- 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iv) Included in wages and salaries is an amount of GH¢2,500 withdrawn by the owner.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