Question

Question 2

Use the following information to answer questions that follow.

The following information was found in the books of Kelebale.

Capital	32,000
Sales	160,000
Sales Returns	5,000
Furniture and Fittings	10,000
Opening inventory	10,000
Motor vehicles	25,000
Purchases	125,000
Purchases Returns	3,000
Accounts Payable	10,000
Accounts receivable	15,000
Short loan	18,000
Bank	10,000
Cash	3,000
General expenses	7,000
Electricity	5,000
Motor expenses	2,000
Telephone	2,000
Rent	5,000
Interest payable	1,500
Interest receivable	500
Closing stock	7,000

Required:

a. Prepare Kelebale’s trial balance as at 31 January 2016. (11 marks)

b. Prepare the income statement for the year ended 31 January 2016. (11 marks)

c. Draw the balance sheet as at 31 January 2016. (8 marks)

Answer 1

Kelebale Trial balance as at 1-31-16 accounts capital sales sales returns furniture opening inventory motor vehicles purchases purchases returns accounts payable accounts receivable short loan bank cash general expenses electricity motor expenses telephone rent interest payable interest receivable debit credit 32000 160000 5000 10000 10000 25000 125000 3000 10000 15000 18000 10000 3000 7000 5000 2000 2000 5000 1500 500 TOTAL 224500224500 Note- closing stock is not included in the trial balance because it is already included in the purchases.

Kelebale income statement for the year ended 1-31-16 Particulars net sales less cost of goods sold gross profit-A Amount $ 155000 125000 30000 operating expenses general expenses electricity motor expenses telephone rent total operating expenses-B 7000 5000 2000 2000 5000 21000 operating income A-BEC Net income C 9000 9000 WORKINGS net sales sales less-sales returns NET SALES 160000 5000 155000 cost of goods sold purchases less: purchases returns add: opening stock less: closing stock cost of goods sold 125000 -3000 10000 -7000 125000

Kelebale balance sheet as 1-31-16 Assets Amount Liabilities Amount 32000 Property, plant, and equipments: furniture motor vehicles current assets: accounts receivable bank cash interest receivable closing stock Stockholders equity: 10000 capital 25000 current liabilities: accounts payable 15000 short loan 10000 interest payable 3000 500 Retained earnings C. 7000 10000 18000 1500 9000 Total assets 70500 Total liabilites 70500