Question

Below is the trial balance of Tom’s Tents at 5 April 2018.

	£	£
Trading account:
Sales		1,125,000
Opening inventory at 6 April 2017	150,000
Purchases	590,000
Carriage inwards	1,250
Other revenues and expenses:
Income from repair services		2,250
Rent	28,000
Insurance	7,500
Advertising expense	6,400
Heating and lighting	5,900
Shop and office expenses	44,000
Salaries and wages	65,500
Discounts allowed	3,500
Carriage outwards	3,200
Balance sheet accounts:
Fixtures and fittings at cost	140,000
Fixtures and fittings - accumulated depreciation 6th April 2017		28,000
Motor vehicles at cost	100,000
Motor vehicles - accumulated depreciation 6th April 2017		50,000
Receivables	85,500
Allowance for receivables 6th April 2017		4,000
Bank	51,000
Payables		32,500
Loan		20,000
Capital		100,000
Drawings	80,000
	1,361,750	1,361,750

The following information is relevant.

1.     The closing inventory at 5 April 2018 is valued at £143,000.

2.     On 5 January 2018 Tom sold a motor vehicle for £12,000. The customer was due to pay Tom’s Tents on 5 April 2018 but had not paid at the year end. This disposal has not been recorded in the accounts. This motor vehicle had been bought on 6 April 2015 for £25,000.

3.     On 6 January 2018, Tom bought a new motor vehicle on credit for £30,000. At the year-end Tom had still not paid for this motor vehicle and the transaction had not been recorded in the accounts.

4.     Depreciation on motor vehicles is provided at 20% per annum using the reducing balance basis on a monthly pro-rata basis. Depreciation on fixtures and fittings is provided at 10% per annum on the straight line basis, assuming no residual value. There were no purchases or disposals of fixtures and fittings during the year.

5.     Tom estimates that £6,000 due from customers will be irrecoverable and must be written off.

6.     The allowance for receivables is to be set at 5% of net receivables at 5 April 2018.

7.     Rent includes a prepayment of £2,000.

8.     Insurance includes a prepayment of £700.

9.     The heating bill will arrive on 5 May 2018 and about £500 is expected to relate to the period until 5 April 2018.

10.  The long-term loan is repayable in 5 years’ time. Interest payable on the loan is 6% and will be paid once per year.

Required:

a.Prepare the income statement for Tom’s Tents for the period ended 5 April 2018. Show your workings, including a full non-current assets note.

b.Prepare the balance sheet for Tom’s Tents as at 5 April 2018. Show your workings.

Answer 1

Income Statement:
Sales	11,25,000.00
Income from Repair Services	2,250.00
Sale of Assets	12,000.00
Discounts	-3,500.00
Total Revenues		11,35,750.00
Cost of Goods Sold:
Opening Inventory	1,50,000.00
Purchases	5,90,000.00
Carraige inward	1,250.00
Closing Inventory	-1,43,000.00	5,98,250.00
Gross Profit		5,37,500.00
Other Expenses:
Rent	26000
Insurnace	6800
Advertising	6400
Heating & Lighting	6400
Shop & Office Expenses	44000
Salaries & Wages	65500
Carraige Outward	3200
Interest on Loan	1200
Depreciation	36500
Bad Debts	6000
allowance for receivable	-25
Loss on Sale	1600	203575
Net Profit		3,33,925.00
Balance Sheet:
Capital	1,00,000.00
Earnings	3,33,925.00
Drawings	-80,000.00
Loan	20,000.00
Payables	64,200.00	4,38,125.00
Assets
Fixtures & Car	1,53,900.00
Receivables	87,525.00
Bank	51,000.00
Inventory	1,43,000.00
Prepaid expenses	2,700.00	4,38,125.00

Depreciation:
Fixtures	140000		Asset Bought	25000
Motor Vehicels	100000		Dep Yr 1	-5000
			Dep Yr 2	-4000
Depr.	-77000		Dep Yr 3	-2400
			WDV on Sale	13600
Net Block	163000
Dep	32600		Sale Value	12000
			Loss on Sale	1600
Dep on Assets on BL	34100
Dep on Asset sold	2400		Asset purchase	30000
	36500		Dep Yr 1	1500