350
Rates 250

At 31 March inventory was GH₵700,000 and rates paid in advance amounted to GH₵150,000.

Required
(a) Prepare the trial balance at 31 March 20X9.

(b) Prepare the statement of profit or loss for the period to 31 March 20X9 and a statement of financial position at that date.

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  • 12 Marks

FA – L1 – Q38 – Accruals and prepayments

Record adjustments for stationery, rent, rates, insurance, and lighting in ledger accounts for Nyame at 31 Dec 20X9.

The following is an extract from the trial balance of Nyame at 31 December 20X9.

| | Dr | Cr | |

| GH¢(000) | GH¢(000) |

| Stationery | 560 |

| | Rent | 900 | |

| Rates | 380 | |

| Lighting and heating | 590 | |

| Insurance | 260 | |

| Wages and salaries | 2,970 | |

There was stationery still in hand at 31 December 20X9 which had cost GH¢15,000.
Rent of GH¢300,000 for the last three months of 20X9 had not been paid and no entry has been made in the books at all for it.
Of the rates, GH¢280,000 was for the year ended 31 March 20Y0. The remaining GH¢100,000 was for the three months ended 31 March 20X9.
Fuel had been delivered on 18 December 20X9 at a cost of GH¢15,000 and had been consumed before the end of 20X9. No invoice had been received for the GH¢15,000 fuel in 20X9 and no entry has been made in the records of the business.
GH¢70,000 of the insurance paid was in respect of insurance cover for the year 20Y0.
Nothing was owing to employees for wages and salaries at the close of 20X9.
Required:
Record the above information in the relevant accounts for the year ended 31 December 20X9 and close the accounts.

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