Question

Bank Account: year to 31 December 20X1 Sales ledger receipts Cash Sales New shares issued 103,900 Balance, 1 January 20X1 97,200 Purchases ledger payments 2,500 Wages Rent Trading expenses New van Directors' salaries Balance, 31 Dec 20X1 203,600 5,800 8,250 119,400 21,200 11,000 14,700 3,250 20,000 5,800 203,600 Bal b/f Extracts from trial balances as at: 31 Dec 20x0 31 Dec 20X1 1,330 Inventory, at cost 43,100 55,800 Receivables 9,470 11,880 Payables 10,560 9,640 Rent paid in advance 1,000 Trade expenses accrued 2,530 Shop fittings: cost 3,700 3,700 accumulated depreciation 1,500 1,200 Van: cost 3.500 (note 1) accumulated depreciation 2,100 (note 1) Share capital 20,000 (note 2) Notes 1. A new van was bought in January 20X1 at a cost of £5,000 less a trade-in allowance of £1,750 on the old one. Depreciation is to be provided for 20X1 at 20 per cent of the cost of the new van. 2. The company is authorised to issue a maximum of 50,000 ordinary shares with a par value of £1 each. 20,000 shares were issued at par when the company was formed. During 20x1, 1,000 new shares were issued to an employee at £2.50 each.

I don't understand how they got 17,330 in balance sheet for the year 2000. I completely cant get how they got every figure in balance sheet and income statement for 2001. I would be really grateful if someone would take their time and explain in details how they got these figures, I know it will be quite time consuming to go through every figure, but please help me.

Answer 1

Question 1. How to get 17,330 in balance sheet for the year 2000.

In the balance sheet of 2000, Retained earnings shows a balance of 17,330, which is the balancing number which is not given in the question, we have to find it by preparing the opening balance sheet. attachment of balance sheet as at 2000 gives the explanation of this question.

Question 2. How to obtain amounts for income statement and balance sheet for the year 2001.

Please go through the following attachments for solution.
Balance sheet as at 2000 Liabilities and equity Assets Shop(net of depreciation) 2500 Trade payables-purchases 10560 1400 Trade payables- expenses 43100 Bank overdraft 9470 Share Capital 1000 Retained Earnings 57470 Total Van (net of depreciation) 1330 Inventories 8250 Receivables 20000 17330 57470-40140 Prepaid Rent Total 57470 Sales Revenue Receivables Amount 9470 Cash receipts 107670 Bad debts provision Amount Debit Credit Balance B/d 103900 Sales Revenue 1360 ( Balancing Figure) Balance C/d 11880 117140 Total Total 117140 Purchases Payables Amount 119400 Balance B/d Debit Amount Credit Purchase payments 10560 Purchases 118480 9640 ( Balancing Figure) 129040 Total Balance C/d Total 129040

Closing Inventory Closing inventory has been given in the question directly as 55,800 Profit on sale of Van Profit =Net sale receipts-( Cost - accumulated depreciation) Net Sale receipts 1750 This is the Trade in allowance of old one Less: Net Book value of old one Cost of Old Van 3500 Less: Depreciation 2100 1400 Profit on sale of Van 350 Note: There is a printing mistake in document. It is not 1700, it is 1750 Bad debts Bad debts written of during the year is 1360 Add: Ending bad debts on receivables 240 Total 1600 Trade Expenses Trade Expenses Amount Debit Credit Amount 14700 Balance B/d Trade expense payments 1330 Purchases 15900 2530 ( Balancing Figure) 17230 Total Balance C/d Total 17230 Rent Rent Amount Debit Credit Amount 1000 Income Statement Balance b/d 12000 Rent paid 11000 ( Balancing Figure) 1000 Total Total 12000 Wages and directors salary are same as in the question Depreciation On shop fittings Accumulated Depreciation 300 1200 to 1500, so there is an increase of 300 Depreciation on New van = 5,000*20%= 1000 Total Depreciation 1300 Bad debts provision Current year provision 440 Statement of changes in retained profits Previous share share + current year issue = 20,000+1,000 21000 Dividend per share =0.3 0.3 Total Dividend3D21,000*0.3 6300 Profit for the year is calculated by applying the above adjustments.

Balance sheet as at 2001 Calculation Item Amount Reason Shop 2200 As it is directly given in the question 3700-1500 Van 4000 Only new van is to be considered. Old is exchanged 5000-1000 Inventories 55800 Ending balance of inventory 55800 Receivables 11640-440 11200 Ending balance - Bad debts provision O No ending balance Prepaid Rent Total Assets 73200 Trade payables-purchases 9640 Ending balance Trade payables- expenses 2530 Ending balance Bank overdraft 500 Debit balance of 5800- dividend payment of 6300=Overdraft of 500 5800-6300 20,000+1000 shares * 1 per share Share Capital 21000 1000 shares *1.5 per share Share Premium 1500 Retained Earnings Balancing figure Total Liabilities and equity 38030 73200-(9640+2530+500+21000+1500) 73200