Question

How do I get the answer to note (b)?

Adjustments a Non-current assets are to be depreciated at the rate of 20 per cent per annum on a reducing balance basis. b Closing inventory amounted to £18,900. c Business expenses of £2,735 have been incurred but not yet recorded. d A provision for bad debts amounting to 10 per cent of receivables is to be created. Prepare an income statement and an appropriation account for the year ending 30 June year 3, and a statement of financial position as at that date. $ The trial balance of Faraway Retailers Lad as at 31 December year 1 is shown below. Debit 2000 Credit 2000 600 1,500 750 Inventories as at 1 January year 1 Trade receivables Trade payables Share capital: 1 shares Share premium 8% debentures Retained profits at 1 January year 1 Printing and stationery Provision for bad debts Wages and salaries Distribution costs Bad debt written off Purchases Sales Cash at bank Rent and rates Electricity Debenture interest Land and buildings at cost Land and buildings provision for depreciation as at 31 December year o Fixtures and fittings at COSE Fixtures and fittings provision for depreciation as at 31 December year o Plant and machinery at Cost Plant and machinery provision for depreciation at 31 December year o 7.900 3,000 1.500 2.800 1.264 14134 Additional information a The stocktake on 31 December year 1 revealed the following

This is for question 5: Faraway Retailers

Answer 1

The final account is prepared at the end of the year.This includes the income statement and balance sheet .The income statement shows the company's gross margin and net income for year. The balance sheet shows the financial position of the company in the form of assets and liabilities.

Income statement and statement of financial position on 31 December is as follows Income statment for the year ended 31 Loecember year 1 is calculated below particular 2000ot cooo) particular. tcooo) t cooo) To Inventories $45 by sales 7900 To purchases 13350 To wages and 890 Salanes To Gross Margin (4,055 by Inventories 940 8,840 8,840 To Dep. on Land & Building 60 To Dep en Fixtures Fitting 300 by gross margin 4055 To Depan Plant & machinery 1384 To Printing & stationary 750 To Rent & rates 320 Lless prepaid 36 284 ( 144 X 3 To Eletricity Add: outstanding J 12 67 ( 18 x bez To Bad debts wif) 20 Add: Rad debts untten off (New) Add: Provision for 135 - Bad debt i New) less provision for 40 Rad debt cold) Debenture cost 100 20 96 payable Debentare interest 48 Add. Interest 48 parable Tax pay able po Net Ihome 1615 1379 4055 4055

12 36 Palana sheet aron 31 pecember year 1 Liability 2 (0ool 2(006) Assets £ (ooo) 2 006) current liability current Assets outstanding Inventories 940 Eletricity Prepaid rent grade payable 600 a taxes Interest payable Trade Receivable 705 (1200x87.)=96 less: Bad debt 5 (96-48 =48 untten off Tax Pay a5) с 615 7,00 ong term loan less: Provision 35 8%. Deben tenes 1200 1200 for Rad debts sl 48 T Shareholders Equity Share capital Shane Premium - Retained Rotit Net Income 750 1901 1379.38 19 cash at Rank Nen-current Asrets Lands Building 3000 CS2 Less provision 90 for Depreciation 2910 Less Depreciation 60 2850 (straight line) 2. Fittin - s LSOO Fixture (cost) Less! Bovision 600 Ifor Depreciaban 1900 Less Depreciation 300 600 (straight line) 20% plant and machinery ((ost) 2,800 less provision 1264 for Depreciation J1536 Less: Depreciation 28 tReducing Balance (25%) 16294 a 152. 16294