Question

STATEMENT OF FINANCIAL POSITION AS AT END OF YEAR 1 £000 £000 Non current assets Equipment NBV 6.25 Current assets Inventory Receivables Cash 20.1 48.35 Total Assets 56.35 Non current liabilities Bank Loan Current Liabilities Payables: inventory Payables: admin 1.5 9.5 Equity Capital Reserves 4.85 22.85 Net Assets (Assets - Liabilities) 22.85 Note: The equipment purchased in year 1 had originally cost €10,000 with a useful life of 5 years, no residual value. The Straight line depreciation approach is used for equipment. Thus there was a depreciation charge of £2,000 in year 1.

Answer 1

STATEMENT OF FINANCIAL POSITION AS AT BEGINNING OF YEAR 2
	000'S	000'S
Non current assets:
Equipment NBV		8
Current Assets
Inventory	6.25
Receivables	22
Cash	20.1	48.35
Total assets		56.35
Non current liabilities
Bank loan		24
Current liabilities
Payable-Inventory	8
Payable-admin	1.5	9.5
Equity
Capital	18
Reserves	4.85	22.85
Net Assets (Assets-Liabilities)	22.85
Particulars	Debit	Credit
1. Payable- Inventory	8
Payable- Admin	1.5
Cash		9.5
2. Cash	22
Receivables		22
3. Cash	900
Equipment		800
Profit on sale of equipment		100
4. Rent deposit	45000
Cash		45000
5. Vans or vehicles	16000
Cash		16000
At the Year end 2
Depreciation	3200
Vans or vehicles		3200
At the Year end 3
Depreciation	2560		The useful life of the asset is 5 years it means 20% p.a.
Vans or vehicles		2560	(C46-C51)*0.2
At the Year end 4
Depreciation	2048		(B45-B50-B54)*0.2
Vans or vehicles		2048
At the Year end 5
Depreciation	1638.4		(B45-B50-B54-B58)*0.2
Vans or vehicles		1638.4
At the Year end 6
Depreciation	1310.72		(B45-B50-B54-B58-B62)*0.2
Vans or vehicles		1310.72
			6000
6. for purchase of 750 gadgets
Purchases/Inventory	6000
Accounts Payable		6000
Purchase of 850 gadgets in June
Purchases/Inventory	5950
Accounts Payable		5950
Purchase of 1500 gadgets in June
Purchases/Inventory	7500
Accounts Payable		7500
Tota amount to be paid to suppliers		19450
Less: BY the end of the year clsoing balance		10000
Cash paid to suppliers		9450
Journal entry for cash payment to suppliers
Notes payable	9450
Cash		9450