Question

In: Accounting

A. Smith and B. Jones are in partnership, trading as A. Smith & Co., retail drapers....

A. Smith and B. Jones are in partnership, trading as A. Smith & Co., retail drapers. The following trial balance is extracted from their books at 30 June 2002:

Accumulated depreciation R1 600. Advertising R1 000. Barclays bank R6 600. Buildings, at cost R40 000. Capital A. Smith-Balance at 31 Dec. 2001 R60 000. Capital B. Jones - Balance at 31 Dec. 2001 R36 000. Creditors R13 000. Customs duty R7600. Debtors R16 000. Delivery charges R2 200. Drawings A. Smith R16 800. Furniture & fittings at cost R9 600. General expenses R4 800. Goods in transit at 30 June 2002 R 4200. Purchases R51 000. Railage inwards R6 600. Salaries & wages R9 600. Sales R97 000. Stock on hand at 31 Dec. 2001 R34 400.

They share profits and losses: A. Smith two-thirds and B. Jones one-third. Interest at 10% p.a. must be allowed on capital, but no interest is to be charged on drawings.

A provision of 5% of the debtors must be created to cover doubtful debts.

Furniture and fittings must be depreciated at the rate of 20% p.a. on cost. Stock on hand at 30 June 2002, is valued at R38 600.

REQUIRED: Income Statement and Balance Sheet

Solutions

Expert Solution

In this problem The TB is not talled before adjust ment it is out by 2,800

The following assuption had taken for this problem

1. Difference of 2800 booked as other income

2. Goods in transit is not added to the closing stock on 30/06/2002

3. Depreciation is caclulated for 6 months

4. Accumulated balance is treated as opening balances.

5. Interst on capital is also calculated for 6 months

Income Statement
Particulars Debit Particulars Credit]
Opening stock      34,400.00 Sales              97,000.00
Purchases      51,000.00 Closing stock              38,600.00
Customs duty        7,600.00
Delivery charges        2,200.00
Railage inwards        6,600.00
Gross profit      33,800.00
   135,600.00           135,600.00
Advertisement        1,000.00 Gross profit B/D              33,800.00
General expenses        4,800.00 Other income                2,800.00
Depreciation            960.00
Salary        9,600.00
Interest in capital        4,800.00
Provision for bad debt            800.00
Net profit      14,640.00
     36,600.00              36,600.00
Balance sheet
Liability Amount Asset Amount
Partners account
A. Smith Capital     60,000.00 Building           40,000.00
A smith drawings (16,800.00) Accumulated depreciation           (2,560.00)
Interest on capital       3,000.00 Furniture             9,600.00
Share of profit       9,760.00      55,960.00
B. Jones Capital     36,000.00 Bank             6,600.00
Share of profit       4,880.00 Debtors           16,000.00
Interest on capital       1,800.00      42,680.00 Less Provision for doubtful debts               (800.00)
Closing stock           38,600.00
Creditors      13,000.00 Goods in transit             4,200.00
Total    111,640.00 Total         111,640.00

ekkarill92 answered 1 year ago
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