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- 20 Marks
Question
The following trial balance was extracted from the ledger account of Bob & Sons, a sole proprietor, as at 31 December 2016:
Trial Balance as at 31 December 2016
| Account | Debit (GH¢) | Credit (GH¢) |
|---|---|---|
| Building, at cost | 650,000 | |
| Office equipment at cost | 135,000 | |
| Plant and Machinery | 263,500 | |
| Accumulated depreciation | ||
| – Building | 39,000 | |
| – Office equipment | 27,000 | |
| – Plant and Machinery | 65,875 | |
| Purchases | 248,000 | |
| Sales | 500,000 | |
| Inventory 1 January 2016 | 27,500 | |
| Discount allowed | 4,800 | |
| Returns inwards | 3,200 | |
| Wages and Salaries | 64,885 | |
| Rent | 5,580 | |
| Insurance | 6,000 | |
| Trade receivables | 145,000 | |
| Trade payables | 132,750 | |
| Provision for bad debt | 24,840 | |
| Bank overdraft | 58,956 | |
| Cash in hand | 5,400 | |
| Long-term loan | 350,000 | |
| Capital 1 January 2016 |
1,558,865 |
360,444
1,558,865 |
Additional Information:
i) Inventory as at December 2016 was valued at GH¢24,000.
ii) Insurance was paid for 15 months ending 31 March 2018.
iii) 3 months rent is outstanding. The agreed amount per month is GH¢620.
iv) Included in wages and salaries is an amount of GH¢2,500 withdrawn by the owner. Secondly, the cleaner has not been paid his salary for December 2016 as at the end of the year. His monthly salary is GH¢500.
v) Interest on capital per annum is 15% and is yet to be recorded.
vi) Depreciation for the year ended 31 December 2016 has not been charged as follows:
- Building 3% per annum using the straight-line method.
- Office equipment 20% using the reducing balance method.
- Plant and machinery 25% using the reducing balance method.
Required:
a) Prepare Bob & Sons’ Statement of Profit or Loss account for the year ended 31 December 2016. (8 marks)
b) Prepare the Statement of Financial Position as at that date. (12 marks)
Answer
- Tags: Depreciation, Financial Statements, Sole Proprietorship
- Level: Level 1
- Uploader: Theophilus