Lecture Question

The following Trial Balance was extracted from the books of Kaseka Bailey on June 30, 2015.
Particulars DR ($) CR($)
Building 240,000
Equipment 155,000
Purchases 165,000
Wages 45,500
Bad debts 1,700
Donations to charity 3,000
Provision for depreciation – Building 16,000
Provision for depreciation - Equipment 7,500
Capital 250,000
Loan 80,000
Commission received 20,000
Bank 24,500
Rent received from Gareth Simms 35,000
Discounts 4,150 7,500
Returns 2,500 3,500
Carriage inwards 5,250
Carriage outwards 3,200
Provision for bad debts 8,000
Creditors 27,200
Drawings 27,000
Stock at July 1, 2014 35,200
Cash 7,500
Debtors 45,000
Sales 270,800
Insurance 10,000
750,000 750,000
Notes
a) Insurance prepaid was $2,500
b) The provision for bad debt is to be adjusted to 20% of debtors
c) Stock at the yearend was valued at $40,700; however it appears that an additional amount
for $13,000 was found in a store room. The amount was deemed material and should be
accounted for in the financial statements.
d) Wages were to be paid at $4,000 per month for the year.
e) Depreciate building at 9% using the straight line method and equipment 12% based on
the reducing balance method.
 f) Commission received owing amounted to $5,500
g) Kaseka rented Gareth office space for nine (9) nine months of the year, charging him
$3,600 per month

Required:
a) Prepare Kaseka Bailey’s Statement of Profit or Loss for the year ended June 30, 2015
b) Prepare Kaseka Bailey’s Statement of Financial Position as at June 30, 2015

SOLUTION LECTURE QUESTION

Kaseka Bailey Statement of profit or loss
for year ended June 30, 2015      
  $ $ $
Sales   270,800  
less return inwards   (2,500)  
less discount allowed (4,150)
Net Sales     264,150
Cost of Sales      
Opening Stock   35,200  
Purchases 165,000    
Carriage inwards 5,250    
Return Outwards (3,500)    
Discount received (7,500)
Net Purchases   159,250  
COGAFS   194,450  
Closing Stock   (53,700)  (140,750)
GROSS PROFIT     123,400
Other Income      
Commission received 20,000
Commission received owing 5,500 25,500
Rent received 35,000
Rent received prepaid (2,600) 32,400
Total other income     57,900
Total Income     181,300
Less Expenses      
Carriage Outwards   3,200  
Wages 45,500    
Wages accrual 2,500   48,000  
Insurance 10,000    
Insurance prepaid (2,500) 7,500  
Donations to charity   3,000  
Bad debts 1,700
Increase in provision for bad debts 1,000
Depreciation      
Building   21,600  
Equipment   17,700  
(103,700)
NET PROFIT     77,600

Kaseka Bailey Statement of Financial Position as at June 30, 2015

Non-Current Assets      
Accumulated
  Cost Depreciation Net Book Value
Building 240,000 (37,600) 202,400
Equipment 155,000 (25,200) 129,800
  395,000 (62,800) 332,200
       
Current Assets      
Stock   53,700  
Debtors 45,000    
less PFBD (9,000) 36,000  
Cash 7,500  
Prepaid insurance   2,500  
Commission received owing 5,500
      105,200
      437,400
       
Current Liabilities      
Creditors   27,200  
Bank overdraft   24,500  
Wages owing   2,500  
Rent received prepaid 2,600
      56,800
       
Non-Current Liabilities      
Loan     80,000
       
Equity      
Opening capital   250,000  
Net profit   77,600  
Drawings (27,000)  
      300,600
      437,400
TUTORIAL QUESTIONS
1. Discuss some of the reasons for the occurrence of a bad debt in a business organization

2. What are some of the factors that give rise to the issue of depreciation?

3. The following Trial Balance was extracted from the books of Jiminy Cricket, a retail
salesman, on May 31, 2014.
Particulars DR ($) CR($)
Building 180,000
Equipment 155,000
Purchases 160,000
Wages 55,500
Bad debts 1,700
Loan interest 5,000
Provision for depreciation – Building 16,000
Provision for depreciation - Equipment 15,000
Capital 265,000
Loan 80,000
Commission received 10,000
Bank 34,500
Rent received from Pinocchio 25,000
Discounts 4,150 7,500
Returns 2,500 3,500
Carriage inwards 5,250
Carriage outwards 3,200
Provision for bad debts 8,000
 Electricity 7,500
Creditors 47,200
Drawings 17,000
Stock at June 1, 2013 55,200
Cash 7,500
Debtors 45,000
Sales 207,800
Insurance 15,000
719,500 719,500

Notes
a) Jiminy took goods worth $6,000, each month beginning March 1, 2014 until the end of
the accounting year that was not previously recorded
b) Insurance owing was $5,600, wages is prepaid by $1,000
c) The provision for bad debt is to be adjusted to 10% of debtors
d) Stock at the yearend was valued at $51,500; however it appears that an additional amount
for $20,000 was found in a store room. The amount was deemed material and should be
accounted for.
e) Depreciate building at 10% using the straight line method and equipment 15% based on
the reducing balance method.
f) Commission received owing amounted to $2,500
g) Jiminy rented Pinocchio office space for the entire year, however, Pinocchio overpaid
Mr. Cricket $15,000 for the accounting year.

Required:
a) Prepare Jiminy Cricket’s Statement of Profit and Loss for the year ended May 31, 2014
b) Prepare Jiminy cricket’s Statement of Financial Position as at May 31, 2014
 4. Prepare Trina Haldane’s Statement of Profit or Loss for the period ended 31 December
2014 and Statement of Financial Position as at that date.

Trina Haldane’s unadjusted Trial Balance as at 31 December 2014

Particulars Dr Cr

Capital 200,000

Drawings 12,000

Bank balance 5,500

Cash in hand 7,000

Accounts receivables 40,000

Accounts payable 55,000

Inventory: Opening 18,000

Premises 150,000

Motor Vehicle 90,000

Fixtures and Fittings 65,000

Sales 255,600
Purchases 130,000

Returns inwards 7,500

Carriage outwards 4,500

Carriage inwards 6,500

Returns outwards 11,500

Motor expenses 10,400

Rent Received 20,000

Telephone charges 12,000

Wages and salaries 34,000

Insurance 10,600

Commission Received 14,800

Bad Debt 2,500

Provision for depreciation: Motor Vehicle 20,000

Provision for depreciation: Fixtures and Fittings 25,000

Provision for doubtful debt 3,600

Total 605,500 605,500

Additional information
a) Closing Inventory $25,000
b) Wages and Salaries prepaid $2,500
c) Commission Received owing $2,000
d) Trina Haldane took $6,000 worth of goods for her personal use.
e) Trina Haldane’s insurance premium incurred is $1,000 per month commencing 1st March
2014.
f) Provision for doubtful debt is to be adjusted to 5% of Accounts Receivable
g) Depreciation is to be charged on Fixtures and Fittings at 10% using the Reducing Balance
Method and on Motor Vehicle at 10% using the Straight Line Method

5. Rupert McDonald is a sole trader who operates a haberdashery in St Elizabeth. Mr.

McDonald opened on April 1, 2013 in Bethlehem Plaza where his monthly rental is
$20,000. This rent expense will remain at this rate for the next four (4) years. He rents a
small section of the shop to Jim Bone, since January 1, 2015 for $12,000 per month. The
following trial balance was as at March 31, 2015.

Particulars DR ($) CR($)

 Motor Van 3,000,000
Provision for depreciation – Motor Van 480,000
Capital 2,840,000
Purchases and Sales 640,000 3,034,000
Inventory at April 1, 2014 61,200
Motor Expenses 36,300
Bad debts 6,500
Provision for depreciation – Equipment and Furniture 90,000
Salaries and wages 334,000
Electricity 100,000
Loan 731,000
Commission received 20,000
Bank 154,400
Rent received from Jim Bone 50,000
Discounts 7,500 8,000
Returns 22,000 40,000
Carriage inwards 17,500
Carriage outwards 38,500
Provision for bad debts 16,000
Accounts receivable and payable 240,000 353,900
Drawings 342,000
Equipment and Furniture 2,500,000
Cash 23,000
Rent paid 140,000
7,662,900 7,662,900
Notes
a) Electricity has been prepaid $25,000
b) The provision for bad debt is to be adjusted to 15% of accounts receivables
c) Stock at the yearend was valued at $197,000; however it appears that an additional
amount for $33,000 was found in a store room. The amount was deemed material and
should be accounted for in the financial statements.
d) Depreciate motor van at 8% using the straight line method and equipment and furniture
5% based on the reducing balance method.
e) Commission received owing amounted to $10,500

Required:
a) Prepare Rupert McDonald’s Statement of Profit or Loss for the year ended March 31,
2015
 b) Prepare Rupert McDonald’s Statement of Financial Position as at March 31, 2015

6. The following balances were extracted from the books of Michelle O’Connor as at
December 31, 2015. She is a sole trader who operates a clothing wholesale in May Pen.
Michelle rented Cecil Bryan a very small section of the wholesale for $6,000 per month.
PARTICULARS DR CR
Sales 180,000
Capital 104,000
Stock at January 1, 2015 9,700
Purchases 58,200
Returns 10,180 8,730
Wages 88,520
Utilities 17,900
Insurance 40,000
Discounts 3,400 2,200
Motor Vehicle 40,000
Provision for Depreciation - Motor Vehicle 10,840
Drawings 12,000
Loan 105,000
Building 70,000
Provision for Depreciation - Building 33,600
Debtors 13,300
Sundry Expenses 6,400
Provision for bad debts 1,190
Commission Received
Land 160,000
Carriage Outwards 1,800
Bad debts 9,600
Carriage Inwards 2,200
Rental Income (from Cecil Bryan) 65,000
Creditors 15,500
Bank 21,300
Cash 4,160
547,360 547,360

Year-end notes:

a) Buildings are to be depreciated using the straight line method at a rate of 8% per annum;
and the reducing balance method is to be used to depreciate motor vehicles at a rate of
10% per annum.
b) Wages are owing at the yearend amounted to $11,480
 c) The insurance paid represents fixed monthly premiums for the period January 1, 2015 to
March 31, 2016
d) Stock at December 31, 2015 $8,300, however it appears that an additional amount,
$1,700 was found in a store room. The amount was deemed material and should be
accounted for.
e) On October 1, 2015, the owner took goods amounting to $1,000 from the warehouse and
continued to do so at the beginning of every month up to February 20116.
f) The provision for bad debts is to be revised to 5% of debtors at the end of the financial
year of the business
Required:
1. Prepare the Statement of Profit or Loss for Michelle O’Connor.
Prepare a Statement of Financial Position.

Question 1
The following balances were extracted for the books of Latoya Jackson trading as "Tek You
Han
Tun Fashion Variety Store" at the end of September 2018
Particulars DR (S)

Sales

Provision for depreciation — Motor Vehicle 15,000

Accounts Receivable 20,600

Capital 257,500

Provision for bad debts 1,500

Carriage Inwards 2,050

Return Inwards 12,200

Return Outwards 13,600

Carriage Outwards 2,000

Accounts Payable 24,870

Discounts 10,000 4,500

Purchases 320,500

Motor Vehicle 400,000

Rent Received 48,000

Wages 50,500

Drawings 8,000

Stock at October l , 2017 25,280

Equipment 550,000
Bank 42,840

Cash in hand 1,500

Provision for depreciation — Equipment 85,000

Commission Received 6,000

Rent Payable 26,000

Rates 7,500
 Loan 75,000

Building 910,000

Provision for depreciation — Building 358,000

of 8
Notes

a) Depreciation rates are as follows:

i. Equipment — 10% per annum on the reducing balance
basis ii. Building — 5% per annum on the straight line basis
iii. Motor Vehicle— 15% per annum on the reducing balance

b) Latoya took merchandise valued at $ 8,600 from the shop for her birthday party. This
was not recorded in the books.

c) Latoya rents a small section of the store to Jessica, the rent amounts to $4,000 per month
due the first day of each month. For the month of June until the end of the accounting
year, the rent was increased by 20%.

d) Wages is accrued by $5,000; rates are prepaid by $800, commission receivable earned
for the year amounted to $10,000.

e) The provision for bad debt is to be adjusted so it is 10% of accounts receivable

f) Stock at the yearend was valued at $14,750.

Required:
a) Prepare Latoya Jackson's Statement of Profit or Loss with the appropriate headings
(25 marks)
b) Prepare Latoya Jackson's Statement of Financial Position with the appropriate
headings
(15 marks)
Ouestion 1
The following balances were extracted for the books of Micah Brown at the end of
December 2017
Particulars DR (S)

Sales

Provision for depreciation — Motor Vehicle 15,000

Accounts Receivable 20,600

Capital 350,000

Provision for bad debts 1,500

CarHage Inwards 2,050

Returns 12,200 13,600

CarHage Outwards 2,000

Accounts Payable 24,870

Purchases 706,180

Motor Vehicle 600,000

Rent Received 68,000

W ages 50,500

Drawings 6,000

Stock at January 1, 2017 25,280

Equipment 850,000
Bank 42,840
Cash in hand 1,500

Provision for depreciation — EquiplT.Len: 85,000

Commission Received 6,000

Rent Payable 19,000

Rates 7,500

Loan 275,000
 Bad Debts 3,000
Discounts 6,000 12,000
Building

Provision for depreciation — Building 488,000

3 381 810
Notes

a) Wages prepaid at the yearend amounted to $6,000; Rates accrued amounted to $2,000.
b) The provision for bad debts is to be revised to 5% of accounts receivable at the end of
the financial year of the business
c) Stock at December 31, 2017 amounted to $32,300; however it appears that an
additional amount, $2,700 was found in a store room. The amount was deemed material
and needs to be accounted for in the financial statements
d) Motor Vehicle is to be depreciated using the reducing balance method at a rate of 15%
per annum; equipment at 10% using the reducing balance method and the straight line
method is to be used to depreciate the Building at a rate of 5% per annum.
e) Commission received owing amounted to $2,000
f) On September l , 2017, the owner took goods amounting to $2,000 from the warehouse
and continued to do so at the beginning of every month up to March 2018.
g) "Ihe rent received amount was from Mr Brown renting a section of his premises to

Raymond Pryce, his cousin, on January 1, 2017 for $4,000 per month. However, on
March l , 2017 he increased the rent by 20%.

Required:
Prepare Micah Brown's Statement of Profit or Loss (25 marks)
2. Prepare Micah Brown's Statement of Financial Position (15 marks)