Question

Lance, the owner of Onya Bikes, informs you that he has completed all adjusting journal entries. He provides the following adjusted ledger balances for the year ended 31 December 2020.

	$
Accounts payable	29,300
Accounts receivable	45,220
Accumulated depreciation: Equipment	84,050
Allowance for doubtful debts	9,000
Bad debts expense	6,000
Cash at bank	15,660
Cost of sales	227,100
Depreciation expense - equipment	20,100
Equipment	191,790
GST Clearing (owing to Tax Office)	8,550
Insurance expense	16,610
Interest payable	6,250
Inventory	25,500
Lease Expense	4,000
Lance, Capital: 1January	102,600
Lance, Drawings	71,240
Loan from Best Bank (due 2025)	125,000
Prepaid rent	2,000
Rent expense	26,000
Sales returns	14,000
Sales revenue	484,000
Supplies expense	8,640
Supplies on hand	4,400
Unearned revenue	8,500
Utilities expense	26,040
Wages expense	152,950

Required:

Prepare/answer the following:

a. An Income Statement for the year ended 31 December 2020. (Classification of expenses not required) (8 marks)

b.  A Statement of Changes in Equity for the year ended 31 December 2020.

c. A classified Balance Sheet as at 31 December 2020.

Answer 1

Answer :

a. Income Statement for the year ended 31 December 2020 :

Particulars	Amount (in $)
Sales revenue 484,000
Less : Sales returns 14,000	470,000
Expenses :
Bad debts expense	6,000
Cost of sales	227,100
Depreciation expense - equipment	20,100
Insurance expense	16,610
Lease Expense	4,000
Rent expense	26,000
Supplies expense	8,640
Utilities expense	26,040
Wages expense	152,950
Net Loss	17,440

b. Statement of Changes in Equity for the year ended 31 December 2020 :

Particulars	Amount (in $)
Lance, Capital on 1January	102,600
Less : Net Loss	17,440
Less : Lance drawings	71,240
Lance, Capital on 31 December 2020	13,920

c. Balance Sheet as at 31 December 2020 :

Assets	Amount (in $)	Liabilities	Amount (in $)
Non Current assets		Non Current liability
Equipment 191,790		Loan from Best Bank (due 2025)	125,000
Less : Acc. Dep. 84,050	107,740
		Current liability
Current assets		Interest payable	6,250
Accounts receivable   45,220		GST Clearing (owing to Tax Office)	8,550
Less : Allowance for D.D 9,000	36,220	Accounts payable	29,300
Cash at bank	15,660	Unearned revenue	8,500
Prepaid rent	2,000
Supplies on hand	4,400	Shareholders' Equity
Inventory	25,500	Capital on 31 December 2020	13,920
Total	191,520	Total	191,520