Question

Question 5: Financial statements (13 marks) Longford Ltd has provided the following information at the end of May 2020 LONGFORD LTD Trial Balance 31 May 2020 Cr Dr. $ 2.000 3,900 1,500 800 18,000 Cash Accounts Receivable Prepaid Rent Supplies Motor vehicle Accumulated Depreciation-Motor vehicle Accounts Payable Interest Payable Salaries Payable Revenue Received in Advance Loan Payable (payable in 2025) Share capital (31 May 2020) Retained earnings (1 May 2020) Dividends paid Service Revenue Salaries Expense Electricity Expense Rent Expense Supplies Expense Depreciation Expense-Motor vehicle Interest Expense Totals $ 1,500 3,000 120 600 4,360 10,000 6,000 1,200 3,200 9,200 2,660 2,100 1,100 400 200 120 $35,980 $35.980 Additional information - During the month of May there was a new share issue of $1,500. Required (a) Prepare a Statement of Profit or Loss (also referred to as an Income Statement) for the month (3 marks) (b) Prepare a statement of Changes in Owner's Equity (3 marks) (c) Prepare a classified Statement of Financial (also referred to as a Balance Sheet) (7 marks)

Answer 1

Solution:

(a) Statement of Profit & Loss Account

LONGFORD LTD. Statement of Profit & Loss Account For the month ended May 31, 2020 S Particulars Revenues Service Revenue $ 9,200.00 Expenses Salaries Expense Electricity Expense Rent Expense Supplies Expense Depreciation Expense Interest Expense Total expenses Net Income $ 2,660.00 2.100.00 1.100.00 400.00 200.00 120.00 $ S 6,580.00 2,620.00

(b) Statement of Changes in Owner's Equity

LONGFORD LTD. Statement of Changes in Owner's Equity For the month ended May 31, 2020 $ Particulars Share Capital Share Capital, May 01 Add Issuance of shares S S 4,500 1,500S 6,000 Retained Earnings Balance. May 01 Add Net Income Less: Dividend 1.200 2,620 (3.200) 620 Owner's Equity as on May 31 S 6,620

(c) Statement of Financial Position

LONGFORD LTD. Statement of Financial Position As on date May 31, 2020 S S ASSETS Current Assets Cash Accounts Receivable Prepaid Rent Inventory Non-Current Assets Motor Vehicle Less: Accumulated Depreciation 2.000 3,900 1,500 800 $ 18,000 (1,500) 16,500 Total S 24,700 S S LIABILITIES AND OWNER'S EQUITY Current Liabilities Interest payable Accounts payable Salaries payable Revenue received in advance Non-Current Liabilities Loan Payable 120 3,000 600S 3.720 4,360 10.000 Owner's Equity Owner's Capital 6.620 Total S 24,700