Question

Question 2 - Financial Reporting Escape from LA is a business selling electrical goods owned and operated by Kurt Russell. The following adjusted trial balance has been prepared at year's end. Please see next page for requirements for this question. Credit (5 970 17 800 XXXX__117700 337 800 ESCAPE FROM LA - TRIAL BALANCE AS AT 30 JUNE 2019 Debit (5) Cash 32 600 Accounts Receivable 26 900 V Doubtful Debts Expense TE 1 700 V Inventory (1 July 2018) 43 100 Rent Expense AE 1 800 Interest Expense TE 1 500 Telephone Expense AZ Wages Expense AE 19 500 Accumulated Depreciation -- Equipment freight In Expense 4340 General Expense AZ 17 820 Capital (1 July 2018) V Drawings 17 500 Sales Income Sales Returns 22 450 Discount Allowed TE 7 450 Purchases 157 200 Purchases Returns COGS VDiscount Received Coles Freight Out Expense SE 2 150 Accounts Payable VEquipment 145 000 Electricity Expense AZ 2 840 Depreciation Expense - Equipment AZ 2 800 Loan Payable Allowance for Doubtful Debts Salaries Expense AE 37 720 Advertising Expense SE 4 750 V Prepaid Rent 6.950 Solo 5 200 1940 26 200 48 500 1 700 387040 VClosing Inventory at 30/6/19 was $52 700

Answer 1

Computing the total of the given Trial balance, we get

Total Debit = 557040

Total Credit = 439140

So difference of 117900 is Opening Capital..

Capital
Opening balance (based on above)	117900
Less: Drawings (given)	-17500
	100400
Add: Income for CY (from Income statement below)	85600
Total	186000

b.

Income Statement

Sales (337800-22450)	315350
COGS	146740
Gross profit	168610
Discount Received	1940
Operating expense:
Administrative expense	83450
Selling expense	16050
Total Operating expense	83450
Operating income	87100
Non-operating/others
Other expense	1500
Total Non operating	1500
Net Income	85600

Notes:

1.

COGS
Opening Stock	43100
Freighnt in	4340
Purchases	157200
returns	-5200
	199440
less: closing stock	52700
	146740

2.

Administrative expense
Rent	1800
telephone	970
Wages	19500
Gen expense	17820
Electricity	2840
Depreciation	2800
Salaries	37720
	83450

3.

Selling expense
Discount allowed	7450
Doubtful debt	1700
freight out	2150
advertisement	4750
	16050

4.

Other expense
Interest	1500

Please note, wages can also be taken under COGS.

Plz comment in case of any query regarding this solution.