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In: Accounting

QUESTION THREE [20] The following list of balances was taken from the books of Orange Traders,...

QUESTION THREE [20]

The following list of balances was taken from the books of Orange Traders, a fruit and vegetable distributor as at 28 FEBRUARY 2019, the end of the financial year: Capital	60500
Drawings	3 400
Loan: NRB	70 000
Inventory: 1 March 2018	13 760
Provision for bad debts	150
Sales	250620
Purchases	116040
Sales returns	250
Purchases returns	1 150
Rent income	10 500
Salaries and wages	77 500
Railage on sales	1 600
Interest on loan	6 300
Packing material	3 600
Discount received	400
Bad debts	300
Stationery	5 400
Insurance	660
Printing	1 350
Railage on purchases	2 500

Additional Information:

(a) Inventory on hand at 28 February 2019 amounts to R 15 350.

(b) Depreciation must be provided as follows: Vehicles R 3 400

Equipment R 560

(c) The loan was granted on 1 March 2017 at 12% p.a., payable every three months.

Interest for the period 1 December 2018 to 28 February 2019 is payable on

1 March 2019.

(d) A store room was sublet from 1 June 2018 at R 1 050 per month.

(e) An amount of R120 was paid to Vesta Insurers as an advance premium for March 2019.

(f) An account of R1 350 was received from Prints Printers for the printing of

documents. This must still be recorded.

Required:

Prepare the Statement of Comprehensive Income (Income Statement) for the year ended 28 February 2019.

Expert Solution

Ans.

Orange Traders

Income Statement for the year ended feb. 28th, 2019

Particulars

Amount

(Revenue)

Gross Sales

2,50,620

Less: Sales Return

-250

Net Sales

2,50,370

Rent Income

10500

Rent- Sublet (1050*9)

9450

Discount Received

400

Total Revenue

2,70,720

(Expenses)

Opening inventory

13760

Add: Purchases

116040

Less: Purchase Return

-1150

Less: Closing Inventory

-15350

Add: Railage on purchase

2500

Cost of Goods Sold

115800

Salary & wages

77500

Railgare on sales

1600

Packing Materials

3600

Bad Debts

300

Stationery

5400

Insurance (660 - 120)

540

Printing

1350

Depreciation (3400+560)

3960

Interest on loan

6300

Add: Outstanding Interest

2100

( 70000*12/100*3/12)

Total Expenses

218450

Net Profit (Revenue - Expenses) 52,270

Notes:

1. It is assumed that which store room was sublet is other than on which rent of R 10500 was received and it is accrued.

2. Prepaid Insurance premium R 120 is reduced from insurance paid amount as the same was for march 2019 month.

3. Outstanding of R 1350 was provided in printing expenses as the same was payable as on 28.02.2019.

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