Question

Question 5 [31] - RESBAKHOW WITH ATTAILES INFORMATION ON EXTRA PAGE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME The following information relates to Iball Industries Pre-adjustment trial balance for the year ending 31 May 2020 R R Statement of financial position section Capital 615 231 Drawings 5 500 Land and buildings 353 000 Vehicles 145 560 Accumulated depreciation: Vehicles 30 560 Furniture and fittings 65 310 Accumulated depreciation: Fumiture and fittings 9310 Fixed deposit 110 000 Trading inventory (1 June 2019) 45 000 Debtors control 34 750 Bank 45 000 Creditors control 44 500 Statement of profit or loss and other comprehensive income section Sales 460 000 Purchases 310 000 Sales returns 13 500 Purchases returns 35 000 Rent income 39 900 Commission income 14 000 Advertising 18 530 Insurance 26 400 Interest expense 3 340 Stationery 11 B43 Telephone 23 418 Water and electricity 37 550 1 248 501 1 248 501 Additional information: 1. The entity uses the periodic system to record Inventory. A physical stocktake was performed on 31 May 2020. The value of the stock on this date was R60 000. 2. The water and electricity account for the month of May 2020 amounts to R2 450. This has not yet been paid or taken into account 3. During the first 7 months of the financial year the rent received from the tenant was R3 000 per month. On 1 January 2020, the rent was increased to R3 150 per month. The rent for June 2020 has already been received and banked. 4 Depreciation must be provided for as follows: Vehicles at a rate of 20% on cost Furniture and fittings at a rate of 10%, using the diminishing balance method 5. At year end, notification was received that a debtor owing R550 was declared insolvent and the debt should be written off. 6. After consideration of the trade receivables, it was decided to raise an allowance for credit losses at 10% of outstanding debtors. 7. Interest earned on the fixed deposit is 6% per annum. 8. The insurance premium for June 2020, R200, was already paid in May 2020 Required: Prepare the statement of profit or loss and other comprehensive income of ball Industries for the year ended 31 May 2020,

Answer 1

Statement of Profit or Loss and Other Coprehensive Income
Sales				460000
Less: Sale Retrun		-13500
Net Sales				446500
Purchases		310000
Openong Inventory		110000
Less: Purchase Retrurn	-35000
Less: Closin Stock		-60000			W/n - 1
Consmption of Material		325000
Gross Profit			121500
Rent Income		36750			W/n-3
Interest Earned on FD	6600			W/n-7	Assumed to be Invested not for personal Purpose.
Comission Income		14000	57350
Advertising Expenses		18530
Insuranc eExpenses		26200			W/n-8
Interest Expenses		3340
Stationary Expenses		11643
Telephone Expenses		23418
Depreciation - Vehicles	29112			W/n-4
Depreciation- Furniture and Fitings	5600			W/n-4
Water And Electricity Expenses	40000			W/n -2
Bad Debts Expenses		550			W/n- 5
Bad Debts Allowances	3420	161813		W/n-6
Net Profit			17037
If FD income is charegd to Capital Then Profit will reduced by 6600
Net Profit ( IF FD is Part of Capital)	10437

W/n-1: Clsoing Stock is Recorded at 60000

Hence Adjustment is required in Purchases as Theya re Showing at Oprning balance and Purchases are also not adjusted

Hence, opening Stock+ purchases - Closing Stock = Consumption Charged to P and L A/c

W/n-2 : Water And Electricity Expenses not Charged for 2450 hence Added

W/n- 3: 3000 X 7 months + 5 X 3150 = 36750

But Charging 3150 for june month as prepaid hecne 3150 reduced from 39900

W/n- 4:

Deprecitaion on Vehicle on Cost @ 20 % i.e 145560 X 20% = 29112

Depreciation on Furniture is 10 % on WDV i.e 65310 - 9310 = 56000 X 10% = 5600

W/n- 5:

Bad Debt samount to 550

W/n- 6:

Bad Debt Proviion for Coming future is 10%

Debtor Control = 34750 - 550 = 34200 X 10% = 3420

W/n- 7:

Fixed Interest earning amounts to 6% p.a

Although it can be treated as Personal Earning or Buisness earning

Assumption here , Treatment as Business Earnings

110000 X 6% = 6600

W/n- 8:

Insurance Expenses Paid in Advance for 200

Hence Reduced from Expenses 26400 -200 = 26200