Question

On December 31, 2017 the following Trial Balance was extracted from the books of Rosetta Park.

Details/Accounts	Dr	Cr
Capital	-	151,350
Acc. Prov. for Depreciation: Fixtures and Fittings Jan. 2017	-	4,500
Acc. Prov. for Depreciation: Motor Vehicle Jan. 2017	-	4,950
Creditors	-	40,500
Commission Received	-	5,400
Rent Received	-	18,000
Sales	-	61,500
Purchases	17,400	-
Office Expenses	16,000	-
Miscellaneous Expenses	1,110	-
Salary and Wages	11,700	-
Carriage inwards	150	-
Telephone Expense	360	-
Bad Debt	2,600
Rent expense	3,150	-
Electricity Expense	1,710	-
Discounts allowed	240	-
Return Inwards	600	-
Stock, January 1, 2017	5,400	-
Debtors	58,500	-
Cash at Bank	35,100	-
Drawings	13,380	-
Land	58,800	-
Fixtures and Fittings	25,500	-
Motor Vehicle	34,500	-
	286,200	286,200

The following additional information has been made available:

(a) Electricity expense accrued $3,790.

2. $2,150 for Rent Received relates to 2018.
3. Office expenses prepaid $1,700.
4. Depreciation is to be provided for as follows: Motor Vehicle at 25% of cost; Fixtures and Fittings at 30% reducing balance method.
5. Stock at December 31, 2017 was valued at $15,200.

Required:

1. Prepare Income Statement for the year ending December 31, 2017
2. Prepare Balance Sheet as at December 31, 2017.

Answer 1

a) $82,150 Rosetta Park Income Statement For the Year Ended December 31st, 2017 Sales $61,500 Return inward $600 Net Sales $60,900 Commission received $5,400 Rent received $15,850 Total revenue Less: Cost of goods sold Opening Stock $5,400 Add: Purchases $17,400 Add: Carriage inward $150 $22,950 Less: Closing stock $15,200 Cost of Goods sold Gross profit Operating Expenses Salaries and wages $11,700 Office expenses $14,300 Miscellaneous expense $1,110 Telephone expenses $360 Bad debt $2,600 Rent expense $3,1501 Electricity expense ($1,710+$3,790) $5,500 Discount allowed Depreciation - Fixture and Fittings $6,300 Depreciation - Motor Vehicle $8,625 Total Operating expenses Net Profit $7,750 $74,400 $240 ($25,500- $4,500)*30% $34,500*25% $53,885 $20,515 Working notes: Statement of Owners' Equity For the Year Ended December 31st, 2017 Capital, Opening balance Net profit transferred from P & L Account Sub-total Less: Drawings Capital, Closing balance $151,350 $20,515 $171,865 $13,380 $158,485 b) Rosetta Park Balance Sheet As on December 31, 2017 Assets Current Assets Cash Debtors Inventory Prepaid office expenses Total Current Assets $35,100 $58,500 $15,200 $1,700 $110,500 $58,800 Property, Plant and Equipment: Land Fixtures and Fittings Less: Accumulated Depreciation $25,500 $10,800 $14,700 $34,500 $13,575 $20,925 $94,425 $204,925 Motor Vehicle Less: Accumulated Depreciation Total Assets Current Liabilities: Creditors Accrued Electricity expense Unearned rent Total Current Liabilities $40,500 $3,790 $2,150 $46,4401 Owners' Equity: Capital balance Total Liabilities and Owners' equity $158,485 $204,925