Question

The following trial balance was extracted from the books of Big Bamboo Limited on December 31, 2020               

Big Bamboo Ltd
Trial Balance as at January 1, 2020
Motor vehicle at cost	10,600
Provision for depreciation on Motor Vehicle		2,120
Building at cost	90,000
Provision for depreciation on Buildings		1,800
Stock at January 1, 2020	53,000
Carriage inwards	500
Debtors	50,130
Returns Inwards	6,000
Returns Outwards		5,560
Bad debt provision		1,100
Cash	3,200
Creditors		30,350
Bank overdraft		15,500
Sales		600,000
Purchases	440,000
Wages	93,200
Insurance	54,100
Discount received		8,300
Drawings	14,000
Capital		150,000
	814,730	814,730

Additional Information:

1.      Stock at December 31, 2020 $80,000

2.      Payment of $10,100 for insurance relates to the first quarter of 2021.

3.      Wages owing $4,800

4.      Provision for bad debt is to be increased to $1,500

5.      Depreciation on fixed assets:

-          Motor vehicles 10% on cost

-          Buildings 15 % on the reducing balance method

Required:

Prepare for Big Bamboo Limited:

(a)    An income statement for the year ended December 31, 2020

(b)   A statement of financial position as at December 31, 2020

Answer 1

Income Statement :-

Particulars	Amount($)	Credit($)
Net Sale Revenue :-
Sales Revenue	600000
Less : Return Inwards	6000
Net Sales	594000	594000
Expenses :-
Cost of Goods Sold	399140
Wages (93200+4800)	98000
Insurance ($54100-$10100)	44000
Depreciation on Motor ($10600*10%)	1060
Depreciation on Building ($90000-$1800)*15%	13230
Carrige Inwards	500
Provision for Bad Debts ($1500-$1100)	400
Total Expenses	556330	556330
Net Income		37670

Cost of Goods Sold :-

= Begining Inventory + Purchase - Purchase Return - Discount Received - Ending Inventory

= $53000 + $440000 - $5560 - $8300 - $80000

= $399140

Balance Sheet :-

Asstes	Amount($)	Amount($)
Current Assets :-
Cash	3200
Stock	80000
Prepaid Insurance	10100
Debtors	50130
Total Current Assets	143430	143430
Fixed Assets :-
Motor Vehicle	10600
Less : Provision for Depreciation ($2120+$1060)	(3180)	7420
Building	90000
Less : Provision for Depreciation ($1800+$13230)	(15030)	74970
Total Assets		225820
Liabilities
Current Liabilities :-
Creditors	30350
Bad Debt Prvision	1500
Outstanding Wages	4800
Bank Overdraft	15500
Total Current Liabilities	52150	52150
Capital
Beginning Capital	150000
Add : Net Profit	37670
Less : Drawings	(14000)
Total Capital	173670	173670
Total Liabilities and Capital		225820