Question

Joe Wright, a sole trader, extracted the following trial balance from his books at
the close of business on 31st March 2006.
GH¢ GH¢
Sales 400,000
Purchases 350,000
Sales returns 5,000
Purchases returns 6,200
Opening stock at 1st January 2006 100,000
Provision for doubtful debts 800
Wages and salaries 30,000
Rates 6,000
Telephone 1,000
Shop fittings at cost 40,000
Van at cost 30,000
Debtors and creditors 9,800 7,000
Bad debts 200
Capital 179,000
Bank balance 3,000
Drawings 18,000
593,000 593,000
a) Closing stock at 31st December 2006 GH¢120,000.
b) Accrued wages GH¢5,000.
c) Rates prepaid GH¢500.
d) The provision for doubtful debts to be increased to 10% of debtors.
e) Telephone account outstanding GH¢220.
f) Depreciate shop fittings at 10 percent per annum, and Van at 20 percent
per annum, on cost.
Required prepare income statement and a balance sheet as at 31st December 201

Answer 1

Joe Wright
Income Statement
	Amount in GH¢
Sales	400,000
Less: Sales Return	5,000
Net Sales	395,000
Cost of Goods sold ( 100,000 + 350,000 - 6,200 - 120,000 )	323,800
Gross Profit	71,200
Expenses:
Rates ( 6,000 - 500 )	5,500
Telephone ( 1,000 + 220 )	1,220
Wages & Salaries expense (30,000 + 5,000 )	35,000
Bad Debts ( 200 + ( ( 9,800 x 10% ) - 800) )	380
Depreciation Expense (40,000 x 10% ) + ( 30,000 x 20% )	10,000
Net Income	19,100
Joe Wright
Balance Sheet
Assets	Amount in GH¢
Non-current assets
Shop Fittings , Net of Depreciation (40,000 - 4,000 )	36,000
Van , Net of Depreciation (30,000 - 6,000   )	24,000
Current assets
Debtors, net of provision for doubtful debt (9,800 - 800 - 180 )	8,820
Bank Balance	3,000
Closing Stock	120,000
Prepaid Rate	500
Total Assets	192,320
Owner's Equity & Liabilities
Owner's Equity
Capital ( 179,000 + 19,100 - 18,000 )	180,100
Current Liabilities
Creditors	7,000
Telephone payable	220
Wages & Salaries Payable	5,000
Total Owner's Equity & Liabilities	192,320
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