Question

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

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

a) Credit 155 000 Kelebale Trial Balance 31 January 2016 Debit Cash 3 000 Bank 10 000 Accounts Receivable 15 000 Interest Receivable 0 500 Stock of Inventory 10 000 Furniture & Fittings 10 000 Motor Vehicles 25 000 Accounts Payable Interest Payable Short Loan Capital Sales Sales Returns 5 000 Purchases 125 000 Purchase Returns General Expenses 7 000 Electricity 5 000 Motor Expenses 2 000 Telephone 2 000 Rent 5 000 Totals 224 500 Kelebale Income Statement For the Month Ended April 30 Sales 160 000 Less: Sales Returns -5 000 Net Sales Revenue Cost of Goods Sold: Opening Stock of Inventory 10 000 Add: Purchases 125 000 Less: Purchase Returns 3 000 Less: Closing Stock of Inventory -7 000 Cost of Goods Sold Gross Profit Expenses: General Expenses 7 000 Electricity 5 000 Motor Expenses 2 000 Telephone 2 000 Rent 5 000 Total Expenses Net Income 125 000 30 000 10 000 1 500 18 000 32 000 160 000 3 000 21 000 9 000 224 500 Kelebale Statement of Owners' Equity For the Month Ended April 30 Capital - Beginning Balance Add: Net Income 9 000 Less: Drawings 0 000 Net increase in owners' equity Capital - Ending Balance 32 000 [Ref: Income Statement] NOTE: Closing stock shall not appear on trial balance as it will be reported on balance sheet and used in cost of goods sold calculation. 9 000 41 000

Kelebale Balance Sheet 31 January 2016 Liabilities & Shareholders' Equity Current Liabilities: Accounts Payable Interest Payable Short Loan Total Liabilities 10 000 1 500 18 000 29 500 Assets Current Assets: Cash 3 000 Bank 10 000 Accounts Receivable 15 000 Interest Receivable 500 Stock of Inventory 7 000 Total Current Assets Property, Plant and Equipment: Furniture & Fittings 10 000 Motor Vehicles 25 000 Property, Plant and Equipment, Net Total Assets 35 500 Owners' Equity: Capital 41 000 [Ref: Statement of Owners' Equity] 35 000 70 500 Total Liabilities & Shareholders' equity 70 500