Question

In: Accounting

“The following balances were taken from Jane's books who is a sole trader and operates a...

“The following balances were taken from Jane's books who is a sole trader and operates a catering business.

Jane's trial balance for the year to 30th June 2019 was as follows:

Trial Balance	Dr (£)	Cr (£)
Equipment at cost	42,000
Accumulated depreciation of equipment as at 1st July 2018		35,000
Inventory as at 1st July 2018	50,800
Debtors	32,000
Bank / cash	112,678
Creditors		23,027
Provision for doubtful debts as at 1st July 2018		1,280
Long term loan (at 10% per annum)		50,000
Owners capital		30,640
Retained profits as at 1st July 2018		62,901
Sales		353,800
Purchases	185,000
Motor expenses	34,890
Loan interest (all relating to long term loan)	2,500
Insurance	56,790
Rent	24,500
Office expenses	14,890
Bad debts written off	600
Totals	556,648	556,648

Additional information

The stock/inventory as at 30th June 2019 originally cost £36,000. However, the estimated net realisable value is calculated at £35,200.
A motor vehicle repair carried out in September 2018 costing £400 was still unpaid at the end of the year.
Insurance prepaid as at 30th June 2019 was £1500.
Rent owing as at 30th June 2019 were £2050.
Increase the provision for doubtful debts to 6% of debtors.
Depreciation on equipment is to be taken at 25% on a reducing balance basis.”

Required

Prepare Jane's income statement for the year ending 30th June 2019 and a statement of financial position as at 30th June 2019.

Expert Solution

JANE

INCOME STATEMENT

FOR THE YEAR ENDING AT 30 JUNE 2019

PARTICULARS AMOUNT ( IN £ )

Sales 353800

TOTAL INCOME 353800

Purchases 185000

Changes in Stock ( 50800 - 35200 ) 15600

Motor expenses 34890

Loan Interest 2500

Insurance ( 56790 - 1500 ) 55290

Rent ( 24500 + 2050 ) 26550

Office Expenses 14890

Bad Debts Written off ( 32000 * 6%) 1920

Depreciation ( 7000 * 25%) 1750

TOTAL EXPENSES 338390

NET PROFIT 15410

JANE

STATEMENT OF FINANCIAL POSITION

AS ON 30 JUNE 2019

PARTICULARS AMOUNT ( IN £ )

Equipment at cost 42000

Less: Accumulated Depreciation (36750) 5250

Inventory as at 30 June 2019 (Lower of Cost or NRV) 35200

Debtors 32000

Bank / Cash 112678

Prepaid Insurance 1500

TOTAL ASSETS 186628

Owners Capital 30640

Retained Profit as at 30 June 2019 ( 62901+ 15410 ) 77311

Creditors 23027

Provision for doubtful debts as at 30 June 2019 ( 1280 + 1920 ) 3200

Long term Loan 50000

Outstanding Rent 2050

Outstanding for motor vehicle repair 400

TOTAL LIABILITIES 186628

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